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Weekly

The US-Israeli war on Iran, now in its sixth month since it began on 28 February, has settled into an exhausting rhythm: Washington pauses its bombing campaign, hints at a deal, then resumes strikes days later when talks stall — and the Strait of Hormuz, the 33-mile-wide chokepoint for roughly a fifth of the world’s oil and gas, sits at the centre of it every single time. This was the week that rhythm played out in full, twice over.

It started with hope. On Sunday, a senior Iranian official told Reuters that Tehran would halt its own attacks as long as Washington did the same — the Pentagon had quietly suspended its bombing campaign two nights earlier after military advisers warned Trump the US was running low on munitions and had largely exhausted its list of targets. Oil responded exactly as you’d expect: Brent crude tumbled 5% on Monday to under $92, then kept falling as Trump told reporters the US was having “good talks” with Iran — Brent eventually sank more than 9% to $87.77 and US crude fell over 8% to $81.98.

The optimism didn’t last the week. Oman put forward a Gulf-backed plan for voluntary fees to manage Hormuz traffic — modelled loosely on how Malaysia, Indonesia and Singapore handle the Strait of Malacca — but Iran rejected it outright on Tuesday, with Deputy Foreign Minister Kazem Gharibabadi instead proposing a one-sided arrangement that would keep both directions of shipping largely in Iranian waters, and warning the Strait would stay closed if Oman refused. Hours later, Yemen’s Houthis struck Saudi Aramco’s Jizan refinery, forcing a shutdown of the 400,000 barrel-a-day plant until at least mid-August and pushing European diesel margins to a record $70.77 a barrel.

By Wednesday, the fragile calm was over. The US and Saudi Arabia struck Iran-backed groups in Iraq — the first time Riyadh had publicly joined Washington in an attack — killing at least 20 fighters, while Iran fired missiles at US bases in Jordan and on ships attempting to transit Hormuz “along an unauthorised route.” Trump vowed to “hit them very hard,” and oil obliged: Brent jumped nearly 8% to $90.74 in one of the sharpest single-day spikes of the entire war, as US crude inventories fell to their lowest level since 2018. A drone also hit a US-owned gas tanker at Egypt’s Damietta port, drawing yet another country into the conflict’s orbit.

Thursday brought a partial retreat — Brent eased back to $89.03 as Saudi Arabia unveiled a 14-nation maritime coalition (Pakistan among the signatories) to protect Red Sea and Gulf of Aden shipping, and as talks between Iran and Oman over Hormuz’s management quietly continued despite Tuesday’s rejection. Then, on Thursday, the Federal Reserve held its benchmark rate at 3.50%–3.75%, with three regional bank presidents dissenting in favour of a hike — new Chair Kevin Warsh’s second meeting, and a decision that left markets guessing about September.

The week closed on yet another reversal. By Saturday, Trump said he would hold off on a fresh attack on Iran “for the future benefit of the WORLD” as long as a quick deal could be reached to reopen Hormuz — a claim Iran’s state media flatly denied making any such request for. Iran, for its part, warned of a “proportionate response” to any further US or Israeli action. Meanwhile in the shipping lanes themselves, the disruption is reshaping the industry: Abu Dhabi’s ADNOC spent roughly $590 million buying five supertankers and chartered 25 more from South Korea’s Sinokor, deploying about 15 as shuttle vessels ferrying crude out of Hormuz to storage in Fujairah and Oman.

Gaza, running in parallel, had its own version of the same on-again, off-again pattern: Trump announced Thursday what he called a “historic” agreement for Hamas to disarm in phases, only for Israeli strikes to continue killing Palestinians in Gaza City and Deir al-Balah through the weekend, and for Hamas officials to describe the deal as still a “draft” pending an Israeli withdrawal that hasn’t happened.

Where Pakistan sits in all this

Pakistan’s own footprint in this week’s story was mostly logistical rather than diplomatic: Islamabad was one of 14 signatories, alongside Turkey, Egypt, Sudan and Djibouti, to Saudi Arabia’s proposed multinational maritime coalition to protect shipping through the Bab el-Mandeb Strait, the Red Sea and the Gulf of Aden — the alternative route that’s absorbed some of the traffic diverted away from a contested Hormuz. Field Marshal Asim Munir’s recent travels through Turkiye and Gulf capitals have kept Pakistan’s military leadership in the loop on the region’s security discussions, even as the country’s own exposure remains mostly economic: every spike in Brent crude shows up almost immediately at the pump and in the KSE-100, as this issue’s Pakistan Desk lays out in more detail.

A QatarEnergy-controlled LNG tanker exiting Hormuz for Pakistan this week — the first such cargo in nearly three weeks — was a small but real sign that some energy flows to Pakistan are still finding a way through, even at a premium.

If Pakistan’s week was volatile, Asia’s was more so. The trigger was the same anxiety that has been simmering under the AI-driven rally all year: are chipmakers’ valuations, and the hundreds of billions of dollars being committed to AI data centres, actually justified? On Tuesday, the market’s answer was a resounding no. South Korea’s KOSPI dived more than 8%, triggering a circuit breaker and wiping over $2 trillion from the country’s equity market in a single session, while Japan’s Nikkei slid 4% and the Philadelphia Semiconductor Index dropped 2.2%.

The proximate spark: a Wall Street Journal report that Nvidia was in talks to provide roughly $250 billion in financing guarantees for OpenAI’s data-centre buildout, which sent Nvidia shares down 5% overnight, plus a 466–470% debut-day surge for Chinese chipmaker CXMT on its Shanghai listing — a $8.6 billion IPO that simultaneously excited investors about China’s semiconductor sector and spooked them about the competitive threat it poses. SK Hynix fell nearly 11%, Samsung Electronics shed more than 9%, and in Tokyo, Kioxia dropped 18% and Tokyo Electron 9.8%. News that China had begun domestically manufacturing immersion deep ultraviolet lithography machines — long an ASML monopoly — sent ASML shares down 8.5%.

Wednesday brought a partial stabilisation as strong earnings from SK Hynix, whose quarterly operating profit rose more than sixfold even if it missed the loftiest estimates, calmed some nerves; the KOSPI gained over 1% in early trading after Tuesday’s rout. But Thursday’s session was the real test, arriving alongside the Federal Reserve’s decision to hold interest rates steady at 3.50%–3.75% — a widely expected move that nonetheless drew dissents from three of twelve FOMC members who wanted a hike, and left investors questioning new Fed Chair Kevin Warsh’s inflation-fighting resolve given prices that have run above target for five years running.

By Friday, the mood flipped entirely: South Korea’s Kospi leapt more than 10% — its best single-day gain in years — reversing most of the week’s earlier losses on renewed confidence in AI-linked assets, while Japan’s Nikkei advanced 4.5% and China’s CSI AI index rose over 7%. Even so, the KOSPI was still on track to lose over 25% for the month, its largest monthly decline since 1997 — wild swings that prompted South Korea’s finance minister to publicly apologise for the earlier introduction of single-stock leveraged ETFs, and authorities to move to rein them in.

Underneath all of it, the Fed’s rate hold weighed on the dollar all week, which fell across the board and helped push the yen up sharply — spot yen trading volumes hit a 10-year high on Thursday as the currency surged 2.4% against the dollar, with traders bracing for possible Japanese and US Treasury intervention. China’s yuan, meanwhile, touched a one-and-a-half-month high after the People’s Bank of China set its strongest midpoint fix since February 2023.