Weekend Edition.
Night and Day.
1. Iran’s military command said Saturday it is closing the Strait of Hormuz in response to Israeli strikes on Lebanon, according to state media, testing a fragile ceasefire agreement intended to lead to a broader peace with the United States. After the announcement of the closure, Iranian and U.S. officials, including Vice President JD Vance, set off for Switzerland for more high-level talks, which are scheduled to resume on Sunday. Stranded vessels had cautiously begun to transit the Strait of Hormuz after a preliminary agreement between the U.S. and Iran in which the countries agreed to lift all restrictions on movement through the strategic maritime corridor. U.S. Central Command said movement continued through Saturday, stating that 55 merchant ships and 17 million barrels of oil passed through and denying that the strait is closed. (Source: washingtonpost.com)
2. Washington Post:
Vice President JD Vance arrived in Switzerland on Sunday for high-stakes talks with Iran on its nuclear program, hoping to bring a 60-day sprint from loosely defined agreement to full peace deal back on track.
The day before, Iran’s military said it was closing the Strait of Hormuz in response to Israeli strikes on Lebanon, a move that tested the strength of recent U.S. diplomatic efforts and underscored how uncertain the war’s endgame remains.
Vance said his top priorities are establishing the structure of the talks, making progress on the nuclear issues and ensuring a ceasefire in Lebanon, where Israel continues to exchange fire with Hezbollah, the Iranian-backed militant group, threatening the tentative deal.
“We’re going to have a principal level of political leadership at the top, and then obviously the technical team is going to stay on the ground,” Vance told journalists at Joint Base Andrews before departing for Switzerland.
The U.S. negotiating team includes White House envoys Steve Witkoff and Jared Kushner, who arrived in Switzerland on Saturday. The Iranian delegation, led by Parliament Speaker Mohammad Bagher Ghalibaf and Foreign Minister Abbas Araghchi, arrived later that day. Pakistani and Qatari officials are mediating the talks.
A memorandum of understanding — which President Donald Trump signed at the Palace of Versailles in France last week — puts the onus on the United States to deliver early, including by lifting sanctions, freeing billions in frozen assets and dismantling a naval blockade of Iran’s ports. The two sides established a two-month timeline to flesh out the details and settle issues that have plagued negotiators for years. (Source: washingtonpost.com)
3. The Wall Street Journal:
The U.S. is working with Qatar on a plan to make billions of dollars in frozen funds available to Iran for humanitarian spending, another early financial incentive under the recently signed deal to end the war, people familiar with the matter said.
The plan, which isn’t yet completed, is aimed at giving Iran access to the spending power of some of its estimated $100 billion in cash frozen worldwide, beginning with $6 billion held in Qatar. Under the deal, Qatar would allow purchases of food, medicine and other humanitarian goods ordered by Iran’s central bank with money drawn from frozen Iranian assets, mainly cash from oil sales that has been locked up overseas by sanctions, the people said.
The facility could provide a template for dealing with other pools of frozen Iranian cash around the world and a start on the first tranche of the $24 billion in blocked funds that Tehran wants released as soon as possible, some of the people said. (Source: wsj.com)
4. Times of Israel:
Israelis overwhelmingly view the war with Iran and subsequent deal with the United States in a negative way, with 92.1 precent of respondents to a poll believing Tehran is the winner.
According to the Hebrew University survey, 82.9% say the campaign weakened Israel’s long-term security and 86.0% have a negative attitude toward the outcome.
Furthermore, 72.5% do not believe Prime Minister Benjamin Netanyahu when he says that Israel achieved significant gains and removed an existential threat, with 87.8% of Israelis believing the country failed to achieve its objectives or fulfilled only some of them.
With regards to Netanyahu’s performance, 56.4% say the premier’s management of the campaign was poor or failed.
Meanwhile, the poll finds 48.2% of Israelis support renewed major military action against the Hezbollah terror group, even at the risk of a clash with US President Donald Trump. (Source: times of israel.com)
5. President Trump said Thursday on “The Axios Show“ that “it’s possible” a potential Cuba invasion would resemble the swift capture of Venezuelan President Nicolás Maduro in January. Trump wants to project U.S. military power across the Western Hemisphere, fitting a second term defined by blunt force and expansionist ambition. Trump also acknowledged the Iran conflict is taking longer to resolve because Iran has a “more powerful“ military and and is far away. He suggested Cuba could be easier to overpower. (Source: axios.com)
6. Ukraine is pounding Russian oil refineries with long-range drone strikes, leading to restrictions on fuel sales, surging gasoline prices and huge lines of cars outside gas stations hundreds of miles from the front lines. This week, drones repeatedly hit a refinery in Moscow that produces more than one-third of the fuel supply for the Russian capital and the surrounding region. Videos of the latest attack posted to social media on Thursday showed a massive fireball erupting from a storage-tank explosion and several other fires raging across the complex. It was the latest in more than two dozen strikes on Russian refineries since March, a growing headache for the Kremlin’s efforts to maintain economic normality and shield its citizens from the consequences of the brutal four-year-old war. (Source: wsj.com)
7. Of all the fields AI is upending, few have deeper ramifications for humanity than its role in warfare. Advanced algorithms have quickly swung from playing a supporting intelligence role to acting as agents of death. “Future combat will be largely robotic. It will be automated,” former Google Chief Executive Eric Schmidt, who now invests in military-drone companies, said recently on stage at an expo. “It will be controlled by the laws of war.” Schmidt’s robot prediction draws little dispute. Less certain is whether last century’s rules can handle warfare’s future. (Source: wsj.com)
8. The Wall Street Journal:
America’s economic anxiety is rising up the income ladder.
