Global Markets Dip as Iran Sanctions Fuel Oil Surge, Hawkish Fed Signals
22 August 2026 · Morning
The US announced 'toughest-ever sanctions' on Iran, pushing WTI crude up 2.89% to $86.83 and reigniting inflation concerns.
This geopolitical risk, combined with a strong Philadelphia Fed index (47.4 vs 25.0 expected) and hawkish Fed comments, led to a significant rise in US Treasury yields.
US 10-year Treasury yields climbed 6.7bp to 4.708%, despite Treasury buyback plans, as the US national debt surpassed $40 trillion.
Major US indices fell, with the S&P 500 down 0.87% and Nasdaq down 1.00%, also impacted by weaker-than-expected Walmart earnings.
Global markets are navigating persistent inflation concerns and rising long-term yields, despite US Treasury efforts to stabilize bond markets.
Global Markets
Detail
S&P 500
Closed at 7,641.16 on August 20, reflecting broad market declines.
-0.87%
Nasdaq
Finished at 26,067.16 on August 20, with tech stocks leading the downturn.
-1.00%
STOXX 600
European benchmark closed at 650.36 on August 20, showing a modest decline.
-0.12%
Nikkei 225
Japanese index rose to 66,216.57 on August 20, bucking the global trend.
+1.36%
CSI 300
Chinese blue-chip index saw a slight gain, closing at 4,592.75 on August 20.
+0.09%
KOSPI
South Korean index rebounded sharply to 6,852.58 on August 20, reversing previous losses.
+5.89%
Hang Seng
Hong Kong's benchmark index closed higher at 25,698.49 on August 20.
+0.80%
Dollar Index (DXY)
The dollar strengthened to 98.88 on August 20, reflecting safe-haven demand.
+0.11%
USD/JPY
The pair traded at 159.05 on August 21, showing minimal change.
+0.01%
EUR/USD
The euro slightly weakened against the dollar, trading at 1.17 on August 21.
-0.01%
USD/KRW
The Korean won depreciated against the dollar, closing at 1,394.05 on August 20.
+0.47%
USD/CNY
The yuan strengthened slightly against the dollar, closing at 6.72 on August 20.
-0.10%
US 10-year Yield
Yields rose to 4.708% on August 20, driven by inflation and Fed concerns.
+6.7bp
US 2-year Yield
Short-term yields increased to 4.190% on August 20, reflecting hawkish sentiment.
+2.8bp
Japan 10-year Yield
Japanese bond yields decreased to 2.863% on August 20.
-3.4bp
Germany 10-year Yield
German bond yields saw a minor dip, closing at 3.255% on August 20.
-0.3bp
Korea 10-year Yield
South Korean bond yields fell to 4.334% on August 20.
-7.9bp
US HY Spread
US High-Yield spread narrowed to 273bp on August 19, signaling easing credit stress.
-2.0bp
WTI Crude
Oil prices surged to $86.83 per barrel on August 20 amid Iran supply concerns.
+2.89%
Gold
Gold prices slightly dipped to 4,518.45 on August 20.
-0.08%
Copper
Copper prices fell to 6.47 on August 20.
-0.42%
VIX
The volatility index rose to 16.02 on August 20, but remained at a relatively low level.
+7.66%
Rising Yields and Fed Policy
Rising long-term yields are a global issue, weakening the policy signaling power of the Federal Reserve.
Yields Up
AI Productivity and Inflation
The IMF's new chief economist, Tenreyro, warned that AI productivity gains may not automatically lead to lower inflation.
IMF Warning
Global Stock Weakness
Global stock markets continued their downward trend, with investors doubting the sustainability of policy support.
Stocks Down
United States
US Announces 'Toughest Sanctions' on IranSanctions
The US Treasury Secretary announced 'the toughest sanctions in history' against Iran, with details to be unveiled on Monday.
China was urged to cooperate with the new policy, intensifying pressure after previous warnings against nations providing a lifeline to Iran.
Hezbollah was also re-designated as an organization under Iran's IRGC-Quds Force, subjecting it to additional sanctions.
Oil Prices Jump on Iran Supply ConcernsWTI +2.89%
WTI crude oil surged 2.89% to $86.83 per barrel, reflecting fears of supply disruptions from Iran.
The rise in oil prices is expected to exacerbate inflation pressures, impacting global economic outlooks.
US Treasury Yields Resume ClimbUS 10Y +6.7bp
US 10-year Treasury yields rose 6.7bp to 4.708%, despite the Treasury Secretary reiterating plans to increase bond buybacks.
The US national debt surpassed $40 trillion for the first time, fueling fiscal concerns and contributing to yield pressure.
The 30-year Treasury yield also resumed its ascent, reaching 5.225-5.2214%, indicating persistent long-term investor skepticism despite Treasury intervention.
Hawkish Fed Signals PersistPhilly Fed 47.4
The Philadelphia Fed's August business outlook index significantly exceeded expectations, reaching 47.4 against a forecast of 25.0.
This strong economic data, coupled with hawkish comments from Fed officials, sustained market expectations for a potential September rate hike, currently at 39%.
Fed officials emphasized the central bank's independence in monetary policy, maintaining focus on inflation and employment targets despite Treasury bond market interventions.
US Stocks Decline on Weak Earnings, Rising YieldsS&P 500 -0.87%
Major US indices, including the S&P 500 (-0.87%) and Nasdaq (-1.00%), closed lower.
The credit market remained relatively stable, with the US high-yield spread narrowing by 2.0bp, while the VIX rose 7.66% to 16.02 but stayed at a low level.
US Government Debt Exceeds $40 TrillionDebt Record
The US government debt reached an unprecedented $40 trillion, driven by structural spending pressures from aging demographics, climate change, and defense.
The re-ignited inflation risks from the Iran conflict are expected to accelerate borrowing costs, with US debt and borrowing expenses approaching decade highs relative to G7 peers.
Walmart (WMT)-9.15%
Q2 US comparable sales grew only 2.6%, missing the +3.8% consensus and marking the lowest growth in six years.
Adjusted EPS of $0.81 beat the $0.74 consensus, and revenue of $187.9 billion also surpassed market expectations.
Annual revenue guidance was set at +4-5%, below the +5.3% consensus, with Q3 guidance also lower than expected.
Micron Technology (MU)+3.97%
Announced plans to invest over $25 billion in the US over the next decade, creating more than 90,000 jobs.
This includes a $10 billion AI memory research lab in Boise, Idaho, focusing on AI memory and computing systems.
The investment aims to strengthen Micron's competitiveness in the rapidly expanding AI infrastructure market.
Broadcom (AVGO)+0.43%
Reportedly negotiating over $6 billion in debt financing with lenders to fund AI chip development.
The financing could reach up to $10 billion, with funds benefiting various AI companies, including Anthropic.
The debt structure includes $3 billion in subordinated debt and $6-7 billion in senior secured debt, partly guaranteed by Broadcom.
Abbott (ABT)-0.25%
Agreed to a $670 million settlement for approximately 2,000 claims related to premature infant formula lawsuits.
The settlement includes the Gill case, where a jury awarded $495 million for necrotizing enterocolitis (NEC).
However, about 1,700 related lawsuits involving 12,700 infants are still pending, indicating ongoing legal risk.
Merck (MRK)-2.11%
Its personalized mRNA melanoma vaccine, co-developed with Moderna, showed significant efficacy in late-stage clinical trials.
The positive results have increased expectations for Merck's oncology pipeline.
Marvell Technology (MRVL)+5.79%
Reportedly secured a $12 billion deal with Google for custom AI chip development.
This partnership could significantly boost Marvell's revenue in the AI sector.
Palo Alto Networks (PANW)-2.84%
Announced a strategic alliance with NTT DATA, targeting $1 billion in joint business by 2029.
The collaboration aims to accelerate secure AI transformation for enterprises.
Boeing (BA)-3.20%
The US State Department approved a $4.5 billion sale of KC-46A aerial refueling aircraft to Qatar.
Boeing is the prime contractor for this significant export deal.
Amazon (AMZN)-2.16%
Prime Video announced plans to invest over $2 billion in five Latin American countries from 2027-2030 to more than double local original content.
The company is also expanding its drone delivery service to 500 US locations by year-end.
Amazon is among nine tech companies facing a lawsuit in Chicago federal court over alleged violations of Illinois' Biometric Information Privacy Act (BIPA).
Alphabet (GOOGL)-1.17%
Launched Antigravity, a new management feature for Gemini Enterprise app subscriptions, including administration and expense management.
Alphabet is also a buyer in Marvell's reported $12 billion AI chip supply deal.
