Oil Eases After Rising To 2-week High On Russia-Ukraine Supply Concerns

Economic

Commodity

Summary:

Oil prices edged down on Tuesday, after surging nearly 2% in the previous session, as traders closely monitored developments in the Russia-Ukraine conflict for potential disruptions to regional fuel supplies.

Brent crude fell 32 cents, or 0.5%, to $68.48 per barrel at 0448 GMT, while West Texas Intermediate (WTI) crude also lost 33 cents, or 0.5%, to $64.47 per barrel.

Both contracts rose to their highest in more than two weeks on Monday, with WTI climbing above the 100-day moving average.

"The risks for crude oil prices appear tilted toward further gains, particularly if the price sustains a move above the $64–$65 resistance level," IG analysts said in a note.

Oil's rally on Monday was primarily driven by worries about supply disruptions as Ukraine struck Russian energy infrastructure, and as traders anticipated more U.S. sanctions on Russian oil.

The attacks disrupted Moscow's oil processing and exports, created gasoline shortages in some parts of Russia, and came in response to Moscow's advances on the front lines and its pounding of Ukraine's gas and power facilities.

Barclays, in a note to clients on Monday, said that oil prices remain in a tight range amid geopolitical volatility and relatively resilient fundamentals.

U.S. President Donald Trump has renewed his threat to impose sanctions on Russia if there is no progress towards a peace deal in the next two weeks.

Traders will also be monitoring the impact of looming U.S. tariffs against India for its continued purchase of Russian oil, said Ole Hansen, head of commodity strategy at Saxo Bank.

Indian exporters are bracing for disruptions after a U.S. Homeland Security notification confirmed Washington will impose an additional 25% tariff on all Indian-origin goods from Wednesday.

This means Indian exports will face U.S. duties of up to 50% - among the highest imposed by Washington - after Trump announced extra tariffs as a punishment for New Delhi's increased purchases of Russian oil earlier in August.

Traders are awaiting the U.S. inventory data from the American Petroleum Institute (API) later in the day, with expectations pointing to a fall in crude and gasoline stocks but a possible build in distillate inventories.

Source: Reuters

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Trump Holds Line on Tariff Pact as Lee Jae Myung Commits to U.S. Investment

President Donald Trump announced Monday that South Korea would fully adhere to the sweeping trade and investment deal struck in late July, despite initial uncertainty heading into his first summit with newly elected South Korean President Lee Jae Myung. At stake was a 15% tariff framework and $350 billion in investment commitments aimed at bolstering American industry and infrastructure.

Speaking after the meeting outside the White House, Trump declared, “We stuck to our guns,” confirming that Seoul would proceed with the deal’s terms. The agreement notably includes hundreds of billions in both public and private sector funds from Korea, alongside large-scale industrial partnerships such as Korean Air Lines’ plan to purchase more than 100 Boeing aircraft and additional $150 billion in private sector investment projects in the U.S.

Pre-Summit Uncertainty Eased by Diplomatic Charm

Earlier Monday, the meeting had been in jeopardy after Trump raised doubts over South Korea’s political stability, citing alleged “vicious raids” by the Lee administration on religious institutions and even U.S. military bases. His Truth Social post likened the political climate in Seoul to a “Purge or Revolution,” referencing the fallout from former President Yoon Suk Yeol’s martial law declaration and subsequent ousting.

However, President Lee managed to smooth over tensions, praising Trump’s Oval Office renovations, stock market performance, and peacekeeping efforts with North Korea. Their Oval Office exchange was marked by friendly rhetoric, with Lee even suggesting Trump could “build a Trump Tower in North Korea” if peace talks advance. Trump, for his part, reiterated his interest in meeting Kim Jong Un again, claiming they had developed a “very friendly” relationship.

Shipbuilding and Defense Cooperation Expand the Deal’s Scope

Alongside trade and investment, both leaders highlighted collaboration in defense and shipbuilding. Trump expressed intent to purchase ships from South Korea and push for Korean firms to manufacture vessels within the U.S., creating American jobs. President Lee responded with a pledge to increase South Korea’s defense spending to acquire advanced warfare assets, though details remain vague.

The expanded cooperation reflects broader U.S. strategic interests in maintaining supply chain resilience and military readiness, especially amid heightened tensions with China and North Korea.

