US-Iran Tensions Flare Again Over Strait of Hormuz as BOJ Signals Potential Rate Hikes

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Summary:

Iran says the Strait of Hormuz will not return to its pre-war operating conditions; the U.S. Strategic Petroleum Reserve falls below 300 million barrels for the first time since 1983...

【Highlights】

1. Iran’s president holds seven- to eight-hour meeting with Supreme Leader

2. BOJ releases meeting opinions, with several policymakers calling for faster rate hikes

3. Iran says the Strait of Hormuz will not return to its pre-war operating conditions

4. Hammack: Multiple rate hikes may be needed to bring inflation down

5. U.S. Strategic Petroleum Reserve falls below 300 million barrels for the first time since 1983

6. Trump says U.S. forces have full control of the Strait of Hormuz and demands compensation from Iran

【Details】

Iran’s President Holds Seven- to Eight-Hour Meeting with Supreme Leader

Iranian President Masoud Pezeshkian said on August 10 that he recently held talks with Iran’s Supreme Leader, Mojtaba Khamenei, with the meeting lasting seven to eight hours. He said Mojtaba Khamenei is in good health.

According to Iranian state media on August 9, Mojtaba Khamenei and Pezeshkian held talks covering a wide range of challenges currently facing Iran, including basic livelihood needs, the ongoing war against Iran, future prospects, military developments, and economic cooperation with foreign partners.

BOJ Releases Meeting Opinions, with Several Policymakers Calling for Faster Rate Hikes

On August 10, the Bank of Japan released the main views expressed at its monetary policy meeting held on July 30-31. Although the BOJ kept its policy rate unchanged at 1% following the meeting, several policymakers warned that the risk of inflation exceeding 2% should not be overlooked and called for a faster pace of rate hikes.

Japan’s Cabinet Office said in its fiscal 2026 Economic and Fiscal White Paper, released on July 24, that the country’s economic recovery continues to face multiple challenges, including imported inflationary pressures stemming from the situation in the Middle East and persistent structural issues such as labor shortages.

Iran Says the Strait of Hormuz Will Not Return to Its Pre-War Operating Conditions

Iran said the Strait of Hormuz will not return to its pre-war operating conditions, reinforcing its position on the strategically important shipping route.

Ali Nikzad, deputy speaker of Iran’s parliament, said there is no military solution to reopening the strait and that only shipping routes agreed upon by Iran and Oman will be recognized. Tehran insists that vessels must follow routes designated by Iran’s armed forces.

Hammack: Multiple Rate Hikes May Be Needed to Bring Inflation Down

Cleveland Fed President Beth Hammack said on Monday that inflation has yet to return to the central bank’s target and that the Federal Reserve may need to raise interest rates multiple times. She said a single 25-basis-point rate hike would not have a significant impact on the economy, but she declined to predict the exact number of hikes or the eventual level of interest rates.

The current 3.50%-3.75% target range has not imposed significant constraints on the economy, as businesses have yet to materially reduce growth-related investment due to high interest rates. Therefore, now is the time to act. The longer policymakers wait, the more difficult it will be to bring inflation back to 2%.

Hammack said there are currently no significant problems in the labor market and that the July employment data would not change her focus on inflation. She added that markets can assist the Federal Reserve but cannot replace the central bank in making policy decisions.

U.S. Strategic Petroleum Reserve Falls Below 300 Million Barrels for the First Time Since 1983

The U.S. Department of Energy said on Monday that the Strategic Petroleum Reserve (SPR) fell by 6.1 million barrels last week to 298.7 million barrels, the lowest level since 1983. The decline further highlights the significant pressure facing global energy inventories.

In March, U.S. President Donald Trump ordered the release of 172 million barrels from the Strategic Petroleum Reserve to address oil supply disruptions caused by Iran’s blockade of oil tankers transiting the Strait of Hormuz.

Trump Says U.S. Forces Have Full Control of the Strait of Hormuz and Demands Compensation from Iran

Trump said on Monday that the United States had completed mine-clearing operations across the entire Strait of Hormuz and that the U.S. Navy now has “100% control” of the critical shipping route.

He said the Strait of Hormuz is now open, although Iran occasionally continues to lay mines, which U.S. forces will remove.

Trump also reiterated that after Iran demanded compensation from the United States for losses incurred during the military conflict, Washington would make its own compensation claims against Tehran. Trump said Iran is seeking compensation for damages suffered during the past five months of military conflict. “I am also demanding compensation from Iran,” he said, adding that he had instructed his representatives to make the demand an explicit part of all future negotiations.

Today’s Key Events

12:30 (UTC+8) Australia August interest rate decision

13:30 (UTC+8) RBA Governor Michele Bullock holds a monetary policy press conference

20:15 (UTC+8) U.S. weekly change in ADP employment through July 25

22:00 (UTC+8) U.S. July existing home sales, annualized

00:00 (UTC+8) EIA releases its monthly Short-Term Energy Outlook

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