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Oil may zoom further ahead of US midterms & Israeli elections

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  Iran may turn offensive from a defensive strategy in this war of attrition rather than paving a face-saving exit for Trump and Netanyahu. Trump’s ‘Operation Epic Fury’ on Iran is now turned into ‘Operation Epic Tragedy’ amid logistical & munitions constraints. Trump’s new strategy of ‘Operation Economic Fury’ on Iran and secondary sanction threat on Chinese refiners may backfire, and oil may zoom further.  The US-Iran war has entered a highly dangerous phase of unprecedented economic attrition and territorial annexations following the official expiration of the 60-day June Islamabad Memorandum of Understanding (MOU) deadline on August 17, 2026. Trump also officially confirmed on August 18 that the US would not extend the MOU and that the SOH (Strait of Hormuz) is ‘totally controlled’ by the US CENTCOM. But Iran was not ready to oblige and succumb to Trump’s bullying tactics. Following the remote signing of the June 17 Islamabad MoU, a brief, fragile truce was established...
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Gold, stocks, and UST surged on Trump’s back-door YCC plan; USD slumped. Will it work?

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Trump & Co. can’t resolve structural issues with cyclical fixes. Trump has to exit from his Iran war mess gracefully rather than stage an imaginary takeover of the SOH to bring oil, inflation expectations, and bond yields down. The Trump administration has to roll over ~$10T in debt at lower borrowing costs (coupon rate) in the coming months desperately. On Wednesday, gold and USTs surged, while US bond yields and the USD slumped as the US Treasury (TSY) Secretary Besant officially announced the intention of the US TSY to double the buyback of longer-term (10-30Y) USTs from the present $2B/operation to at least $4B/month per operation for Sep-Nov '26 (refunding QTR). The US TSY may also indicate the size of the next tranche of bond buying for the next fiscal refunding quarter on November 4, 2026. Overall, the program is officially the TSY Liquidity Adjustment Facility (TLAF), but the real purpose is to manage longer-term bond yields (10-30Y); i.e., it’s a form of back-door YCC....
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