ExxonMobil (XOM)+0.84%
Confirmed the arrival of its fifth floating production storage and offloading (FPSO) vessel, Erea Wittu, in Guyanese waters.
The facility, built by MODEC, will be deployed at the Uaru project in the Stabroek offshore oil block, with a daily processing capacity of 250,000 barrels.
Nvidia (NVDA)-0.33%
Plans to ship small quantities of China-specific AI chips by year-end, which are variants of its Language Processing Unit (LPU).
These chips are designed to comply with US export regulations and enhance AI chatbot response speeds.
Meta Platforms (META)-0.04%
Reportedly emerged as a key AI client for Microsoft, indicating growing collaboration in AI development.
The company is facing a lawsuit from 29 states over child safety, with an ex-engineer testifying about the CEO's alleged negligence in safety policies.
Eli Lilly (LLY)N/A
Signed a co-development agreement with Amplitude Therapeutics for mRNA vaccines targeting infectious diseases.
The deal grants Eli Lilly exclusive commercialization rights and additional target options.
JPMorgan (JPM)N/A
An affiliate had its local trading suspended by Indian securities authorities due to alleged closing price manipulation.
Berkshire Hathaway (BRK.A/B)N/A
An appeals court upheld a large settlement in a real estate commission collusion case involving its home services unit.
NextEra Energy (NEE)N/A
Maine's governor publicly opposed its acquisition of Dominion Energy, citing concerns about competition and potential rate hikes.
AMD (AMD)N/A
Appointed Tim Ryan to its board and named KC McClure as Chair of the Audit and Finance Committee, reorganizing its governance structure.
Asia
India Allows Duty-Free Sugar ImportsSugar Prices +40%
India authorized the duty-free import of 1 million tons of sugar to stabilize prices, which had surged 40% in two months to record levels.
This emergency measure marks India's return to sugar imports after a decade, aiming to ease consumer burden ahead of the festive season.
Indian Bonds Dumped After Hawkish RBI Minutes10Y Yield +5bp
Investors sold off Indian bonds following hawkish minutes from the Monetary Policy Committee, which signaled potential rate hikes if inflation risks persist.
The benchmark 10-year bond yield (6.94% 2036) rose 5bp to 6.8709%, reaching its highest level since mid-June.
The bond yield curve flattened, with short-term yields rising and long-term yields falling, reflecting central bank unpredictability.
Indian Shares Rebound, Rupee StableNifty 50 +0.64%
Indian shares snapped a losing streak, with the Nifty 50 gaining 0.64% to 24,231.85 and the BSE Sensex rising 0.82% to 77,537.72.
The rupee showed slight strengthening to 95.7050 per dollar from 95.7525, with central bank intervention limiting volatility.
India Eases Rupee Export Payment RulesRupee Internationalization
India amended its trade policy to treat rupee and foreign currency export contracts, invoices, and settlements equally.
This move aims to remove barriers to rupee transactions with non-Asian Clearing Union countries, promoting the internationalization of the rupee in trade.
India Considers Low-Cost Loans for RenewablesRenewable Energy
The government is considering low-cost loans to compensate renewable energy projects affected by transmission constraints.
Despite 162 GW of solar-centric renewable capacity, about one-third of total generation, inadequate transmission infrastructure has led to supply limitations and losses for developers.
Latin America
Mexico Central Bank Signals Prolonged Rate PauseRates Held at 6.5%
Minutes from Mexico's August monetary policy meeting indicated the central bank's unanimous decision to maintain the reference rate at 6.5% for an extended period.
Policymakers noted that while inflation is easing, the pace of decline is slower than expected due to persistent services inflation.
Upside risks to inflation include Middle East conflict, trade uncertainties, and an intensifying El Niño phenomenon, despite GDP growth and a negative output gap signaling weak domestic demand.
Brazil Fiscal Discipline PledgeFiscal Rule
Brazil's Finance Minister Dario Durigan pledged to maintain fiscal rules and spending restraint if the Lula government secures re-election in October.
The current administration has made fiscal efforts equivalent to 2% of GDP and is prepared to continue this level of effort.
Muted Growth Outlook for Latin America2026 GDP 2.2%
The UN's ECLAC projected Latin American and Caribbean economic growth to remain subdued through 2027, despite stable inflation.
The 2026 GDP growth forecast was revised down to 2.2% from 2.4%, reflecting worsening international conditions and marking a fifth consecutive year of weak growth.
