TMGM Daily Market Breakfast: 1 September 2026

Morning Snapshot

• Middle East tensions remained the dominant market driver after U.S. strikes on Iranian launchers near the Strait of Hormuz, Iranian retaliatory attacks on U.S. targets in Jordan and a reported projectile strike on a tanker leaving the chokepoint.
• WTI crude traded around $85.50 to $85.60 a barrel after rising more than 3% on Monday, while Brent briefly moved back above $90 as supply risks in the Persian Gulf stayed in focus.
• U.S. President Donald Trump said any strikes on Iran would be limited and framed the objective as keeping oil flowing through Hormuz.
• Federal Reserve Chair Kevin Warsh’s Jackson Hole remarks kept the September rate debate open, with fed funds futures pricing around a 58% to 60% chance of a 25 basis point hike and about 60 basis points of tightening over the next 12 months.
• U.S. July personal income rose 0.4%, personal spending increased 0.2%, and the headline PCE deflator held at 3.7% year on year while core PCE remained at 3.3%.
• China’s August manufacturing PMI rose to 49.8 from 49.2, but non-manufacturing stayed weak as Beijing rolled out property-market reforms and officials signalled further fiscal and monetary support.
• Japan Finance Minister Satsuki Katayama said she confirmed with U.S. Treasury Secretary Scott Bessent that continued, coordinated action on foreign exchange is needed.
• Japanese data and policy commentary kept Bank of Japan normalization in focus ahead of the September 17-18 meeting, even as Bessent described recent yen moves as well contained.
• U.S. equities came under pressure, with the Dow Jones Industrial Average trading near 53,250, roughly 300 points lower on the session, as investors reacted to the escalation in the Middle East.
• Eurozone inflation data remained central for ECB expectations after German CPI accelerated and markets continued to price a near-certain September rate increase.

Market Developments

Energy

WTI crude traded around $85.50 to $85.60 per barrel after rising more than 3% on Monday and approaching a one-month high of $87.38, while Brent briefly moved back above $90 per barrel as Persian Gulf supply risks intensified.

U.S. Equities

The Dow Jones Industrial Average traded near 53,250, about 300 points lower on the session, as the U.S.-Iran escalation and attacks linked to Jordan and the UAE weighed on risk sentiment.

Foreign Exchange

The U.S. Dollar Index was down 0.1% near 99.58 early in the week after a strong Friday, EUR/USD traded near 1.1600 with the euro up about 0.15% on Monday, and USD/CHF hovered around 0.8090 as markets balanced hawkish Fed signals against incoming inflation and labour-market data.

Geopolitics & Energy

U.S.-Iran Escalation Keeps Strait of Hormuz Supply Risks at the Centre

Tensions in the Middle East intensified after the U.S. said it struck Iranian rocket launchers that were preparing to send mines into the Strait of Hormuz, marking its first military action against Iran in more than a month. U.S. Central Command said forces were monitoring the area closely and remained ready to protect commerce through the waterway, a key route for global oil and LNG flows.

Iran’s Islamic Revolutionary Guard Corps said its aerospace forces carried out retaliatory drone and ballistic missile strikes against U.S. targets at two air bases in Jordan earlier in the day and warned that it would respond decisively to any further hostile military aggression. Separately, U.S. President Donald Trump said strikes on Iran would be limited after Axios reported that he and senior aides were considering limited action in Hormuz to prevent Iran from rebuilding radar and missile capabilities used to attack ships.

Maritime security risks also rose after the United Kingdom Maritime Trade Operations said a tanker reported being struck by three projectiles while sailing out of the Strait of Hormuz. The latest incidents added to concerns over shipping through the chokepoint, where reports cited in market commentary put transit flows at roughly 6 million to 8 million barrels a day, with some analysts assuming an average closer to 5 million barrels a day.

Oil Holds Above $85 as Gulf Disruptions and Russian Diesel Curbs Tighten Supply

Oil prices stayed elevated as the Hormuz escalation fed concerns about crude and fuel flows from the Persian Gulf. WTI traded around $85.50 to $85.60 per barrel during Asian hours on Tuesday after gaining for a second straight session, and had risen more than 3% on Monday while drawing close to a one-month high of $87.38. Brent briefly moved back above $90 per barrel in early Asia trading.

The market was also digesting reports that American forces struck two Iranian rocket launchers on Larak Island and that Tehran responded with missile and drone attacks on two air bases in Jordan. Commentary during the session also cited attacks on assets in the United Arab Emirates, underscoring the broader regional security risk around energy infrastructure and shipping.

Supply concerns were compounded by Russia’s decision to extend its diesel export ban by another month until the end of September 2026. In parallel, President Trump said the U.S. had struck a deal with Venezuela to secure majority control of more than 65 billion barrels of oil reserves, although no legal terms, timing or implementation details were provided.

U.S. Stocks Retreat as Geopolitical Risk Hits Sentiment

U.S. equities weakened as investors reacted to the latest Middle East escalation. The Dow Jones Industrial Average traded near 53,250, roughly 300 points lower on the session, after American forces struck Iranian launchers and Tehran answered with attacks on bases in Jordan and assets in the United Arab Emirates.

The move reflected a broader deterioration in risk sentiment as higher energy prices and the threat to shipping through the Strait of Hormuz added to an already tense macro backdrop.

Macroeconomics & Central Banks

Warsh’s Jackson Hole Message Reprices September Fed Expectations

Federal Reserve Chair Kevin Warsh used his Jackson Hole speech to stress that the central bank still has “work to do” to return inflation to its 2% target and signalled openness to further rate increases if underlying inflation does not improve convincingly. The remarks marked a shift from his earlier communication approach and helped rebuild his inflation-fighting credentials in the eyes of markets.

