USA - The Federal Reserve on Wednesday raised interest rates by 25 basis points – or 0.25%. The Federal Open Market Committee (FOMC) voted 12-0 to increase the benchmark rate to 3.75%. This is the first rate hike since 2023. The rate hike comes just weeks before the midterm elections. President Trump responded to the rate hike: "Interest Rates in the United States should be 1%, or less, because we are the Best Credit in the World — BY FAR. Our Country is BOOMING with new Investment! If we stopped Trading with every country that we have a Deficit with, which is most of them, we would make, at least, 1.5 Trillion Dollars a year. The word 'Deficit' is nothing more than a fancy word for LOSS. We are 'carrying' almost every country in the World, and that cannot go on any longer. LOWER THE INTEREST RATES FOR THE UNITED STATES OF AMERICA, AND FAST! President DONALD J TRUMP"

UK - UK drivers face paying £2.30 per litre for diesel by the end of the year if the Iran war continues to rage, analysts have warned. Global supply constraints from the Middle East conflict mean diesel pump prices could surge by another 19 percent compared with current levels – surpassing the previous record set in 2022 by a margin of 31p per litre, according to Wood Mackenzie. Alan Gelder, from Wood Mackenzie, said that if the war in Iran continues and Ukraine maintains attacks on Russian refineries, factory-gate diesel prices will surge to $285 per barrel, 65 percent above their August average of $173.

UK - Andrew Bailey, the Governor of the Bank of England, says inflation risks are “on the upside” as the Iran war keeps rattling oil prices. And he isn’t alone. Central bankers worldwide fear persistent inflation requires fast action to cool prices, but this theory is wrong-headed. Sustained tightening is both unnecessary and a mistake. Globally, central bankers were scarred by 2022’s hot inflation, a self-inflicted wound created by their massive Covid-era money-supply explosion. They think high oil prices risk driving all prices higher. They think AI data centre build-outs and long-ago-priced US tariffs add inflation tinder. They think wrongly – but most economists were wrongly trained that way. As I wrote here in April, high oil prices alone never fuel true inflation. They drive substitution, mostly dampening luxury-goods demand.

EUROPE - Polish oil refiner Orlen is racing to replace supplies from Saudi Arabia as Houthi attacks on that country's oil infrastructure disrupt deliveries and send the energy markets into further tumult. The Yemen-based Houthis, last week, overran Saudi-backed forces on the Red Sea coastline and launched a string of attacks on Saudi pipelines and critical infrastructure. Those developments have prompted the Saudis to deactivate its main East-West pipeline and seen them struggle to keep up with delivery schedules. Orlen, accordingly, has expanded purchases from myriad North Sea suppliers, Reuters reported, citing "five industry sources."

IRAN - Iran’s top security official warned President Donald Trump on Monday that the strategic balance around the region’s critical waterways has changed, ruling out negotiations until Tehran’s sweeping conditions are met and declaring that American “damage control won’t stop what’s coming.” “Don’t get distracted by the US president’s mixed signals — from ‘no negotiations’ to ‘we’re ready to talk,’” Mohsen Rezaei, secretary of Iran’s powerful Supreme National Security Council, wrote on X. “The stakes around oil and the straits have changed. Damage control won’t stop what’s coming,” he continued. “No talks until Iran’s conditions are met. Period!”

SAUDI ARABIA - Drone attack on Mecca from unknown location being reported overnight, though the Saudi coalition has been prompted to blame Yemen's Shia Houthis: Saudi Arabia and the Organisation of Islamic Cooperation have condemned what they described as a “heinous” Houthi attack targeting Mecca. And emerging reporting via Al Jazeera: The Saudi-led coalition spokesperson, Turki al-Maliki, said Royal Saudi Air Defence Forces intercepted the hostile drone before it entered the restricted airspace on Tuesday evening. Al-Maliki condemned the incident as an attempt to frighten worshippers and harm civilians, warning that the security of the two holy mosques and pilgrims is a “red line”. The Houthis have previously denied targeting Mecca, saying that they do not target holy sites.

IRAN - The Iranian-backed Houthis in Yemen launched an attack on Mecca in Saudi Arabia early Wednesday! Mecca is the holiest city of Islam and is thought to be home of the birthplace of the prophet Mohammad. The Houthis are a Shia Islamist political and military organization that emerged from Yemen in the 1990s. A strike on Mecca by the Shiite sect would likely launch a Muslim holy war. It should be noted that Islam is divided into two major sects, Sunni and Shiite. Sunni Muslims make up 87-90% of all Muslims. Shiite Muslims take up only 10-13% of all Muslims. Muslims make up 24% of the world population, Christians make up an estimated 31% of the world population.

UK - A perfect storm of wars in Iran and Ukraine, extreme weather and the AI bubble threatens disaster. Four powerful shocks are hitting the world economy at the same time. They are escalating and feeding on each other, driving a commodity spiral that can end only in an inflationary blow-off.

