A summary of a RANE Insights webinar featuring Matthew Bey, Markus Jaeger, and Adriano Bosoni.
A US-Iran ceasefire is holding, supported by negotiations in Switzerland, but remains fragile. Both sides are incentivized to avoid escalation: the US wants to contain energy prices ahead of midterms; Iran needs time to rebuild its military capabilities and benefit from sanctions relief. The most likely outcome at the 60-day mark is a rollover rather than a formal breakdown — though two spoilers loom: the ambiguous terms of the MoU on Iranian oil exports, and Iran’s insistence that Lebanon be part of any resolution.
Normalization of Hormuz traffic will be slow. Commodity carriers (LNG, crude, fertilizers) will return first, since there are no viable alternatives and prices are elevated. Container shipping will lag, as operators have more flexibility to reroute. A single escalatory incident could halt even this partial recovery. Existing bypass options — Saudi Arabia’s East-West Pipeline, the UAE’s Fujairah port, overland trucking — are already near capacity and cannot substitute for the Strait at scale.
• Inflation: Energy and food price pressures remain elevated. Secondary effects are still working through supply chains; the Fed has shifted toward pricing in rate hikes.
• Food security: Advanced economies face cost pressures; parts of South Asia and Sub-Saharan Africa face physical shortages with potential for political instability ahead of the next planting season.
• Financial contagion: Vulnerable countries are small economies with limited private debt — IMF programs in Pakistan and Sri Lanka provide a buffer. Spillovers to global markets are unlikely.
• Oil price outlook: The market could flip from a ~5 mb/d deficit to a similar surplus next year, potentially pulling Brent back toward $65–70.
The White House is transitioning from Section 122 tariffs (expired July 24) to Section 301 tariffs —country-specific investigations targeting forced labor and manufacturing overcapacity, set at 10–12% on economies representing ~98% of US trade. Unlike IEEPA, Section 301 requires a formal investigation and comment period, creating a lag between announcement and enforcement. Tariffs will still be used as leverage on non-trade issues — digital taxes, territorial disputes, judicial matters — but the process is more predictable.
The July 1 extension deadline passed without agreement, triggering annual reviews. The base case is that the US remains in USMCA — exit would require Congressional approval and faces pushback from the business community and White House factions that view North American integration as a China counterweight. Investors in Mexico and Canada retain preferential US market access in most sectors, with the key exception of autos, which face the same 25% tariff as non-USMCA imports.
The trade truce should hold through a planned Trump-Xi summit in late September. The key watch item is the affiliates rule — suspended for one year after last year’s escalation — which expires in November 2026. If China hawks push to reinstate it, or expand export controls on semiconductors and AI, Chinese retaliation could unravel the détente. China’s economy faces mild headwinds from the energy and trade shocks, offset by domestic stimulus capacity, but the structural challenge —rebalancing from exports and investment to consumption — remains unresolved.
Democrats are likely to regain the House; the Senate is a closer call. A divided Congress enables investigations and subpoenas but cannot override presidential vetoes or constrain executive action on trade or foreign policy. The more immediate risk is a government shutdown around September 30 if Congress cannot agree on spending, coinciding with the peak of the election campaign.
• Fiscal brinkmanship: A split Congress raises the probability of debt ceiling standoffs, historically a source of short-term global market volatility.
• Fed under new leadership: Potential shifts in communication and policy emphasis from an incoming Fed chair could introduce additional uncertainty.
• AI investment sustainability: The AI boom underpins US economic resilience. A correction would carry significant global spillovers.
• Executive overreach: With no re-election constraint, Trump is more likely to rely on executive orders, raising policy unpredictability on trade, sanctions, and technology.
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