Deal Cemented, but Trade Risks Remain

The finalized agreement allows South Korea to avoid the harsher 25% tariffs Trump had previously threatened, aligning it with Japan’s tariff treatment and preserving competitiveness. However, Seoul still faces exposure to future U.S. tariffs on semiconductors and EV batteries sectors crucial to South Korea’s economic future. The agreement also left the Korean agricultural sector largely untouched, a sore point for Trump’s trade negotiators, though Lee successfully avoided reopening that chapter.

South Korean officials had arrived in Washington concerned that Trump might push for new concessions. Instead, they left with the original deal intact though its durability may still hinge on political stability in Seoul and further demands from Washington as U.S. elections draw closer.

A Stabilizing Moment in a Volatile Alliance

The summit marked a key moment in restoring confidence between two longtime allies after a year of upheaval in South Korean politics. While Trump’s tone was at times confrontational, his willingness to endorse President Lee as a “very good representative” signaled that personal diplomacy may have helped solidify a fragile agreement.

What remains uncertain is how lasting the deal will be in the face of rising domestic political pressures on both sides. But for now, both Trump and Lee emerged from Monday’s meeting with a message of continuity, cooperation, and cautious optimism in navigating the complex intersection of economics, security, and diplomacy in the Asia-Pacific.

Source: Reuters

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Unprecedented Dismissal: Trump Fires Fed Governor Amid Fraud Allegations

In a sweeping and controversial move, President Donald Trump announced late Monday that he had officially removed Federal Reserve Governor Lisa Cook from her post. Trump alleged that Cook committed mortgage fraud by making conflicting claims about her primary residence in Michigan and Georgia during separate property purchases earlier this decade. According to the president, this constitutes “gross negligence” and renders her unfit to serve as a financial regulator.

Trump shared a letter addressed to Cook on social media, stating: “You are hereby removed from your position... effective immediately,” adding that her actions show “deceitful and potentially criminal conduct in a financial matter.” This marks the first time a president has directly removed a sitting Federal Reserve governor an act with unclear legality and wide-ranging implications.

Allegations and Political Backdrop

The decision follows mounting pressure from Trump and his administration since last week, when Federal Housing Finance Agency head Bill Pulte urged the Attorney General to investigate Cook. Pulte accused her of falsifying loan documents to obtain favorable mortgage terms, a claim now reportedly under scrutiny by the Department of Justice. The Financial Times confirmed that the DOJ had sent a letter to Fed Chair Jerome Powell, recommending Cook’s removal.

Cook has so far denied any wrongdoing. In a public statement last week, she insisted she had no plans to step down and would “take any questions about [her] financial history seriously.” She also dismissed Trump’s threats as politically motivated, asserting that she would not “be bullied to step down.”

Central Bank in Crisis: Institutional Independence at Risk

The ousting of a Federal Reserve Board member by the executive branch is virtually unprecedented. The Federal Reserve is designed to operate independently from political influence, and governors are appointed for 14-year terms specifically to insulate them from short-term political pressures. Legal scholars now anticipate a fierce court battle that could rise to the Supreme Court, testing the limits of presidential authority over central banking.

The Fed declined to comment when asked by Yahoo Finance, underscoring the fragility of the situation. If the move stands, Trump will have the power to appoint another member to the Fed’s influential Board of Governors, further tilting its policy outlook ahead of a potential rate cut this September.

Wider Power Play: Reconfiguring the Fed

This latest action follows Trump's earlier nomination of Stephen Miran, current Chair of the Council of Economic Advisers, to replace Adriana Kugler, who resigned earlier this month. With Cook now forcibly removed, Trump is poised to nominate another governor effectively reshaping the Fed’s composition during a sensitive moment in monetary policymaking.

Simultaneously, Trump is seeking a successor to Fed Chair Jerome Powell, whose current term ends in May 2026. While Powell could technically remain on the Board of Governors until 2028, it remains unclear whether he would do so. Trump has previously criticized Powell for being too slow to cut rates, nicknaming him “Too Late,” and recently visited the Fed’s $2.5 billion headquarters renovation site, calling the cost a “fireable offense.”

Implications: Politics, Markets, and Policy Uncertainty

The political maneuvering at the Fed introduces heightened uncertainty into financial markets already anticipating a possible shift in interest rates. Trump’s interference could erode the perception of the Fed’s independence, a factor closely watched by investors and foreign governments alike. If the legal justification for Cook’s removal is successfully challenged, it may also set new limits on presidential authority redefining the balance of power between the executive branch and America’s monetary guardians.

