Iran demands reparations, oil jumps 6% and CPI is next

Good morning. The Strait of Hormuz was back at the center last night. Despite talk that a deal was close, Iran demanded U.S. reparations and sanctions relief as the price of reopening the strait. Yemen's Houthis also hit a Saudi refinery the same day. Oil jumped nearly 6% to above $80 a barrel, and European natural gas rose more than 5% on worries about winter stockpiles.

Oil feeds straight into prices, which complicates the Fed's math. Forecasters see July consumer prices up about 3.4% in tomorrow's report. One camp warns that a hot reading would box the Fed in. Another argues the current inflation is an energy supply shock that rate hikes cannot fix. President Trump said he spoke to Fed Chair Warsh only once, briefly, and denied reports of regular contact.

Stocks still held up. The Dow slipped just 0.11%, and the S&P 500 stayed near the record it set last week. Earnings are the reason. Second-quarter profit growth for the S&P 500 is running around 50%, with all 11 sectors beating forecasts, and growth is no longer only about tech. JPMorgan raised its year-end S&P 500 target from 7,800 to 8,000.

In AI, Meta's Mark Zuckerberg pushed back against the doomers in a 6,500-word essay. Meanwhile, economist Torsten Slok pointed out that AI spending has so far lifted profit margins only at a few mega-cap tech names, not the rest of corporate America.