Ships go dark in ‘undeclared naval war’

Ships go dark in "undeclared naval war" in the Strait of Hormuz
The situation in the Strait of Hormuz got worse over the weekend as the U.S. hit 140 targets in Iran overnight, and in response Iran targeted sites in Jordan, Bahrain, Kuwait, and Oman. (Live coverage from the BBC here.)

The Joint Maritime Information Center told the Financial Times that the southern route near the Oman coastline remained open to shipping: “U.S. forces are prepared to maintain freedom of navigation and safeguard lawful commerce in accordance with international law.” 

But it said the threat level was “severe”. Very few ships are moving through the Strait. Data from Shipfinder.com shows only 23 transits in the last 24 hours and Bloomberg reported that those vessels that are making the run are doing so in secret, with their transponders turned off.

• Brent crude oil hit $77 per barrel this morning, up from $71 a week ago.

President Trump is running out of time to solve the crisis before the November midterm elections, Fortune’s energy editor, Jordan Blum, says:

“Nearly 1 billion barrels of worldwide petroleum reserves are now depleted and not being replenished. At the same time, mothballed refineries have yet to come back online, China still hasn’t resumed importing large oil volumes, and now President Donald Trump has declared the interim peace deal ‘over’ amid new drone and rocket exchanges.”

“The reality is there’s no clear, long-term peace deal in sight, even if a full resumption of conflict is avoided. That means the Strait of Hormuz is unlikely to return to its normal volumes for many months, and certainly not in time for the anticipated spike in demand when China and refiners start buying more oil again, energy analysts told Fortune. Prices are going to surge again—likely close to $90 per barrel—despite the world learning to adapt and avoid doomsday scenarios of $200 oil, they said.”

So why isn’t oil nearer $90 per barrel? Traders are complacent, my colleague Jason Ma says. The reality, according to Sal Mercogliano, a Campbell University professor who specializes in military and maritime history, “is that we’re finding ourselves in this undeclared naval war. And an undeclared naval war can escalate.”

That’s what Iran wants, Sanam Vakil, Middle East director at Chatham House, said to the FT: “They are still calculating that Trump is risk-averse and that they can absorb the ‘new normal’ — low-level conflict — and wear the U.S. down. But this is a quagmire.”

Mohammad Bagher Ghalibaf, the Speaker of Iran’s Parliament, posted on X on Sunday: “The era of one-sided deals is OVER. We told you: keep your word or pay the price. Reality is knocking.”

• The escalating U.S.–Iran war is rewriting the CEO playbook again - Diane Brady

Tech stocks stumble as Gulf tensions ripple through Asia
Asian stocks were sharply down this morning but markets in Europe reacted more modestly to developments in the Gulf region. U.S. futures were modestly down as the price of oil rose.

• S&P 500 futures were down 0.3% this morning. The index closed up 0.42% on Friday. 
• In Europe, the Stoxx 600 was flat in early trading, as was the U.K.’s FTSE 100.
• Asia: South Korea’s KOSPI was down 8.95%. Japan’s Nikkei 225 was down 1.92%. India’s Nifty 50 was up 0.15%. China’s CSI 300 was down 1.79%. 
• Brent crude was $77 per barrel this morning.
• Bitcoin was $63K.

Taiwan Semiconductor Manufacturing Co reported a 68% year-on-year revenue increase in June, and Q2 numbers that exceeded the chipmaker’s previous guidance. The stock rose 1% on the news.

The “chart of the year”? There is no mystery as to why semiconductor stocks have done so well this year. This chart from Bank of America—brought to my attention by Ben Carlson at Ritholtz Wealth Management—shows the whole story. The AI hyperscaler companies (Meta, Amazon, Oracle, Google, and Microsoft) are simply transferring their cash flow directly to chipmakers,  



Tariff refunds will juice Q2 earnings, Wells Fargo says
Tariff refunds are well underway, according to Ohsung Kwon and his colleagues at Wells Fargo, who estimate that $85 billion in refunds has now been made since President Trump’s trade war was declared illegal by the U.S. Supreme Court. Crucially, $73 billion of that was refunded in Q2—which Kwon says will now show up in quarterly earnings disclosures as a 3% boost to earnings across the S&P 500. The company that will benefit the most is Staples, whose EPS should jump by 34% due to tariff refunds, Kwon forecasts.