SAUDI ARABIA - Satellite imagery shows a key oil pipeline in Saudi Arabia has been badly damaged after a strike last week, which experts have told BBC Verify could take more than a month to repair and force oil prices even higher. The image shows the most significant damage is at a pumping station along the East-West Pipeline, which Saudi Arabia has increasingly relied on to export crude oil via the Red Sea rather than through the Strait of Hormuz, where ships have been attacked by Iran and the US during their six-month war. The Saudi government has accused Iranian-backed militias in Iraq of the pipeline strike, which followed days of renewed missile and drone attacks on south-western Saudi Arabia by Yemen's Houthi group - which is also backed by Iran. Saudi Arabia has retaliated by carrying out strikes on Houthi-controlled areas of western Yemen.

SAUDI ARABIA - Saudi Arabia has cancelled some oil shipments to Europe in the wake of a series of drone attacks which forced the shutdown of its key East-West pipeline, Reuters reported on Tuesday, adding to mounting pressure on global crude supplies as instability threatens energy infrastructure across the Middle East and North Africa. Riyadh reportedly informed European customers that some crude cargoes scheduled for loading later in September will be cancelled, while loadings at the Red Sea port of Yanbu have been suspended, oil trading and shipping sources told the news agency.

MIDDLE EAST - Oil loadings at the Red Sea port of Yanbu were suspended, sources told Reuters, while Saudi Arabia’s East-West Pipeline remained offline after attacks on the kingdom’s energy infrastructure. The renewed confrontation between Washington and Tehran is increasingly being fought not only through military pressure but through the energy market, where disruptions to Gulf exports are pushing oil prices higher, testing the resilience of regional economies and creating a growing domestic challenge for the United States ahead of November’s midterm elections. That pressure intensified Tuesday as Saudi Arabia’s principal route for exporting oil without passing through the Strait of Hormuz suffered another setback. Separately, Libya halted operations at three oil fields after protests led to the closure of a crude pipeline.

MIDDLE EAST - Iran’s leaders were never going to passively submit to slow strangulation. Facing Donald Trump’s blockade of their ports and the near-total loss of their oil exports, the regime is now striking back across the Middle East, aiming to inflict enough damage to force America to relent. In the last seven days, the Houthi rebels in Yemen have broken out of their highland strongholds and advanced down the coastal plain, seizing key positions alongside the Bab el-Mandeb strait, where the Red Sea meets the Indian Ocean. Ever since Iran began attacking shipping in the Strait of Hormuz, the Bab el-Mandeb has become the principal outlet for Saudi Arabia’s oil. The kingdom has managed to re-route about two thirds of its exports – more than four million barrels per day – via the Red Sea. Iran is now doing everything possible to wreck this alternative, which is why the Houthis have strengthened their hold on the choke point, where they have positioned Iranian-supplied anti-ship missiles.

USA - The Congressional Budget Office estimates that the Iran war cost the US $38 billion up to August 1, a figure that is rising by up to $3 billion a month. Hegseth has requested $67 billion in urgent extra military funding from Congress for the war, in addition to his request for $1.5 trillion in annual funding for the War Department next year, up from $1 trillion this year. Both have yet to be agreed.

GERMANY - Friedrich Merz has cancelled a trip to New York to attend the UN General Assembly amid political pressure at home. The German chancellor was due to fly to the US next Tuesday, where he was to be awarded the “Henry Kissinger Prize” by the American Academy in Berlin. He was also due to address the UN General Assembly. However, he cancelled the trip following his Christian Democrats (CDU) party’s poor performance after the hard-Right Alternative for Germany (AfD)’s triumph in the Saxony-Anhalt election and growing discontent within his own party. The loss, in which the AfD was close to securing an outright majority, has caused mounting political pressure on Mr Merz and his party with a number of leading conservatives calling for his resignation. “Contrary to original plans, the chancellor will not travel to New York next week, as his presence is required in Berlin,” a government source said on Tuesday.

UK - Britain’s money-printing experiment is about to become more expensive. What began as a way to rescue the economy has quickly become a headache for both the Government and the Bank of England. When interest rates were low in 2009 but the economy was crying out for help, banks began their campaign of “quantitative easing”. First deployed in the US, “QE” – as it became known – saw Threadneedle Street print money to buy government bonds, known as gilts. The goal was to drive down the cost of borrowing, encouraging people and businesses to spend more to stimulate the economy. The experiment largely worked during the financial crisis. Jobs were saved while inflation remained low. During lockdown, though, the results were very different as inflation took off and central banks around the world were forced to increase interest rates. There is no easy way out of the QE mess. The next crisis may demand that the printing presses are fired up again. Before then, the Government must work out a different way to pay for it.