As of now, the case remains legally unresolved, but the stakes are significant: the outcome could influence not only the makeup of the Fed, but also investor confidence in the U.S. financial system’s institutional stability.

Source: Bloomberg

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The Rare-Earth Chessboard: Beijing's Move and Washington's Counter

The global tug-of-war over rare earths, critical to military and clean-energy technology, took center stage this week as U.S. President Donald Trump asserted that America has far more negotiating power than China in the ongoing trade dispute. Following China’s move to halt most rare-earth magnet exports to the U.S. in April a retaliatory act tied to broader trade tensions Trump responded by signaling that the U.S. is capable of exerting significant counter-pressure.

While China controls 90% of global rare earth magnet production, Trump pointed to a less-discussed U.S. advantage: control over the supply of Boeing aircraft parts. “If I played those cards, that would destroy China,” Trump claimed, referencing his decision to resume shipments of critical components for roughly 200 grounded Chinese aircraft despite their initial suspension.

Trump’s Strategy: Magnets vs. Metal Wings

Rare earths such as neodymium and praseodymium are central to electric vehicles, wind turbines, and defense technologies. China’s stranglehold over these resources has become a geopolitical weapon. However, Trump used the press event to showcase the countervailing weight of U.S. aerospace supremacy specifically the Boeing supply chain, which remains critical for China’s expanding aviation fleet.

Trump emphasized the asymmetry of power: while China can squeeze magnet shipments, it remains dependent on American-made aerospace technology to keep its commercial fleet airborne. “We have a powerful thing. It’s airplane parts and many Boeing jets,” he stated, framing the situation as a strategic balance of vulnerabilities.

Trade Truce and Tactical Softening: Behind the Scenes of Xi-Trump Diplomacy

Despite previous friction, Trump confirmed that he recently spoke with Chinese President Xi Jinping and expressed hope for an upcoming visit to China. The renewed dialogue aligns with reports that a senior Chinese trade envoy is heading to Washington, possibly paving the way for a new deal. October’s APEC summit in South Korea could serve as a turning point for broader diplomatic rapprochement.

Trump’s approach reflects a nuanced shift: while he maintains the threat of extreme tariffs (up to 200% on magnet imports), he also declared that “the magnet situation is behind us.” This suggests that Beijing’s decision to resume shipments evidenced by a six-month high in July was sufficient to pause further escalation.

U.S. Domestic Magnet Production: Promises and Projections

Amid concerns about dependency, Trump also pointed to domestic efforts to ramp up rare-earth magnet production, stating “it will take us about a year.” While this estimate is optimistic, the U.S. is making progress. MP Materials Corp., America’s sole rare earth miner, is expected to begin modest-scale magnet manufacturing later this year. The firm’s expansion, backed in part by Pentagon funding, represents a longer-term hedge against Chinese dominance.

Still, scaling magnet production to levels necessary for widespread industrial and military use will take years. This makes the current détente with China both fragile and critical.

Tariffs and Trade Psychology: Trump’s Bargaining Toolkit

Ultimately, Trump reaffirmed that tariffs remain his primary economic weapon. “If we want to put 100%, 200% tariffs on, we wouldn’t do any business with China. And you know, it would be OK too,” he said. But even as he reiterated America’s leverage, he acknowledged a mutual dependency: “They have some power over us.”

This duality underscores the delicate nature of U.S.–China trade relations, especially in strategic sectors like aerospace and rare earths. Trump’s rhetoric walks a fine line projecting strength while leaving the door open for collaboration.

Trump’s remarks underscore a calculated high-stakes strategy: using Boeing and national security-linked supply chains to counter Beijing’s rare earth leverage, while maintaining communication channels with Chinese leadership. With the APEC summit approaching and trade envoys on the move, both sides appear interested in avoiding escalation at least for now. Whether this truce leads to lasting decoupling or deeper interdependence remains the critical question for markets, manufacturers, and policymakers alike.

Source: Yahoo Finance

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Strategic Diplomacy Through Shipbuilding Investment

In a carefully choreographed display of economic diplomacy, South Korean President Lee Jae Myung is using his first official summit with U.S. President Donald Trump to spotlight a $150 billion investment into U.S. shipbuilding. This initiative, a central part of South Korea’s broader $350 billion investment package in the U.S., is branded under the slogan “Make America Shipbuilding Great Again” a calculated echo of Trump’s own rhetoric.