A new Wall Street Journal poll finds that even those who consider themselves among the wealthiest classes in America carry high levels of concern about their current finances, the years ahead and the prospects for their children.
More than 40% of Americans who call themselves upper class or upper-middle class say they haven’t saved enough money to retire comfortably. Only about 40% say their financial security is where they thought it would be at this point in their lives. Nearly three in five say they are strained by high gasoline prices.
Those in the wealthiest classes have lost faith that an economy that has benefited them can lift future generations. Some 86% of people who call themselves upper class or upper-middle class say they lack confidence that life for their children will be better than theirs has been. That’s up from 64% in a 2019 survey and shows a level of pessimism that matches the views of less-fortunate groups. (Source: wsj.com)
9. For many Americans, the math of homeownership doesn’t add up any more. A home buyer in 2019 could expect to spend about $20,000 a year on basic homeownership expenses: mortgage payments, property taxes, insurance, maintenance and repairs, according to data from Intercontinental Exchange and home-services marketplace Angi. By 2025, that annual bill had soared above $28,500, outpacing inflation and keeping many would-be buyers out of the market. Homeowners who wish they could sell and move elsewhere are also staying put, turned off by the cost of purchasing today. The affordability challenges are keeping the housing market in a slump for a fourth straight year. (Source: wsj.com)
10. Gillian Tett:
Moody’s calculates that insurance groups now hold $807 billion of illiquid and opaque credit instruments, accounting for 20 per cent of their $4 trillion-worth of fixed-income holdings. Meanwhile, private capital firms have been buying insurance companies too, creating the appearance (if not the reality) of circular ties. More striking still, those insurance companies are increasingly turning to private credit ratings to evaluate those opaque, illiquid assets. These are often commissioned from agencies such as Morningstar, Egan-Jones and Kroll, instead of the bigger traditional players like Moody’s, S&P and Fitch.
Why are they doing this? A key reason may be, as the Bank for International Settlements recently warned, that private ratings seem to be “systematically” inflated compared with public ratings, creating a flattering aura of safety that permits insurance companies to cut their capital reserves. That boosts current profits but also reduces their future resilience to shocks.
A trio of economists — Xuelin Li, Sangmin Oh and Giacomo Ricciardi — has just quantified this in startling new research. They note “a 10-fold increase in the use of private ratings since 2018, predominantly in opaque securities and concentrated among large and PE-owned insurers”. Indeed, privately rated assets now represent 12 per cent of all US life insurance groups’ portfolios — but a whopping 36 per cent at Everlake (owned by Blackstone), 28 per cent at NZC Capital (owned by Eldridge) and 24 per cent at Athene (owned by Apollo).
The trio calculate that “eliminating this gap [between public and private ratings] would increase the required capital charges on insurers’ bond holdings by $4.5 billion per year”. In plain English: they think insurers are undercapitalized by that amount. (Source: ft.com)
11. Keir Starmer is preparing to set out a timetable for his departure from No 10 this week after Andy Burnham’s triumphant return to Westminster in the Makerfield byelection. The prime minister is understood to have reached the conclusion that his position is no longer tenable after conversations in recent days with cabinet ministers, Downing Street advisers, trade union leaders, and party donors. Although Mr. Starmer is spending the weekend talking his future over with his wife, Victoria, at Chequers before making a final decision, senior Labour figures believe a “clear statement” could come as early as Monday. (Source: observer.co.uk)
12. Wyndham Clark will enter the final round of the U.S. Open with the largest lead since 2011, but the world’s No. 1 player is in the final group with him. Clark shot an even-par 70 on Saturday at Shinnecock Hills and is six strokes ahead of four competitors with 18 holes to play. It is the largest 54-hole lead at this major since Rory McIlroy led by eight strokes in 2011. But it’s Scottie Scheffler in the final group with him, playing on his 30th birthday and only needing a U.S. Open win to complete the career Grand Slam. Mr. Clark is — understatement — not well-liked, so the golf world will be rooting for Mr. Scheffler, who is well-liked and much-admired. The leaderboard is here. (Sources: nytimes.com/athletic, usopen.com)
Quick Links: Mon Dieu! Europe swelters under heatwave, France restricts alcohol consumption. Politico seems surprised to learn that Canada’s prime minister is shrewd. Prime Minister Meloni is shrewd, lambasting President Trump at the G-7 meeting. According to YouGov’s monthly European tracker, only 7% of Italians have a favorable opinion of Trump, while 86% have an unfavorable opinion. Senator Tom Cotton (R-AR) is also shrewd, but finds himself in a political Trump-jam.