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Oil prices shot past $100 a barrel this week because of fighting between the U.S. and Iran, then dropped sharply when both sides agreed to pause. However, experts say the bigger issue is that oil supply remains tight even without conflict—there simply isn't much spare capacity available. China's oil imports jumped to 7.8 million barrels a day in July, up from 6.2 million in June, showing demand is recovering faster than worries about supply are fading. Because markets believe the fighting will stay calm, central banks like those in Germany and England are becoming more confident they can hold off on raising interest rates, which actually helps prices for things like oil and metals. The danger is that if fighting breaks out again around key shipping routes, central banks will be caught off guard, since they're now betting on peace holding up—and that could force them to reverse course on rates very quickly.

President Trump has placed sweeping new tariffs on more than 80 countries covering 99.4% of U.S. trade, including the European Union. He used a 1974 trade law designed for specific unfair practices, but legal experts like Georgetown's Peter Harrell expect courts to strike the move down. The action stems partly from a political feud over the EU fining Google for abusing its search and app-store dominance. Two small businesses have already sued to block the taxes, pointing out that the Supreme Court struck down a similar global tariff effort just five months earlier. While courts may eventually stop these tariffs, the slow legal process will hurt businesses and create supply chain uncertainty in the meantime.

The U.S. temporarily paused airstrikes in Iran, even as Houthi rebels launched new attacks on Saudi Aramco oil facilities in Yanbu and Jizan. Meanwhile, President Donald Trump is trying to negotiate a deal to open the vital Strait of Hormuz through talks in Tehran mediated by Oman, but Iran is demanding full control and toll fees from passing ships. With Hormuz blocked and Houthis also threatening the Bab el-Mandeb Strait in the Red Sea, oil prices are pushing higher due to these severe shipping bottlenecks. In response, Saudi Arabia launched retaliatory strikes on Hodeida to defend its export routes. If these water passages stay unsafe, forced long-distance rerouting will drive up freight rates, insurance costs, and overall global inflation.