The US-Iran war further escalates
Fighting between the U.S. and Iran is likely to further escalate in the coming week as the fragile cease-fire brokered last month is declared “functionally dead.” Iranian Supreme Leader Mojtaba Khamenei said Sunday President Trump’s signature on the Memorandum of Understanding (MOU) was “worthless and unreliable.” An Iranian Foreign Ministry spokesman said Iran has “no plans for negotiations.”

U.S. attacks on Iranian military positions and infrastructure significantly ramped up this weekend following an Iranian attack on a U.S. base in Jordan, killing three U.S. servicemen, and the killing of a U.S. serviceman in Northern Iraq by an Iranian drone. Iranian missile and drone strikes have also hit U.S. sites in Kuwait, Bahrain, and Oman.

At this point, Iran’s rhetorical posture is now uniformly rejectionist across the Supreme Leader's office, Iran's negotiating team, and the Iranian Foreign Ministry — a marked shift from the ambiguity and disunity heard in early July. The best bet for a return to a cease-fire and a possible return to the negotiating table is via Omani and Pakistani diplomatic efforts. Still, for now, those efforts are falling on deaf ears in Tehran.

Adding to tensions in the region, the Saudi-Houthi truce that has been in effect since 2022 may now be breaking down, threatening a second war front in the Gulf region. The truce began unraveling on July 13 when air strikes by Yemen's internationally recognized government (seen as being backed and assisted by Saudi Arabia) blocked an Iranian aircraft carrying a Houthi delegation, which included Iranian military experts, from landing in Sanaa, Yemen, which is under control of the Houthis. The Houthis retaliated by firing missiles at the Abha International Airport in Saudi Arabia.

Lebanon’s president travels to meet Trump
Markets will also be watching Lebanese President Joseph Aoun's visit to Washington to meet with President Trump. This is Aoun's first face-to-face meeting with Trump, his first White House trip as President, and the first visit by a Lebanese head of state in nearly two decades — the last presidential-level meeting was Sleiman-Obama in 2009.

The White House is hoping to bolster Aoun's efforts to help de-escalate Israeli-Hezbollah fighting in southern Lebanon and begin moving on a plan to disarm Hezbollah fighters (something Hezbollah leaders adamantly refuse to do). The Trump-Aoun meeting could also result in an announcement of new investment funding to help rebuild the beleaguered country following years of war.

ASEAN foreign ministers meet
Meanwhile, Association of Southeast Asian Nations (ASEAN) foreign ministers will be gathering in Manila, the Philippines, this week. Joining them will be U.S. Secretary of State Marco Rubio, Chinese Foreign Minister Wang Yi, Russian Foreign Minister Sergey Lavrov, and the foreign ministers of Australia, Canada, Japan, and the United Kingdom (UK). The meeting will focus on hammering out a South China Sea code of conduct aimed at cooling tensions among China, Vietnam, and the Philippines.

But the real action may be on the sidelines, as markets will be watching for any bilateral meetings between Rubio and Wang or between Rubio and Lavrov to discuss Ukraine peace talks. Additionally, Rubio and the foreign ministers of Japan, India, and Australia will hold a Quad meeting to discuss security issues of mutual concern.

Britain gets a new prime minister as IMF issues warning
In London, Andy Burnham will formally become the UK's new prime minister, the seventh prime minister the country has had since 2016. Burnham is facing a host of economic challenges that were made tougher this week by the International Monetary Fund (IMF) warning against raising the top rate of income tax, as it assesses that this will further hurt the economy. Burnham is searching for a means to offset rising energy costs in the wake of the Iran War.

Trump’s tariffs set to expire
Back here in Washington, the Trump Administration's 10% Section 122 tariffs are set to expire later this week. The President put these tariffs in place to replace the tariffs struck down by the U.S. Supreme Court earlier this year. Trump cannot renew the tariffs – only the U.S. Congress can do that – but he can effectively do so by raising the rate to 15%, something he has said he intends to do. The rationale for the higher rates, according to the Office of the U.S. Trade Representative, is that they will target human rights violations in more than 50 countries. Also this week, Brazil gets its own separate Section 301 25% tariffs imposed by President Trump.

The ECB and PBoC meet on interest rates
Turning to the global economic and financial radar screen, the big events this week will be the European Central Bank (ECB) meeting on rates and the People's Bank of China's (PBoC) decision on rates.