Fed funds futures moved to price roughly a 58% to 60% chance of a 25 basis point hike at the September 15-16 meeting, up from about 35% before the speech, while markets implied around 60 basis points of tightening over the next 12 months. Commentary across the reporting window also noted that short-dated Treasury yields rose while longer-dated yields fell, flattening the curve as investors interpreted the speech as reducing longer-term inflation and policy-risk premia.

The repricing left upcoming U.S. data in sharper focus. Reports highlighted July JOLTS on Tuesday, ADP private payrolls on Wednesday, Revelio Labs employment data on Thursday and the August nonfarm payrolls report on Friday. Consensus estimates cited in the coverage put August payroll growth at 55,000 after a 23,000 decline in July, with the unemployment rate seen holding at 4.1%.

U.S. Income Growth Outpaces Spending as PCE Inflation Holds Firm

Fresh U.S. data showed nominal personal income rose 0.4% in July, double expectations, while nominal personal spending increased 0.2%, led by a 0.6% gain in services. After adjusting for inflation, disposable income rose 0.4% and real spending was flat.

The headline PCE deflator held at 3.7% year on year in July, one tenth above consensus, while core PCE was unchanged at 3.3%. On a monthly basis, both headline and core PCE rose 0.2%. The figures added to the inflation backdrop confronting the Fed as markets reassessed the possibility of another rate increase.

Ahead of Friday’s payrolls release, one economics note projected August nonfarm payroll growth of about 80,000, with the unemployment rate unchanged at 4.1% and labour-force participation edging up to 61.5%.

China’s PMI Recovery Remains Uneven as Beijing Signals More Support

China’s August manufacturing PMI rose to 49.8 from 49.2 in July, with large firms returning to expansion at 50.6 and export orders moving back into growth territory. Even so, the manufacturing reading remained below 50 and non-manufacturing activity stayed weak, underscoring an uneven recovery.

Policy pressure is building as growth tracks below the official 4.5% to 5.0% target range. Government spending contracted 4.4% year on year in July, an improvement from June’s 11.9% decline, and Vice Finance Minister Liao Min said new coordinated fiscal and financial policies are being drafted for deployment in the second half.

On the monetary side, the People’s Bank of China said in its second-quarter monetary policy implementation report that it would maintain a moderately loose stance, strengthen counter-cyclical adjustments and make greater use of overnight reverse repo operations as a liquidity management tool. Coverage during the period also pointed to the possibility of further reserve requirement ratio and rate cuts before year-end.

Beijing also announced property-market reforms aimed at strengthening homebuyer protections and shifting the market toward completed-home sales. The measures tighten presale rules, require stronger safeguards for buyer funds, delay mortgage disbursement until sales or completion registration depending on the project type, extend the maximum term of individual home loans to 40 years from 30 years and broaden financing channels for viable developers through equities, bonds, asset-backed securities and REITs.

Japan and U.S. Reaffirm Need for Coordinated FX Action

Japan Finance Minister Satsuki Katayama said she confirmed with U.S. Treasury Secretary Scott Bessent that continued, coordinated action on foreign exchange is needed. The comment underscored how closely Tokyo and Washington are watching yen moves after recent volatility in the currency.

The statement came after Bessent had earlier described recent yen moves as “pretty well-contained” rather than disorderly, reducing immediate expectations of another joint intervention even as the yen’s slide below 160 per dollar drew market attention.

BoJ Normalization Stays in View Ahead of September Meeting

Japanese macro data and official commentary kept Bank of Japan normalization in focus ahead of the September 17-18 policy meeting. July industrial production was broadly flat, rising 0.1% month on month on a seasonally adjusted basis, while shipments increased 2.2%, inventories rose 0.5% and the inventory ratio fell 1.7%.

Analysts said resilient housing and commerce indicators supported the view that Japan has exited deflation. Bessent said he expects Governor Kazuo Ueda to “do the right thing” on policy while declining to tell Japan what to do on rates, and added that he plans to meet Ueda at the G20 gathering in Asheville.

Eurozone Inflation Readings Keep September ECB Move in Focus

Eurozone inflation data remained central to European Central Bank expectations after stronger national readings added to pressure for another rate increase. Coverage during the reporting window cited forecasts for August euro-area headline CPI to accelerate to 3.3% year on year from 2.9% in July, with core inflation seen holding at 2.5%, while German headline HICP was expected at 3.1% after 2.8%.

Markets were described as pricing a near-certain September move, with estimates ranging from a 97% probability of a 25 basis point increase to swaps almost fully pricing a hike to 2.50% on September 10. Reports also noted that the ECB’s estimated neutral range was seen at 1.75% to 3.00% and that the pre-decision quiet period was approaching, leaving inflation and PMI releases as the main remaining signals.

Upcoming Key Events

• U.S. JOLTS Job Openings — null: July JOLTS data is due on Tuesday as markets assess labour-market conditions ahead of the September FOMC meeting.
• U.S. ADP Private Payrolls — null: August ADP private payrolls are due on Wednesday, with one estimate in the reporting window at 47,000 after 44,000 in July.
• U.S. Nonfarm Payrolls — null: The August employment report is due on Friday, with cited estimates ranging from 55,000 to 80,000 payroll gains and the unemployment rate seen at 4.1%.
• Eurozone Flash CPI — null: August flash inflation data is due on Tuesday, with headline CPI forecast at 3.3% year on year and core inflation seen at 2.5%.
• Bank of Canada Policy Decision — null: The Bank of Canada is scheduled to meet on September 2, with commentary in the reporting window centred on whether it keeps the overnight rate at 2.25%.
• Bank of Japan Policy Meeting — null: The Bank of Japan’s next policy meeting is scheduled for September 17-18 and remains a focal point for normalization expectations.