On Tuesday, Lee is set to visit Hanwha Group’s Philly Shipyard, acquired in 2024, to emphasize tangible industrial commitment. Hanwha plans to boost annual output at the Philadelphia site from fewer than two vessels to as many as 20, leveraging its advanced shipbuilding expertise from Korea, where its facilities produce a vessel per week.

Economic Leverage Amid Trade and Security Tensions

The shipbuilding pledge is a diplomatic “carrot” in broader negotiations over tariffs and defense spending. While both sides have been locked in contentious trade talks, Seoul views industrial cooperation especially in shipbuilding as a viable path to trade concessions from Washington.

Trump, in turn, appears receptive. “We’re going to be buying ships from South Korea,” he told reporters, while also emphasizing domestic production: “We’re also going to have them make ships here with our people.” The aim is to counter China’s dominance in global shipbuilding and modernize a U.S. industry whose global market share has collapsed to just 0.04% by 2024, down from world-leading status during WWII.

Legal and Structural Barriers to Revival

Despite the political fanfare, the road to reviving U.S. shipbuilding is fraught with structural and regulatory barriers. Key among them are longstanding laws like the Jones Act (requiring goods shipped between U.S. ports to be carried on U.S.-built ships) and the Byrnes-Tollefson Amendment (restricting U.S. Navy shipbuilding to domestic yards). While Trump could issue national security waivers, congressional reform is still required for full bilateral integration in naval production.

South Korean officials are aware of these barriers and have hinted at “detours and institutional improvements” to enable more flexibility in joint construction efforts. Proposals from some U.S. lawmakers could open legal loopholes to allow allied participation in modular shipbuilding and modernization.

Implementation Hurdles: Labor, Materials, and Time

Beyond legalities, physical and human capital challenges remain. U.S. shipyards, suffering from decades of underinvestment, lack modern facilities and skilled labor. According to Hanwha executives, training local technicians could take 4–5 years. The company plans to offset this by introducing automation (such as robotic welding), importing parts of its advanced Korean production line, and possibly leasing additional idle docks near Philly.

However, logistical bottlenecks including access to steel plates and other key materials may stall rapid scale-up, especially amid current global supply chain vulnerabilities.

Geopolitical Significance and Economic Symbolism

Lee’s investment pledge is not merely economic but deeply symbolic. It projects South Korea’s rising geopolitical confidence and technological superiority in shipbuilding while strategically courting the Trump administration’s industrial policy agenda. Eleven non-binding agreements were signed during the trip, spanning shipbuilding, nuclear energy, and critical minerals solidifying bilateral momentum beyond security alliances.

South Korea’s bold move to revive America’s shipbuilding sector represents a shrewd blend of strategic diplomacy, economic partnership, and industrial outreach. While significant regulatory, logistical, and labor obstacles remain, Seoul is betting that its technological edge and early action will cement deeper ties with Washington and position it as an indispensable ally both militarily and economically in a shifting Indo-Pacific order.

Source: Reuters

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Williams Stresses Persistence of Low R-Star Dynamics

Speaking at a monetary policy conference in Mexico City on Monday, Federal Reserve Bank of New York President John Williams offered a cautionary yet stabilizing perspective on long-term interest rates. Drawing attention to R-Star, the neutral real interest rate that neither stimulates nor restrains economic growth, Williams underscored that its subdued level is likely to persist.

“The era of low R-Star appears far from over,” Williams noted, adding that global factors such as demographic shifts and slow productivity growth remain unchanged since the pre-pandemic era. He cited growth-adjusted R-Star estimates hovering around 0.5% for the U.S., Eurozone, U.K., and Canada nearly identical to the values observed prior to the COVID-19 shock.

Relevance to Long-Term Monetary Policy Debate

Williams’ commentary comes at a time when market participants are increasingly pricing in a possible structural revaluation of long-run interest rates, especially as inflationary pressures, fiscal stimulus, and geopolitical tensions have all contributed to recent rate volatility. Yet, his remarks signal a return to the pre-pandemic interest rate regime, where policy rates remained near or below neutral due to secular stagnation pressures.