U.S. tariff revenue is now close to zero: Somewhat astonishingly, U.S. tariff revenue is now heading into negative territory, according to this chart from James Smith at ING. Put another way, the U.S. collected more in tariffs before Trump’s Liberation Day than it does currently. 

James Murdoch may have reaped as much as $7.5 billion from his pre-IPO investment in Elon Musk’s SpaceX - Claire Atkinson

‘Without our money, people will struggle’: Muangthai Capital’s new CEO Parithad Petampai defends the role of microfinance in Thailand - Angelica Ang

SpaceX and Amazon are tech dopplegangers worth $4.5 trillion—and they’re headed for a collision - Amanda Gerut

More tech workers are retiring early because they don’t want to deal with AI-related changes: ‘Many people believe it’s overblown’ - Sasha Rogelberg

OpenAI’s latest AI model likely has similar cyber vulnerabilities to one that led to U.S. export controls on Anthropic’s Fable, British agency says - Emily Forlini and Jeremy Kahn

GOP Sen. Mitch McConnell ends frenzied speculation about his health, revealing a fall led to his hospitalization and he’s now in a rehab center - AP

The K-shaped economy suddenly came to an end in June


Lower-income household wage growth went up to 4.1% in June, year-on-year, nearly matching that of higher-income households (4.2%) and beating the middle-income bracket (3.4%), according to Bank of America’s Liz Everett Krisberg and David Tinsley. “Lower tax withholding under the One Big Beautiful Bill Act (OBBBA) may be lifting take-home pay and could support after-tax wage growth for up to a year,” they said in a note. “Bank of America internal data shows increased job switching in Q2 2026 compared to a year earlier, with lower-income switchers seeing larger pay bumps of around 12%, versus 9% for higher-income households.”

27 trillion
The number of tokens processed by Chinese AI models in June, as estimated by Deutsche Bank. U.S. models only processed 19 million. More users are moving to Chinese models because they are cheaper. “The most expensive model, the benchmark-topping Claude Fable 5, charges almost 10 times as much to complete a standard task as Z.ai’s GLM 5.2 for a much smaller differential in performance, according to the Artificial Analysis Intelligence Index,” Jim Reid and his team at DB said in an email. An increasing number of U.S. companies are using model-picking software to ensure employees use the cheapest AI that will deliver the best results.

Dimon pressed over whether he lobbied UK government on Epstein’s advice - FT

Nancy Mace eyes run for Lindsey Graham's Senate seat - Axios

Apple’s ‘Thermonuclear’ Response to the OpenAI Threat - WSJ

Lindsey Graham’s Death Deprives Ukraine of Key Trump Whisperer - Bloomberg

‘Jurassic Park’ star Sam Neill dead at 78 - NY Post

The $86,000 interns are winners in Wall Street’s entry-level arms race
The battle for entry-level talent is getting expensive, at least on Wall Street. Trading firm Susquehanna International Group is dangling an eye-popping offer for master’s and PhD interns: $8,600 a week—or $86,000 total over a 10-week summer program, Fortune’s Preston Fore reports. The postings are specifically for 2027 quantitative trader and quantitative research roles in New York and Philadelphia. 

Lavish internship pay is standard across the industry’s top trading firms as they compete for elite quantitative talent. Jane Street, for example, is advertising summer intern pay as $300,000 annually, (but it’s just for three months and paid pro rata to roughly $5,700 a week), while interns at Citadel and Citadel Securities receive around $4,300 to $5,800 weekly in base salary, which is dependent on their job and professional experience. (By comparison, the median U.S. worker earns about $1,235 per week.)

The catch? Landing one of those positions is even harder than getting into Ivy League schools.

• Would you like to sponsor this newsletter? Contact Polly Raven ([email protected]) for details.