Latin American currencies weakened and stocks were mixed as US long-term bond yields continued to climb, despite US Treasury liquidity measures.
The MSCI Latin America stock index fell 0.2%, and the regional currency index declined 0.3%, amidst inflation concerns clouding the economic outlook.
Mexico's central bank hinted at a pause in interest rate hikes, while the Mexican economy grew 2.7% year-over-year in July.
Argentina Economic Activity ReboundsJune Activity +2.7%
Argentina's economic activity increased by 2.7% in June year-over-year, rebounding from a 0.4% rise in the previous month and exceeding market expectations of 1.9%.
The growth was primarily driven by fishing and mineral extraction, with 12 out of 15 tracked sectors showing increases.
Argentina Records Trade SurplusJuly Surplus $2.12B
Argentina recorded a trade surplus of $2.12 billion in July, with exports at $8.85 billion and imports at $6.74 billion.
This surplus exceeded market expectations of $1.85 billion by $270 million.
Emerging Markets
Romania Destroys Marine Drone Near Gas ProjectBlack Sea Security
Romania's Defense Minister announced that an F-16 fighter jet shot down a marine drone found hundreds of meters from the Neptun Deep gas project.
The Neptun Deep project, set to begin operations in 2027, is expected to make Romania the largest gas producer in the European Union.
As a NATO member sharing a 614km land border with Ukraine, Romania faces escalating threats from drones and mines targeting Black Sea energy infrastructure.
Bangladesh Elects New PresidentPolitical Change
Bangladesh's parliament elected Mirza Fakhrul Islam Alamgir, a veteran leader of the Bangladesh Nationalist Party (BNP), as the new president.
The BNP recently transitioned from opposition to the ruling party, taking control during a period of political change.
Poland Plans Corporate Tax HikeTax Hike 30%
Poland plans to temporarily increase corporate tax to 30% from the current 19% for large energy and fuel companies with annual revenues over €50 million, starting in 2027.
The tax rate is planned to gradually return to 19% by 2030, aiming to fund energy sector support and strengthen national defense.
Lebanon Bank Restructuring Law PassedLaw Passed
Lebanon's parliament passed amendments to the bank restructuring law, now awaiting presidential signature.
The High Financial Supervisory Committee's powers are expanded, allowing it to directly decide on bank restructuring or liquidation, with ongoing discussions with the IMF on depositor bailout laws.
Egypt Remittances Reach Record HighRemittances $47.3B
Remittances from Egyptian workers abroad reached a record $47.3 billion in fiscal year 2025/26, a 29.6% increase from $36.5 billion in the previous year.
This significant increase signals an improvement in foreign exchange liquidity.
Czech Economic Growth Forecast Cut2026 GDP 1.9%
The Czech Finance Ministry cut its 2026 GDP growth forecast to 1.9% from 2.1%, while maintaining 2.4% for 2027.
Uncertainty from Middle East conflicts and rising commodity prices are expected to dampen domestic demand, with the 2026 general government deficit worsening to -2.7% of GDP.
Russia-Ukraine Conflict EscalatesKyiv Air Assault
Russian forces launched a large-scale air assault on Kyiv yesterday evening, killing 16 and injuring over 40, hitting civilian buildings, schools, and hospitals.
Ukrainian President Zelenskyy highlighted a shortage of air defense missiles, while internal political tensions saw a dismissed defense minister call for wartime elections amid corruption allegations.
A Ukrainian drone was confirmed to have entered Latvian airspace, raising concerns about the conflict's wider spread.
Monetary Policy Council (MPC) member Tyrowicz proposed a 1.0 percentage point interest rate hike at the July meeting.
The benchmark rate remained frozen at 3.75% for the fourth consecutive month due to opposition from other members, indicating internal pressure for tighter monetary policy.
Malaysia Sovereign Wealth Fund ProbeGovernance Probe
Prime Minister Anwar ordered a comprehensive investigation into alleged governance violations at Xeraya Capital, a biotech investment subsidiary of Malaysia's sovereign wealth fund Khazanah Nasional.
The probe includes past transactions and highlights governance issues within the investment sector.
Ethiopia Central Bank FX Allocation$500M Allocated
Ethiopia's central bank allocated $500 million through a special auction to manage foreign exchange liquidity.
