The U.S. and Israel May Strike Iran Again as Powell Serves as Interim Fed Chair to Stabilize Market Expectations

Daily News

Summary:

The U.S. and Israel are reportedly preparing to launch another attack on Iran within a week; Powell will serve as interim Fed chair until Warsh is sworn in...

Key Headlines

1. The U.S. and Israel are reportedly preparing to attack Iran again within a week

2. Iran warns that any renewed U.S. military action will face an “offensive response”

3. Iran says the U.S. has presented five key conditions to Tehran

4. Trump says he still believes Iran is willing to reach a deal

5. Strait of Hormuz expected to reopen by this summer at the latest, with diplomacy prioritized over military action

6. Wes Streeting confirms bid for Labour Party leadership and urges Starmer to set a transition timetable

7. Iran’s traffic management mechanism for shipping routes in the Strait of Hormuz to be announced soon

8. Traders are betting the Federal Reserve will raise interest rates by the end of this year

9. Federal Reserve says Powell will serve as interim chair until Warsh is sworn in

Details

The U.S. and Israel Reportedly Preparing Another Attack on Iran Within a Week

According to U.S. and Israeli media reports, the two countries are preparing for another attack on Iran, which could take place within a week at the earliest.

Foreign media, citing U.S. officials, reported that one possible plan involves deploying special operations forces into Iran to retrieve nuclear materials buried beneath rubble. However, officials acknowledged that such a complex operation could result in casualties, requiring thousands of support personnel to establish security perimeters around the operation zone and likely leading to clashes with Iranian ground forces.

Another plan reportedly involves launching larger-scale and more intensive bombing campaigns against Iranian military targets and infrastructure.

In addition, Iran’s Fars News Agency reported on the 17th that the United States proposed five conditions in response to Iran’s proposal, including: refusing to pay war reparations to Iran, requiring Iran to hand over 400 kilograms of enriched uranium to the United States, allowing Iran to keep only one nuclear facility operational, refusing to unfreeze Iranian assets, and making ceasefires on all fronts conditional upon the start of negotiations.

The report cited analysts as saying that the U.S. proposal is not aimed at fundamentally resolving the dispute but rather at achieving through negotiations what Washington failed to accomplish through military action.

The report also said that Iran proposed five preconditions for building mutual trust, including a complete end to hostilities—particularly on the Lebanese front—the lifting of sanctions on Iran, the unfreezing of Iranian assets, compensation for war losses, and recognition of Iran’s sovereignty over matters related to the Strait of Hormuz.

Iran Warns of “Offensive Response” if the U.S. Launches Another Military Action

According to Iranian media reports on the 17th, a senior spokesperson for Iran’s armed forces responded to recent remarks by U.S. President Donald Trump regarding Iran and warned Washington against launching any new military action.

The spokesperson stated that any attempt to “restore America’s image” through renewed action against Iran would result in even more severe and heavier blows to the United States.

If the U.S. once again threatens or attacks Iran militarily, American military assets and personnel in the region would face a completely new, offensive, unexpected, and storm-like response, the spokesperson warned.

Iran Says the U.S. Has Presented Five Key Conditions

Iran’s Fars News Agency reported on May 17, citing informed sources, that the United States listed five key conditions in response to Iran’s proposal: the U.S. would not pay any compensation for war losses; Iran must transfer 400 kilograms of enriched uranium to the United States; Iran would be permitted to operate only one nuclear facility; the U.S. would refuse to unfreeze frozen Iranian assets; and ceasefires across all fronts would be conditional on negotiations taking place.

The report stressed that even if Iran accepted these conditions, threats of attacks from the United States and Israel would still remain.

Analysts cited in the report argued that the U.S. proposal was not intended to solve the dispute, but rather to achieve political and military objectives through negotiations that could not be achieved during the war.

Trump Says He Still Believes Iran Wants a Deal

On the evening of May 17 local time, U.S. President Donald Trump said in an interview that he still believes Iran intends to reach an agreement and expects Tehran to submit a revised proposal within the next few days.

Trump reportedly declined to disclose a deadline for negotiations but stated that if Iran fails to meet U.S. demands regarding its nuclear program, Washington would take harsher military action.