While the ECB meeting will dominate European market news, a few other important reports will be released this week. The UK releases labor figures on Tuesday and June Consumer Price Index (CPI) numbers on Wednesday. The July ZEW surveys for Germany are out on Tuesday.

In Asia, aside from the PBoC interest rate announcement, Japan's trade balance is released on Wednesday, and the June CPI is released on Friday.

Here in the U.S., initial jobless claims come out on Thursday, and flash Purchasing Managers' Indexes (PMIs) and new home sales come out on Friday. Canada's June CPI is out on Monday, and May retail sales data is released on Wednesday.

Financial Regulatory Week Ahead

Senate banking holds confirmation hearing
Capitol Hill may be enveloped in a thick, smoky haze from wildfires up north, but key congressional committees are still gearing up for a busy week next week. The Senate Banking Committee is holding a confirmation hearing this coming Thursday for President Trump’s third nominee to serve as Director of the Consumer Financial Protection Bureau (CFPB), Brian Johnson.

The previous two nominees were Jonathan McKiernan (who was instead nominated to serve as Treasury Undersecretary for Domestic Finance, a role he held until last week) and Stuart Levenbach (whose nomination was yanked to make him Chair of the Interagency Council on Statistical Policy).

Johnson has a strong background in financial regulation. He is a former senior bank lawyer who later served at the CFPB in 2017. He then went to work at Patomak Global Partners, a strategy/risk management/regulatory affairs consultancy founded by current Securities and Exchange Commission Chair Paul Atkins. Johnson went from there to Capital One, where he was Vice President and Chief U.S. Card Compliance Officer.

We think he’s likely to get grilled by Committee Democrats for his closeness to the industry and for having served at a major credit card company – but it's highly likely he ultimately gets confirmed.

Others joining Johnson at the hearing include John Crews, a member of the board of the National Credit Union Administration (NCUA). He’ll be the first new NCUA board member since early last year, when President Trump fired the Democratic members of the board. Currently, Crews is serving as the Treasury Deputy Assistant Secretary for Financial Institutions. Previously, he was the Banking Committee’s Policy Director – so the hearing will be something of a homecoming.

Prediction markets get a hard look in the house
Also, this coming week, the House Agriculture Committee will hold a hearing titled “Examining Customer Protections and Market Integrity in Sports Event Prediction Markets.” While focused on sports betting, the timing could not be better, as it was discovered this past week that the White House teleprompter operator was making large bets in the prediction market Kalshi on what President Trump was going to say in his speeches (he’s been suspended from his job).

Looking at what happened last week, we would note that Federal Reserve (Fed) Board Chair Kevin Warsh made some interesting comments in his House and Senate hearings about regulation. When asked by Senator Katie Britt (R-Ala.) about the Fed’s effort on bank regulation tailoring, Warsh said:

• “...broadly, I'll step back and say modernizing our banking system, streamlining regulations so that the rules that apply to the systemically important financial institutions are not one size fits all for every other. The secret to the American economy is we have a few thousand banks and other providers of credit who know their smaller markets better. I'd rather have that system than what most of our G20 peers have, where they have half a dozen institutions implicitly backed by their government. I think reform is coming to supervision and regulation.
• I have my own ideas that might be as dramatic as I've already shared on monetary policy here, and I think the sooner we can get to the bottom of it, the better. If I could say one more thing, the reforms we've been putting in place over the last 15 years, coming out of Dodd-Frank, as we learned in the Silicon Valley Bank example and the First Republic example, they didn't work perfectly. My predecessors had very little choice but then to do another overall bailout. We don't want that to happen again, so we want to tailor the rules and the capital, so they serve the best interests of the U.S. economy, which I describe as a system that is safe, sound, and competitive.”

CFPB close to new consumer financial data rule
Also last week, Acting CFPB Director Russ Vought revealed the CFPB is close to unveiling a rewrite of regulations governing access to consumers’ financial data, rewriting Section 1033 of the Dodd-Frank Act. The Biden Administration rule – which was blocked by a federal judge – banned banks from charging for access to their customers' financial data.

That rule hit fintech firms, digital asset companies, and retailers who heavily rely on that data for their payment platforms (which made banks happy). But fintech and crypto firms rallied, lobbying Vought hard to rewrite the rule rather than letting the court strike it down. Vought’s comments served as something of a starter gun for a new and very tough battle between banks and the fintech/crypto worlds, which is likely to go on for some time.