U.S.-Iran Tensions Escalate Again as the New Fed Chair Prepares to Take Office

Daily News

Summary:

Trump said he is not considering any concessions to Tehran; Kevin Warsh will be sworn in as Federal Reserve Chair on May 22...

Highlights

1. Iran’s Supreme Leader reiterates consideration of opening new fronts

2. Iranian President: Dialogue does not mean surrender; Iran will fully defend its national dignity

3. Trump says military strikes on Iran will be postponed

4. Trump says he is not considering any concessions to Tehran

5. Senior U.S. official: Iran’s latest proposal is insufficient for a deal

6. Warsh to be sworn in as Federal Reserve Chair on May 22

7. Japanese officials question selling U.S. Treasuries to support the yen, warning intervention could backfire

Details

Iran’s Supreme Leader Reiterates Consideration of Opening New Fronts

On May 18, the social media account of Iran’s Supreme Leader Mojtaba Khamenei reposted excerpts from his first statement since taking office, reiterating that Iran is considering opening new fronts in areas where its adversaries lack expertise. The statement said research on opening additional fronts has already been completed and that Iran’s enemies are highly vulnerable in those areas due to their lack of experience. It added that if the state of war continues, Iran will open these new fronts.

Iranian President: Dialogue Does Not Mean Surrender; Iran Will Fully Defend Its National Dignity

On May 18 local time, Iranian President Pezeshkian posted on social media regarding the U.S.-Iran situation, stating that dialogue does not mean surrender. He emphasized that Iran participates in talks while safeguarding the country’s dignity, authority, and the rights of its people, and will never compromise on the legitimate interests of the nation and its citizens. Pezeshkian also stated that the government will use reason and all available means to serve the people and fully defend Iran’s interests and dignity.

Trump Says Military Strikes on Iran Will Be Postponed

On May 18 local time, U.S. President Trump posted on the social media platform Truth Social that, at the request of the leaders of Qatar, Saudi Arabia, and the United Arab Emirates, he had ordered that military strikes against Iran originally planned for May 19 be postponed.

Trump said that serious negotiations are currently underway and that, in the view of these leaders and U.S. allies, the two sides will eventually reach an agreement. Most importantly, he stressed that the agreement must clearly include one core provision: Iran must not possess nuclear weapons. Trump added that he had instructed Defense Secretary Hegseth, Chairman of the Joint Chiefs of Staff Caine, and the U.S. military not to carry out the planned strikes on May 19. However, he also ordered that if a satisfactory agreement cannot be reached, the U.S. military must remain fully prepared at all times to launch comprehensive and large-scale military action against Iran.

Trump Says He Is Not Considering Any Concessions to Tehran

On May 18 local time, after receiving Iran’s response to the latest draft agreement aimed at ending the conflict, U.S. President Trump stated that he is not considering any concessions to Tehran. Trump also warned that Iran already knows what is coming and fully understands the United States’ capability to inflict even greater damage.

Earlier reports from U.S. sources indicated that Iran had submitted a new draft agreement through Pakistan on the evening of May 17 aimed at ending hostilities. However, compared with the previous version, the proposal only contained symbolic adjustments and offered no substantive concessions regarding its nuclear program.

A senior U.S. official said the negotiations are currently at a very critical stage and that if Iran refuses to change its position, the United States will have no choice but to continue the negotiations “with bombs.”

When asked about reports from regional sources claiming that Iran was attempting to use delaying tactics regarding its nuclear issue and navigation through the Strait of Hormuz, Trump said he had not heard such claims. Reports indicate that Trump is expected to meet with key members of his national security team in the White House Situation Room on May 19 to discuss options for renewed military action against Iran.

Senior U.S. Official: Iran’s Latest Proposal Is Insufficient for a Deal

According to AXIOS, a senior U.S. official and a source familiar with the matter said Iran has submitted an updated ceasefire proposal, but the White House believes the proposal contains no meaningful improvements and is insufficient to reach an agreement.

U.S. officials said Trump wants to secure a deal to end the war, but because Iran rejected many U.S. demands and refused to make meaningful concessions on its nuclear program, Trump is considering resuming military operations. Officials added that if Iran does not change its position, the United States may have to continue negotiations “through bombs.”

The senior U.S. official stated: “We have not really made much progress. The Iranians need to show good faith. We need real, solid, and detailed talks on the nuclear program. If talks cannot happen, then we will have to talk through bombs, and that would be unfortunate.”

Warsh to Be Sworn In as Federal Reserve Chair on May 22

On May 13, the U.S. Senate officially confirmed Kevin Warsh as the next Chair of the Federal Reserve by a vote of 54 to 45, replacing Jerome Powell for a four-year term. Warsh will be sworn in as Chair of the Federal Reserve Board on May 22.

Japanese Officials Question Selling U.S. Treasuries to Support the Yen

A senior official at Japan’s Ministry of Finance questioned the idea of Japan selling U.S. Treasuries to support the yen, suggesting that such intervention could ultimately backfire. The official said authorities are cautious about the risks associated with selling their U.S. Treasury holdings, as such sales could push U.S. Treasury yields higher and, in turn, trigger further yen depreciation. Speaking to reporters in Paris on Monday, the official said Japan has ample cash and deposit reserves available for intervention if necessary.

U.S. Treasury Secretary Bessent visited Tokyo last week, where both sides presented a united front. Bessent said the 10-year U.S. Treasury yield is a key financial indicator he watches closely for the U.S. economy, adding that both sides agreed excessive volatility in foreign exchange markets is undesirable. According to data released earlier this month, Japan’s foreign exchange reserves stood at $1.17 trillion as of the end of April. Japan’s holdings of U.S. Treasuries fell by about $48 billion in March from the previous month, although part of the decline was due to valuation changes.

Today’s Focus

14:00 (UTC+8) UK three-month ILO unemployment rate for March

20:00 (UTC+8) ECB Chief Economist Philip Lane and Fed Governor Christopher Waller speak at an ECB research conference

20:15 (UTC+8) U.S. weekly ADP employment change through May 2

22:00 (UTC+8) U.S. April Pending Home Sales MoM

22:45 (UTC+8) ECB Governing Council member Makhlouf speaks

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