Collateral Damage

US-Iran negotiations are stalled, with Iran proposing to reopen the Strait of Hormuz in exchange for lifting the US blockade, but not discussing its nuclear program. This proposal follows a past ceasefire condition that proved ineffective in keeping the Strait open, contributing to high gas prices. While talks falter, Iran strengthens ties with Russia through meetings between their foreign ministers. Meanwhile, Germany criticizes the US approach to Iran, with a German leader stating Iran is stronger than anticipated and the US lacks a coherent strategy. The prolonged closure of the Strait of Hormuz continues to strain the European economy and energy sector. Despite Europe's plan to reopen the Strait post-war, it doesn't satisfy US demands for NATO involvement. Europe's energy dependence on the Middle East and Strait transit suggests they will suffer more than the US from a continued closure. Faced with this, Europe might be compelled to intervene if negotiations fail. The US administration might be intentionally inflicting damage on Europe to pressure them into military cooperation. Crude oil futures are rising, approaching physical market prices, narrowing the pre-war spread. In US domestic news, the path for Warsh's confirmation as Fed chair appears clearer as the DOJ dropped its probe into Powell. However, Powell's future on the Board of Governors remains uncertain, even after the investigation concluded on his term as Chair. Though the DOJ case is dismissed, it has moved to the Fed's Office of Inspector General. The dropped charges allow a vote on Warsh's confirmation as Fed Chair, with Powell's last meeting potentially being the upcoming one. Separately, Canada's Prime Minister announced a new sovereign wealth fund, the "Canada Strong Fund," to boost domestic business and investment. However, this initiative faces scrutiny due to concerns about Carney's personal investments contradicting his calls for Canadian diversification away from the US.