Strait of Hormuz Expected to Reopen by This Summer, With Diplomacy Preferred Over Military Action

According to The Hill, U.S. Energy Secretary Chris Wright said Friday local time that the Strait of Hormuz would reopen by sometime this summer at the latest.

Wright noted that although the closure of the strait has resulted in the loss of 10 billion cubic feet per day in natural gas transportation capacity, the United States is still adding 2.5 billion cubic feet per day in export capacity. He added that a related agreement could be reached within days.

If Iran continues to use the global economy as leverage, the U.S. military would forcibly reopen the strait, although he acknowledged that doing so would not be easy. Preliminary steps have already been taken, but Wright emphasized that reaching an agreement would be preferable to military action.

Wes Streeting Confirms Labour Leadership Bid and Calls for Transition Timetable

Former UK Health and Social Care Secretary Wes Streeting said on May 16 that he would run for Labour Party leader if a leadership contest is held. In an interview, he stressed that Labour needs a proper leadership race involving the most competitive candidates.

Streeting said he would not immediately launch a leadership challenge because it is necessary to wait for Manchester Mayor Andy Burnham to return to Parliament. Otherwise, a hastily elected new leader could lack sufficient legitimacy, prolonging instability within the party.

He again urged Prime Minister Keir Starmer to establish an appropriate leadership transition timetable and allow cabinet ministers to freely nominate candidates for party leader and prime minister.

Starmer has recently come under mounting pressure following Labour’s heavy defeat in local elections, with dozens of MPs calling for his resignation. However, Starmer has stated that he will not resign and is prepared to contest any leadership election. Burnham has already confirmed that he will apply to run in a parliamentary by-election in an effort to return to Parliament.

Iran’s Strait of Hormuz Shipping Traffic Management Mechanism to Be Announced Soon

On May 16 local time, Aziz, chairman of the Iranian Parliament’s National Security Committee, said on social media that Iran has developed a professional traffic management mechanism for shipping routes through the Strait of Hormuz under a framework aimed at safeguarding national sovereignty and ensuring international trade security.

The mechanism will be officially announced in the near future and will only be available to merchant vessels and related parties cooperating with Iran.

Iran will charge necessary fees in exchange for the professional services provided under the mechanism. The route will remain closed to participants in the U.S. “freedom initiative.”

Traders Bet the Federal Reserve Will Raise Interest Rates by Year-End

As inflation accelerates in the United States, bond market investors are increasingly convinced that the Federal Reserve will raise interest rates by the end of this year or early next year.

According to CME’s FedWatch tool, markets are pricing in a 51% probability that the Federal Open Market Committee (FOMC) will raise rates in December this year.

By January next year, the probability of a 25-basis-point increase in the Fed’s benchmark rate has risen to around 60%, while the probability of a rate hike by March exceeds 71%.

Data show that U.S. inflation accelerated in April, driven by rising energy prices linked to the Iran war. The Producer Price Index (PPI) climbed to 6%, marking the fastest increase since 2022. Rising energy prices also pushed up freight costs, while the Consumer Price Index (CPI) came in above economists’ expectations at 3.8%.

According to a report released Friday by the Federal Reserve Bank of Philadelphia, surveyed economists expect U.S. inflation to peak at 6% in the second quarter, a significant upward revision from previous forecasts.

The last major inflation surge prompted the Federal Reserve to launch aggressive tightening measures, including four consecutive 75-basis-point rate hikes beginning in 2022.

Federal Reserve: Powell Will Serve as Interim Chair Until Warsh Is Sworn In

The Federal Reserve Board said in a statement Friday that Jerome Powell has been appointed interim chair until Chair-designate Kevin Warsh is officially sworn into office.

The Fed noted that appointing the outgoing chair as interim leader is consistent with past practices during leadership transitions.

Fed Governors Michelle Bowman and Stephen Miran reportedly stated that they do not support the appointment of an interim chair.

Today’s Key Events to Watch

15:30 (UTC+8) Speech by ECB Executive Board Member Frank Elderson

15:35 (UTC+8) Speech by Bank of England MPC Member Megan Greene

16:30 (UTC+8) Speech by Bank of England MPC Member Catherine Mann

22:00 (UTC+8) U.S. May NAHB Housing Market Index

Time TBD G7 Finance Ministers and Central Bank Governors Meeting (through May 19)

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