The Strait of Hormuz Deadlock Persists as Inflation Complicates Fed Rate-Cut Expectations

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Summary:

The U.S. must accept Iran’s conditions in exchange for the reopening of the Strait of Hormuz; Goolsbee: The biggest concern remains excessively high inflation, rather than a weakening labor market...

【Highlights】

1. The U.S. must accept Iran’s conditions in exchange for the reopening of the Strait of Hormuz

2. The U.S. expects oil supply disruptions caused by the Iran war to persist through the end of 2027

3. Yemen’s Houthi movement says it is willing to engage in dialogue with Saudi Arabia

4. Goolsbee: The biggest concern remains excessively high inflation, rather than a weak labor market

5. U.S. existing-home sales decline for a second consecutive month in July

6. RBA keeps rates unchanged and expects the economy to return to balance next year

【Details】

The U.S. Must Accept Iran’s Conditions in Exchange for the Reopening of the Strait of Hormuz

On August 11 local time, Rezaei, secretary of Iran’s Supreme National Security Council, said the United States is the source of insecurity in the Strait of Hormuz, the Persian Gulf and the Gulf of Oman. He accused the U.S. of waging an “illegal war” against Iran and endangering the entire region.

He said the Strait of Hormuz would remain closed unless the United States changes its behavior and accepts Iran’s conditions. The U.S. must end the war and release Iran’s frozen funds, while also meeting other conditions conveyed through intermediaries.

He added that if Iran and Oman reach an agreement on shipping routes through the Strait of Hormuz, that agreement would be handled separately from the issue of the strait’s blockade.

U.S. Expects Oil Supply Disruptions Caused by the Iran War to Persist Through the End of 2027

The United States currently expects oil supply disruptions of around 600,000 barrels per day caused by the Iran war to continue through the end of next year, as the conflict continues to hinder oil shipments through the strategically important Strait of Hormuz.

According to estimates in the U.S. Energy Information Administration’s (EIA) Short-Term Energy Outlook, an average of 4.9 million barrels of oil per day passed through the Strait of Hormuz in the second quarter of this year. By comparison, the figure was 21.6 million barrels per day in the fourth quarter of 2025, before the United States and Israel launched attacks on Iran.

Yemen’s Houthi Movement Says It Is Willing to Engage in Dialogue with Saudi Arabia

Yemen’s Houthi movement said on August 11 that it was willing to maintain dialogue with Saudi Arabia, while warning that it would continue attacks on Saudi-linked vessels and Saudi-backed military targets unless its demands are met.

Mohammed Abdul Salam, the Houthis’ chief negotiator and spokesperson, said in a statement posted on social media that the Houthi negotiating delegation remains in contact with and is holding talks with regional and international parties over the current situation. “We have not closed the door to dialogue and negotiations,” he said.

At the same time, the statement accused Saudi Arabia of refusing to negotiate and preparing to launch further military action in Yemen.

Goolsbee: Inflation Remains the Biggest Concern, Rather Than a Weak Labor Market

Chicago Fed President Austan Goolsbee said on Tuesday that he was more concerned about persistently high inflation than about a weakening labor market.

However, it remains unclear whether this concern means he supports the calls for rate hikes made by some Fed officials last month.

He said indicators such as the unemployment rate, hiring rate and layoff rate suggest that the labor market remains stable, although it cannot be described as particularly strong. That is his assessment of the current labor market.

U.S. Existing-Home Sales Decline for a Second Consecutive Month in July

U.S. existing-home sales fell for a second consecutive month in July as rising mortgage rates and limited housing supply pushed home prices higher, pricing more potential buyers out of the market.

According to the National Association of Realtors (NAR), existing-home sales fell 1.7% from the previous month to a seasonally adjusted annual rate of 4.06 million units in July. Economists surveyed by Reuters had expected an annualized rate of 4.05 million units.

First-time buyers accounted for 29% of total sales. Industry participants generally consider a first-time buyer share of around 40% to be indicative of a healthy housing market.

There was, however, more positive news from the U.S. small-business sector. Small-business confidence rose to an 11-month high in July, while the share of business owners planning to increase hiring jumped, suggesting that last month’s decline in nonfarm payrolls may have been temporary.

The National Federation of Independent Business (NFIB) said its Small Business Optimism Index rose 2.4 points to 99.8 in July, the highest level since August 2025 and above its 52-year average of 98.0.

RBA Keeps Rates Unchanged, Expects Economy to Return to Balance Next Year

The Reserve Bank of Australia (RBA) kept its policy rate target unchanged at 4.35%, in line with market expectations. The RBA said in its post-meeting statement that the decision was unanimously supported.

Although the impact of the conflict in the Middle East on inflation has so far been smaller than expected, inflation remains too high, and the board remains committed to ensuring that elevated inflation does not become entrenched.

The cash rate target has been raised three times this year, and financial conditions are now tighter than previously. Economic growth also appears to be slowing as expected. The RBA expects inflation to return to around the midpoint of its target range only by the end of 2027, with the forecast subject to upside risks.

The central bank said that, given its assessment that monetary policy remains somewhat restrictive, the board decided to keep the cash rate target unchanged while continuing to assess economic developments.

The RBA will take whatever action is necessary to ensure inflation returns sustainably to target, including raising the cash rate target further if upside risks to inflation materialize.

The RBA expects the economy to return to balance in 2027, slightly earlier than previously anticipated. GDP growth is forecast at 1.4% in the fourth quarter of this year, 1.6% in the fourth quarter of 2027, and 1.8% in the fourth quarter of 2028.

Today’s Key Events

16:00 (UYC+8) IEA releases its monthly Oil Market Report

20:30 (UYC+8) U.S. July CPI

TBD (UYC+8) OPEC releases its monthly Oil Market Report

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