The US and Iran exchanged fire for the first time in more than a month after American forces struck Iranian rocket launchers on Larak Island and Tehran retaliated with missiles against US bases in Jordan. President Trump vowed further strikes as Brent crude jumped and a weak US manufacturing print added to the pressure on markets.
US and Iran trade fire over the Strait of Hormuz
The US military said it struck two Iranian rocket launchers on Larak Island in the Strait of Hormuz on Sunday, saying it believed Iran's Revolutionary Guard was preparing to launch rockets carrying sea mines into the waterway. Iran responded with eight ballistic missiles fired at Jordanian air bases, where the US maintains a troop presence. Trump said one missile got through US air defenses while the rest were intercepted.
President Trump told Fox News, "We're going to hit them hard." An Iranian official told Reuters that any further American attack would draw a response many times greater, adding that no target in the region was beyond Tehran's reach. US Central Command described its own strike as a limited, precise action.
Oil jumps as economic pressure mounts
Brent crude traded up 2%, touching an intraday high of $91.52 a barrel, after the exchange of fire reignited fears of supply disruption through the Strait of Hormuz, which normally carries roughly a fifth of global oil supplies and has been largely closed to commercial traffic since March.
Treasury Secretary Scott Bessent said Tehran was lashing out militarily because it was losing economically, and told Reuters fresh secondary sanctions on Tehran-linked banks would be unveiled weekly. Maritime security expert Ian Ralby told CNBC the Larak strike was likely an attempt to break a deadlock rather than a shift in US policy.
The escalation lands on top of a weakening domestic backdrop: the Chicago PMI for August came in at 47.1, against a forecast of 57.8. Talks between Washington and Tehran have collapsed, and the conflict has stoked inflation ahead of the US midterm elections in November.
Sources: Financial Times, Investing.com
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