Crucially, while Fed officials have raised their long-run dot plot projections slightly in recent quarters, Williams' speech warns against overconfidence in such projections. He stressed the complexity and uncertainty in estimating unobservable variables like R-Star, noting, “Policymakers are well advised to avoid placing too great confidence in precise estimates.”

Implications for Markets and Mortgage Rates

Williams did not comment on current or upcoming monetary policy actions, including whether the Fed might cut rates at its September meeting. However, his defense of the low-R-Star thesis could be read as a dovish signal in the long term, even as short-term inflation and political pressure exemplified by President Trump’s attempt to oust Fed Governor Lisa Cook complicate the outlook.

Despite growing speculation about rate cuts, particularly from political actors, Williams’ remarks imply that mortgage rates and borrowing costs may not fall rapidly in the short term. Instead, investors should consider the structural backdrop that suggests a long glide path back to low rates once inflation stabilizes and macroeconomic noise subsides.

John Williams' reaffirmation of the low-R-Star thesis provides a stabilizing anchor to a financial environment roiled by short-term political interference, inflation volatility, and rate path uncertainty. While markets continue to speculate about imminent cuts, Williams reminds policymakers and investors alike that the fundamentals driving low real rates remain intact, reinforcing expectations that structurally low borrowing costs will eventually resurface.

Source: Reuters

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Asian Equities Follow U.S. Lower Amid Renewed Volatility

Asian stock markets opened the week with declines across major indices, reflecting a global risk-off mood sparked by Wall Street’s pullback and mounting uncertainty around U.S. monetary policy. Japan’s Nikkei 225 dropped 1.1% to 42,342.28, erasing part of last week’s rally fueled by rate cut optimism. Australia’s S&P/ASX 200 slid 0.3% to 8,949.40, while South Korea’s Kospi lost 0.8%, despite improved consumer sentiment data.

Mainland Chinese and Hong Kong equities also fell, though to a lesser extent. The Hang Seng dipped 0.2% to 25,766.68, and the Shanghai Composite edged 0.1% lower to 3,878.24. Market participants in the region grew increasingly wary of the fragility of global growth prospects, given persistent inflation pressures, high rates, and U.S. political turmoil.

Wall Street Weakens as Healthcare Lags and Political Risks Rise

U.S. equity markets declined Monday, with the S&P 500 down 0.4% to 6,439.32 and the Dow Jones Industrial Average losing 349.27 points (-0.8%) to close at 45,282.47. The Nasdaq slipped 0.2% to 21,449.29. The retreat followed a strong week driven by Fed rate cut hopes, but caution returned as President Trump unexpectedly announced the dismissal of Fed Governor Lisa Cook amid mortgage fraud allegations.

The announcement raised fears of growing political interference in the Fed and its policy direction. While rate cut odds remain high with CME Group data showing an 84% chance of a 25 basis-point cut in September the path forward is clouded by institutional uncertainty and concerns over the Fed’s independence.

Health care stocks led the decline, with Pfizer down 2.9% and Eli Lilly off 2.3%. Technology, however, provided some support. Alphabet gained 1.2%, and Nvidia climbed 1% as investors continued to favor AI-linked momentum plays.

Bond Yields Rebound Slightly, Oil Edges Lower

Treasury yields rebounded after Friday’s sharp drop. The 10-year U.S. Treasury yield rose to 4.28% from 4.25%, and the 2-year yield climbed to 3.73% from 3.70%, reflecting still-elevated inflation expectations and market skepticism toward the Fed’s ability to aggressively loosen policy.

In commodities, U.S. crude slipped $0.32 to $64.48 per barrel, while Brent fell $0.28 to $68.52. The soft energy market reflects tepid demand outlooks from Asia and increasing production from non-OPEC suppliers, compounding macroeconomic concerns.

Currency Movements Signal Softer Dollar

In forex markets, the U.S. dollar edged down against major peers, trading at 147.31 yen versus 147.71 yen. The euro strengthened to $1.1644 from $1.1623. Traders interpreted the Fed turmoil and potential leadership shifts as mildly dovish for the dollar, while European currency strength was supported by more stable economic readings.

Asian markets’ synchronized decline reflects a fragile investment environment as optimism over Fed easing collides with rising political risk and mixed macroeconomic indicators. The global equity narrative remains fluid, with Trump’s reshuffling of the Fed board, upcoming inflation data, and central bank decisions likely to shape investor sentiment in the weeks ahead. Until then, caution appears to be the dominant trade.