Key Takeaways
- President Trump threatened an immediate 100% tariff on all goods from any country that imposes a Digital Services Tax (DST) on American technology companies, potentially impacting major U.S. tech giants and global trade partners.
- Minneapolis Fed President Neel Kashkari shifted his policy outlook to favor one interest rate hike in 2026, citing persistent inflation driven by "skyrocketing" costs in the AI infrastructure sector and ongoing Middle East instability.
- Tensions in the Strait of Hormuz spiked as President Trump accused Iran of a "foolish violation" of a recent ceasefire after four attack drones targeted commercial shipping, with one vessel reportedly sustaining damage.
- U.S. refining capacity saw a significant decline, dropping by 263,000 barrels per day (b/d) in 2025, according to a new government report, even as refiners currently push run rates to near-maximum levels to meet robust demand.
- Fitch Ratings revised its 2026 global sovereign outlook to "deteriorating," noting that while the U.S.-Iran conflict creates immense pressure, it has not yet disrupted the broader global credit perspective.
Trump Issues Tariff Ultimatum to Protect Big Tech
President Donald Trump announced via Truth Social that any nation implementing a Digital Services Tax (DST) on American firms will face an immediate 100% tariff on all exports to the U.S. The move is aimed at shielding "Big Tech" companies—including Apple (AAPL), Microsoft (MSFT), Alphabet (GOOGL), Amazon (AMZN), and Meta (META)—from European and global tax initiatives. Trump emphasized that these tariffs would supersede any existing trade deals, whether signed or currently being implemented.
Market analysts warn that this protectionist stance could trigger a "risk-off" move in technology and consumer discretionary sectors. Investors are reportedly repricing growth expectations for U.S. tech firms as the threat of retaliatory trade measures from the European Union and other partners looms.
Fed's Kashkari Pivots to Hawkish Stance on AI Inflation
Minneapolis Federal Reserve President Neel Kashkari delivered a hawkish surprise on Friday, revealing he has "penciled in" one interest rate hike for 2026. This marks a reversal from his March projection of a rate cut, driven by concerns that inflation remains stubbornly high even when excluding volatile energy costs. Kashkari specifically identified Artificial Intelligence (AI) development as a primary inflationary driver in the short term.
According to Kashkari, the hundreds of billions of dollars flowing into AI data center construction and related infrastructure are causing prices to "skyrocket" in those sectors. While he remains optimistic about long-term job prospects, he noted that the Fed may need to move rates "as high as we need to" to bring inflation back to the 2% target, despite the potential for economic harm.
Middle East Ceasefire Strained by Drone Attacks
The fragile geopolitical landscape faced a new test as President Trump accused Iran of violating a week-old ceasefire memorandum of understanding. Trump reported that Iran launched at least four "One Way Attack Drones" at ships in the Strait of Hormuz, with one drone striking the upper deck of a large cargo vessel. Although the ship was able to proceed, the incident led the UN’s maritime agency to temporarily suspend guidance for stranded ships.
In a parallel development, Iranian official Azizi issued a warning to Gulf Cooperation Council (GCC) leaders, claiming that "outsourcing security" to the U.S. has made the region less secure. Despite the friction, Fitch Ratings noted that the global credit environment remains resilient for now, though it has deteriorated since the initial "oil shock" of the U.S.-Iran conflict.
Energy Sector: Refining Capacity Shrinks Amid High Demand
A new government report confirmed that U.S. refining capacity decreased by 263,000 barrels per day in 2025. Despite this contraction, the Energy Information Administration (EIA) reports that current refineries are operating at 96.1% capacity utilization, processing approximately 17.1 million b/d.
Refiners are reportedly delaying essential maintenance to capitalize on strong product margins and high demand for diesel and jet fuel. However, analysts at Energy Aspects warn that operating near maximum capacity for extended periods increases the risk of unplanned outages, which could further tighten global fuel supplies if the Strait of Hormuz remains a contested corridor.
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.