Markets & Commodities
Dollar Weakness DeepensUSD 3-Month Low
The US dollar index traded near a three-month low, primarily due to the weakening advantage of long-term yields.
Option markets saw a significant shift, with EUR/USD 25-delta risk reversals favoring dollar puts for the first time since February, signaling a reversal in positioning.
Canadian Dollar StrengthCAD 3-Month High
The Canadian dollar traded near a three-month high of 1.3790/USD, its highest level since May 21.
This strength was supported by rising oil prices, a weaker US dollar, and positive prospects for trade negotiations with the United States.
Canadian Producer Prices ReboundPPI +0.6% MoM
Canada's July industrial product prices rose 0.6% month-over-month, recovering from a 1.4% decline in the previous month.
Year-over-year, industrial product prices remained high at +12.4%, driven by energy and metals.
Raw materials prices, however, fell 2.2% month-over-month but were up 18.1% year-over-year.
Swiss Franc OutperformsCHF Strongest G10
The Swiss franc was the best-performing G10 currency following a Treasury announcement.
This was attributed to the unwinding of short positions as a low-interest funding currency, though sustained strength depends on robust risk appetite.
Europe
Monte dei Paschi (BMPS.MI) Counter-BidM&A Battle
Monte dei Paschi's board approved a counter-bid plan to acquire Banco BPM and Banca Generali, aiming to fend off Intesa's €36 billion takeover proposal.
Intesa's original plan to split MPS was criticized by the Italian Prime Minister, signaling a restructuring phase in Italy's financial sector.
Eurozone Bond Yields StabilizeYields Steady
Eurozone government bond yields stabilized after the US Treasury announced expanded liquidity support for long-term bonds.
The US Treasury's official goal is to calm rising long-term rates by maintaining current levels of coupon and floating-rate note issuance for several quarters.
British Pound Reaches 6-Month HighGBP $1.3661
The British pound reached a six-month high of $1.3661 against the US dollar yesterday, its highest since February 16.
This surge was driven by the deepening dollar weakness following the US Treasury's bond liquidity measures.
UK GDP Estimates Revised Up2024 GDP +0.5%
The UK Office for National Statistics revised up its GDP growth estimates for 2023 and 2024, with 2024 now 0.5% higher.
The revision reflects improved measurements in the services sector and real estate rentals.
Upcoming UK Economic DataData Watch
Key UK economic indicators are due today, including July retail sales and preliminary August PMI figures.
July retail sales are expected to be -0.5% month-over-month, with public sector net borrowing (PSNB) forecast at 0.
Preliminary August PMI estimates are 51.8 for services and 51.5 for manufacturing.
UK Factory Orders Strongest Since 2024CBI Orders Up
The CBI factory order survey indicated that UK factory orders achieved their best performance since November 2024.
STOXX 600 Slips on Inflation FearsSTOXX -0.12%
The European STOXX 600 index closed down 0.12% at 650.35 points yesterday, as strong oil prices fueled inflation concerns.
German producer prices (PPI) recorded their highest increase in three years, contributing to the inflation outlook.
US Treasury liquidity measures helped limit further losses in the bond market.
Switzerland-China FTA Finalized99.8% Duty-Free
Switzerland and China finalized an updated free trade agreement, significantly improving Swiss export access to the Chinese market.
Under the revised deal, 99.8% of Swiss exports will enter China duty-free, a substantial increase from approximately 50% under the 2014 FTA.
China
Rare Earth Exports to US RiseYttrium Up
China's exports of rare earth yttrium to the United States increased in July, according to customs data.
Yttrium is crucial for the US aerospace and defense industries, used in aircraft, satellites, and electronics, signaling a potential easing of supply constraints.
Foreign Minister Urges Korean NeutralityPolicy Stance
Chinese Foreign Minister Wang Yi urged South Korea to pursue strategic autonomy and avoid choosing sides between the US and China.
Wang also criticized the US's 'hostile policy' towards North Korea as a primary cause of tensions on the Korean Peninsula, calling for a policy shift.
Korea
North Korea Missile Launches10+ Missiles
North Korea launched over 10 ballistic missiles yesterday afternoon, coinciding with the final stages of joint US-South Korea military exercises.
South Korea's presidential office convened an emergency security meeting, while Japan's Ministry of Defense confirmed missiles landed outside its exclusive economic zone.
The launches run counter to efforts by the Trump administration to restore diplomacy with North Korea.
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