Key Takeaways
- U.S. forces conducted heavy strikes on Iranian military infrastructure, including the principal port city of Bandar Abbas, targeting command centers and drone capabilities.
- The Federal Reserve's balance sheet rose by $8.4 billion to approximately $6.7 trillion for the week ending July 9, 2026, as reserve balances surged by $132 billion.
- Brazil rejected U.S. demands to limit rare earth investments from non-market-compliant countries, further straining relations as the U.S. prepares to impose 25% tariffs on Brazilian imports.
- Explosions were reported in Kuwait and Basra, with Kuwaiti air defenses engaging hostile drone attacks following Iranian retaliatory strikes across the region.
U.S. Intensifies Military Operations in Iran
The U.S. military completed a significant wave of strikes against Iranian targets on Thursday, focusing on Bandar Abbas, home to Iran's largest port and critical naval facilities. According to U.S. Central Command (CENTCOM), the operation destroyed command centers, air defense sites, and coastal surveillance facilities to degrade Iran's ability to threaten commercial shipping in the Strait of Hormuz.
The escalation follows the collapse of an interim ceasefire, with Iranian state media reporting injuries at a railway junction in Bandar Abbas. Market analysts warn that the renewed conflict is driving oil prices higher and increasing volatility in global energy markets.
Federal Reserve Balance Sheet and Monetary Policy
The Federal Reserve (WALCL) reported its weekly balance sheet update, showing total assets rising to $6.685 trillion. This $8.4 billion weekly increase comes as the central bank, under Chair Kevin Warsh, operates within an "ample reserves framework."
Total securities held outright reached $6.450 trillion, including $4.500 trillion in U.S. Treasuries and $1.948 trillion in mortgage-backed securities. The stabilization of the balance sheet around the $6.7 trillion mark suggests a pause in previous quantitative tightening efforts as the Fed monitors persistent inflation and household cost-of-living pressures.
Trade Tensions: U.S. Tariffs on Brazil
Relations between Washington and Brasilia reached a new low as Brazil's Trade Minister Marcio Elias Rosa confirmed the country will not accept U.S. conditions to limit rare earth investments. The U.S. had requested Brazil restrict investment from countries not complying with market rules, a move seen as targeting Chinese influence in the critical minerals sector.
The Office of the U.S. Trade Representative (USTR) has confirmed it will impose 25% tariffs on a wide range of Brazilian imports starting July 22, 2026. Brazilian President Luiz Inacio Lula da Silva condemned the move as "unjustified," while industry groups like Abinee warned the tariffs will severely impact the electrical and electronic sectors.
Regional Instability and Retaliatory Strikes
The conflict has spilled over into neighboring states, with "massive" explosions reported at the Mina Abdullah oil refinery in Kuwait. The Kuwaiti Army confirmed its air defense systems intercepted several hostile drones, while similar sounds of explosions were audible as far as Basra, Iraq.
Iran's Islamic Revolutionary Guard Corps (IRGC) claimed responsibility for the strikes on Kuwait, citing the presence of U.S. forces in the region. The widening theater of operations has led to a sharp decrease in the market-implied probability of successful peace talks by the end of July.
Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications.