Economy

United States economic growth slowed in the second quarter of 2026 amid a growing deficit and increasing inflationary pressures.

US gross domestic product (GDP) grew by 1.5 percent between April and June. That is a sharp decline from 2.1 percent growth in the first quarter of the year, according to a Bureau of Economic Analysis (BEA) report released on Thursday.

A widening trade deficit is a key reason why GDP is slowing, as is a jump in petrol prices, experts say.

“It’s a classic supply shock. The combination of tariffs and oil price spikes is exactly what a macroeconomist would expect to happen,” Michael Klein, professor of international economic affairs at The Fletcher School at Tufts University, told Al Jazeera.

The US has increased purchases of goods like semiconductors, telecommunications equipment, and industrial equipment, according to BEA data. Business investment in equipment rose by more than 15 percent in the second quarter. Those are essentially the elements needed for the ongoing investment boom to support the growth of artificial intelligence (AI).

“Imports rose due to the investment and consumption driver, and so net exports were a drag on overall growth. Overall, the US is investing and consuming more but not producing more,” Rachel Ziemba, adjunct senior fellow at the Center for a New American Security, told Al Jazeera.

Exports have not kept pace. The trade deficit in May grew to $77.6bn, a 42 percent increase from the month before, according to BEA data.

Exports tumbled by 3.2 percent to $317.7bn, and imports rose by 3.3 percent to $395.3bn.

This comes as countries around the globe seek to reduce their dependence on the US due to President Donald Trump’s tariff policies.

Among them is Canada, historically one of the US’s biggest trading partners. Canadian Prime Minister Mark Carney has pursued new trade deals with China and Saudi Arabia in recent months, for example, as Trump has slapped steep tariffs on the country, threatened to annex it and called it the 51st state, and refused to renew a trade deal with Canada and Mexico.

Are US tensions with Iran a factor?

In the second quarter, energy prices fluctuated greatly over the past few months. For US consumers, that was mostly reflected in petrol prices. During the second quarter, US petrol prices hit $4.48 per gallon (3.78 litres) in May.

They later retreated to $3.96 per gallon by the end of June. But the reprieve was short-lived as a fragile peace deal failed to take hold, with petrol prices increasing throughout July after the deadline for data to be included in second-quarter GDP had passed. Prices have since moved back above the $4 mark.

Petrol prices drove inflation for much of the second quarter. Between March and April, petrol prices jumped 5.4 percent. The next month, they jumped another 7 percent. They eased between May and June, falling 9.7 percent as global benchmark prices pulled back.

According to analysis from Bank of America, discretionary spending surged in June, the final month of the second quarter, as spending on products outside of petrol jumped while fuel prices temporarily eased.

“With gasoline prices easing in June, total card spending excluding gas surged 5.6% YoY [year over year] – also the strongest growth since April 2022,” the report said.

How can the GDP recover?

US consumers have ramped up spending on prescription drugs, automobiles like light trucks, and new furniture. There was also increased spending in areas like restaurants and hotels, suggesting that consumers remain somewhat resilient.

But, says Fletcher School’s Klein, that spending is by high-income earners, a trend that indicates a K-shaped economy, which is when the wealthy thrive, while lower-income consumers and small businesses face tougher economic conditions.

“The continued consumption growth of those who are better off depends upon things like the stock market staying strong and housing prices staying strong, because people feel wealthier through the value of their house or their stock portfolios, so they’ll spend more. But by a number of measures, the stock market seems to be very highly valued,” Klein, who also authors the EconoFact economic analysis website, told Al Jazeera.

Overall, consumer confidence fell for the third straight month in July, according to a Conference Board report released on Tuesday. Consumers attributed the decline to “current business conditions”, and the organisation expects “little improvement” for the remainder of the year.

Business investment would also need to surge more broadly to lift the wider economy. While there has been a boom in the AI sector, other industries have not been as eager to keep their inventories stocked.

Klein says consistent trade policies would change that.

“The pervasive uncertainty in the economy will affect businesses’ decisions on hiring and investing. That can also contribute to the slowdown, because, in an uncertain environment, businesses don’t want to make decisions that have long-lasting consequences when they have little idea of what the future will look like,” Klein said.

Creating economic conditions that encourage consumers and businesses to spend would help drive up GDP in the coming quarters. However, uncertain trade policies and concerns about widespread layoffs, as has been the case in several tech companies, have made consumers more cautious with the pocket books.

“If people were more secure and felt that their jobs would be there next year; if they felt that things weren’t more expensive and they could afford to spend more. But those are not easy fixes, right? And talk is not going to change what people rightly perceive as a fraught situation,” Klein added.

GDP grew by 1.5 percent in the second quarter following a 2.1 percent increase in first quarter.

Economic growth in the United States slowed in the second quarter amid a growing trade deficit and tensions between the US and Iran which weighed on global fuel prices.

The US Gross Domestic Product (GDP), a measure of goods and services, grew by 1.5 percent between April and June, marking a slowdown from 2.1 percent growth in the first quarter of 2026, according to the Commerce Department’s Bureau of Economic Analysis report released on Thursday.

Consumer spending saw a bump of 3.2 percent for the quarter, both on the back of generous tax refunds from US President Donald Trump’s ‘One Big Beautiful Bill Act’ as well as heightened petrol prices that cost consumers.

Fuel prices are on the upswing after a brief reprieve. The average price for a gallon of petrol (3.78 litres) is $4.09, up from $3.84 this time last month, according to the American Automobile Association (AAA), which tracks daily petrol prices. By comparison, the average price was $2.98 when the US and Israel first struck Iran on February 28 .

Analysts also point to the artificial intelligence spending boom as a reason for the surge, even as those are heavily import reliant and contributing to trade deficits.

“Overall, the economy continues to rely on technology investment,” Rachel Ziemba, adjunct senior fellow at the Center for a New American Security, told Al Jazeera.

That will likely continue into third-quarter reports, which will take into account the month of July. On Monday, it was reported that Nvidia is in talks to make a $250m investment in OpenAI.

However, there are concerns about how long such investments will last amid questions over circular financing propping up the sector.

“Data centres continue to drive investment and economic growth, increasing the sector’s role in the economy while raising questions about its sustainability,” Ziemba said.

Meanwhile, the Personal Consumption Expenditure Price (PCE) Index report, one of the US Federal Reserve’s key metrics for gauging the rate of inflation, increased 3.7 percent on an annual basis for the month of June after a 4.1 percent surge in May.

The slowdown was marked by a brief retreat in petrol prices last month before they climbed higher again over the past month.

“Today’s report is a snapshot of an economy under a ceasefire that no longer exists. Even with last month’s temporary inflation relief, prices are still elevated and families are saving less as they try to keep up,” Alex Jacquez, a member of the National Economic Council under former US President Joe Biden, said in a note provided to Al Jazeera.

On Wednesday, the US Federal Reserve opted to maintain interest rates at 3.5-3.75 percent.

US markets are on the upswing in midday trading, largely driven by an increase in Microsoft stock amid better-than-expected sales and growth in cloud services. Markets have also risen following the PCE and GDP reports.

The tech-heavy Nasdaq is up 2.6 percent, with the S&P 500 following at 1.2 percent and the Dow Jones Industrial Average up 0.5 percent.

Gold prices, which are typically considered a safe investment during economic uncertainty, extended their gains by 1.9 percent to $4,108.30 per ounce after rising 2 percent on Wednesday.

OpenAI CEO Sam Altman has met with US senators to discuss his company’s upcoming models, as President Donald Trump said he is considering AI “controls” following OpenAI’s disclosure that one of its AI systems escaped containment during a security test.

“We’re looking at controls,” Trump told reporters in the Oval Office in response to a question about OpenAI’s rogue agent, adding that he did not want to “restrict” AI developers from building new products.

A rogue agent escaped the handling of ChatGPT maker OpenAI and hacked the AI firm Hugging Face last week. Then, on Tuesday, it was revealed that a second company had been a target, too – Modal Labs, a New York City-based AI infrastructure firm.

The company itself was not hacked but an account of a customer hosted on Modal’s infrastructure. Modal’s chief technology officer, Akshat Bubna, did not confirm which customer was the target. The hack escaped a contained environment during a security test.

“We’re aware a Modal customer published an unauthenticated endpoint that allowed anyone on the internet to use their sandboxes for code execution,” Bubna said in a statement. “This was used by the rogue agent. Modal’s platform or isolation were not compromised in any way.”

Altman has long been accused of dismissing concerns that his products and the AI industry impact society at large, including in a recent lawsuit brought by the State of Florida that alleged the company put profits ahead of user safety.

Now, he appears to be walking back some of his past enthusiasm around AI’s pace of growth.

In a podcast called Invest Like the Best, Altman called the Hugging Face hack an “extremely sci-fi cyber incident” and later said that it was the “first security incident that I have felt very viscerally”.

“We may have to pace the rate of AI development to give ourselves enough time for society to harden around some of these new capability levels,” he said on the podcast.

On Saturday, Altman said that AI has reached “the singularity”, when AI surpasses human intelligence and becomes harder to control. He had previously said this would not be reached by 2030.

Washington meetings

Altman was in Washington, DC, this week, meeting with US Senators Raphael Warnock, a Democrat from Georgia, and Bernie Moreno, a Republican from Ohio on Wednesday. Altman told reporters that the hacking was discussed but was not the focus of the meeting.

Altman is also set to meet with Democratic Senator Mark Warner of Virginia, the top Democrat on the chamber’s Intelligence Committee.

CNBC reported that Altman is also to make a trip to the White House to meet with Trump’s chief of staff, Susie Wiles. Last month, the president signed an executive order requesting that AI companies assess their models before full release.

Financing concerns

The hacking and meetings come alongside pressure from Wall Street amid renewed concerns about potential circular financing, following reports that semiconductor chip giant Nvidia is undergoing talks with OpenAI to provide funding guarantees for a data centre in Ohio.

The $250bn deal would help the ChatGPT owner lease a 10-gigawatt project that SB Energy, a subsidiary of SoftBank, is building in Piketon, Ohio, 109km (68 miles) south of Columbus, Ohio. It is part of a public-private partnership that allowed SoftBank to build the world’s largest AI data centre on government land owned by the US Department of Energy.

“The demand is not as big as it appears to be because, again, the companies are buying from each other using their own money to some degree, as opposed to, say, OpenAI having such tremendous demand from customers, monetising it properly, and then using customers’ money to buy Nvidia chips. They’re essentially using Nvidia’s money to buy Nvidia chips,” said Aleksandar Tomic, associate dean at Boston College.

The development comes as the Altman-led company is leaning towards an initial public offering, which, according to reporting from The New York Times last month, could be in 2027.

The United States Federal Reserve is set to hold interest rates steady as inflationary pressures mount, driven by heightened fuel prices as tensions between the US and Iran continue.

The central bank said on Wednesday that it will maintain rates at 350-375 basis points during the second monetary policy decision under new Chairman Kevin Warsh.

“Inflation remains elevated relative to the Committee’s 2 percent goal, in part reflecting supply shocks that have driven price increases in certain sectors, including energy. The Committee will deliver price stability,” the central bank said in a statement upon the release of its decision.

CME FedWatch, which tracks the likelihood of monetary policy decisions, forecast a 66.3 percent chance of maintaining rates, while there was a 33.7 percent chance that rates would increase to 375-400 basis points.

Of the 12, three members, Beth M Hammack, Neel Kashkari, and Lorie K Logan, voted to raise rates by 25 basis points.

“My colleagues and I considered the economic shocks of recent years, strained supply chains arising from the pandemic, military conflicts, energy supply disruptions, substantial increases in tariff rates, and yes, the surge in AI-related investment,” Warsh told reporters.

“We are not relying on any one individual piece of data as cover or as an excuse, or as validation. What I care about and what I think the Committee cares about is trends on the data.”

Monetary policy decisions have become more uncertain as Warsh has scrapped forward guidance, which typically helps financial institutions and journalists better understand upcoming policy choices.

Flying blind

That is putting pressure on analysts.

“With little guidance on the reaction function under the new chairman, markets are filling the void with speculation that Warsh may be eyeing a surprise hike to reinforce anti-inflation credibility,” Barclays economists said in a note.

Citadel Securities earlier this week forecast a rate hike. Meanwhile, analysts at S&P Global forecast that rates would hold steady.

At the last meeting, the central bank’s governors were evenly split on whether to raise interest rates this year, as the central bank maintained rates during its first meeting under Warsh.

Warsh had previously said that there was “no tolerance” for inflation as the central bank pushes to reach the Fed’s 2 percent target.

Market shifts

Financial pressures on the broader market eased last month, with consumer inflation moderating. The Consumer Price Index report released in July for the month of June by the US Labor Department’s Bureau of Labor Statistics showed a 0.4 percent decline in consumer inflation, marking the first monthly decline since April 2020 in the early days of the COVID-19 pandemic. However, that was a correction from the previous month, when the CPI rose by 0.5 percent.

The CPI remains elevated at 3.5 percent on an annual basis, according to the report, though that is still a slowdown from 4.2 percent in May. However, consumers are still feeling the pinch, especially at the petrol pump.

Prices are on the upswing. The average price for a gallon of petrol is $4.09 ($1.08 per litre), up 3 cents from this time last week, and up from $3.86 ($1.02 per litre) this time last month, according to the American Automobile Association (AAA), which tracks daily petrol prices. By comparison, daily petrol prices were $2.98 ($0.78 per litre) when the US and Israel first struck Iran on February 28.

Those pressures are echoed by a slump in consumer confidence for the third straight month, according to The Conference Board, which released its report on Tuesday.

“Consumers anticipate little improvement in business conditions over the next six months,” Dana M Peterson, chief economist at The Conference Board, said upon the report’s release.

Political flashpoint

The decision is overshadowed by pressure from the White House. Interest rates have been a point of contention between Trump and the central bank. Trump has long pushed the Fed to cut rates, putting former Chair Jerome Powell in the crosshairs and making him the subject of investigations by the US Department of Justice.

But Warsh has yet to become a target of Trump’s scorn. “Kevin is fantastic,” he told reporters on Monday on board Air Force One. “He’s got a board, and the board members are very political.”

Trump made those claims despite the central bank’s longstanding commitment to maintaining its independence from political pressure.

Taiz, Yemen – Fuad Mohammed has been working as a construction labourer for more than 25 years. The 46-year-old has seen things get progressively worse in Yemen’s construction industry since the war in the country started more than a decade ago, and then further deteriorate after the US-Israel war on Iran began in late February, with its devastating economic impact on the wider region.

“We can barely eke out a living for our families,” Fuad told Al Jazeera.

The ongoing regional war has damaged economies across the Middle East, with government-controlled areas of Yemen bearing a heavy burden as commodity prices soar. Among the hardest-hit sectors is fuel: in January, 20 litres (5.3 gallons) of diesel cost 25,000 Yemeni riyals ($17), but today that price has skyrocketed to 45,000 riyals ($30). That massive spike has triggered a domino effect, driving up the costs of all goods and services dependent on fuel and transportation – including construction.

As a result, countless construction projects across those areas – in Yemen’s east and southwest – have ground to a halt.

Pausing construction

Fuad explained that, before the US-Israel-Iran war, he was able to find work for around two weeks every month. But this year, he has now gone several months with barely any work.

“The price hikes in building materials have frustrated both homeowners and construction labourers,” Fuad said. “Those who want to build find that their budgets are no longer enough, and we are left with no work.”

Fuad recalled that he briefly found work in May for a woman who had saved money to build a home for her family. However, when a fresh wave of price increases hit the market, she paused construction to wait for prices to drop.

“I also work with construction contractors, but most of them have paused their projects at the request of homeowners,” he added. “When I call them, they tell me they are waiting for regional conditions to improve.”

As an example of the rising costs, the price of a truckload of sand increased from 130,000 Yemeni riyals ($87) to 190,000 riyals ($127), while the average cost of one metre of window glass rose from 90,000 riyals ($60) to 130,000 riyals ($87).

Fuad’s situation at home is desperate. Relying entirely on daily wages but having no work, he can not provide basic essentials for his family. He has considered finding another job, but he lacks professional experience in other fields.

In a desperate attempt to find work, he has lowered his daily wage from 25,000 Yemeni riyals ($17) to 20,000 riyals ($13).

“My situation is getting worse every day,” he said.

Economic division

An official from the Yemen Petroleum Company in Aden told the Reuters news agency in May that the increase in the price of diesel was caused by the worsening supply crisis and rising global fuel prices, driven by regional tensions and the closure of the Strait of Hormuz, alongside increased transportation and marine insurance costs. The official noted that the measure was temporary and would remain in place until the end of the crisis and conditions returned to normal.

Wafeeq Saleh, executive director of the Taiz Center for Yemeni-Gulf Studies, explained that the Yemeni economy was particularly susceptible to external economic shocks.

“Any disruptions in global commodity markets directly affect the local market because [Yemen] imports nearly 90 percent of its needs,” Saleh told Al Jazeera. “Consequently, the local rise in commodity and fuel prices is a natural outcome of surging global prices, shipping tensions in the Strait of Hormuz, as well as increased maritime insurance and freight fees.”

In areas controlled by Yemen’s Houthi rebels, however, including the capital Sanaa, there has not yet been a sharp increase in fuel prices, and therefore no impact on the construction industry – yet.

Yemen’s war has entrenched two separate economic structures in the country, with the central bank bifurcated between Aden and Sanaa, and two different exchange rates operating for the Yemeni riyal.

The Houthi group is already facing popular anger over a weak economy, as it grows increasingly isolated regionally and internationally. The group has so far avoided an increase in the price of fuel, with 20 litres (5.3 gallons) of diesel costing 9,500 Yemeni riyals, which at the exchange rate set in Sanaa is the equivalent of roughly $18.

“[The Houthis] may have sufficient inventory from previous months, which is why the local market hasn’t been affected,” Saleh said. “However, the impact will appear in the coming period when imports are made at the new price.”

The actions of the pro-Iranian Houthis themselves have contributed to the increase in global oil prices. Having sat out the Iran war for its first few months, the Houthis recently began attacks against Saudi ships passing through the Red Sea, after the Yemeni government and the Saudi-led coalition that backs it refused to allow a plane from Iran to land in Sanaa. The Houthi attacks mean that the transportation of oil from the Gulf is now disrupted in both the Strait of Hormuz and the Red Sea, and has contributed to oil prices going past $100 a barrel for the first time since May.

Will prices come down?

Lutf Zuraiqi, 58, had saved some money to build a home, but the dramatic increase in the cost of building materials forced him to pause the project until “things get better”.

“Price increases aren’t new in Yemen, but I believe this current surge is regional. I believe as soon as the regional war ends, building materials will return to their old prices,” Zuraiqi told Al Jazeera.

Zuraiqi has been following news of the Iran war on a daily basis because its end would mean lower material costs for him and the chance to resume building his planned home.

“The government promised that prices will go back down after the [US-Iran] war ends,” he said. “So this time I’m choosing to believe them and hope I will manage to finish my home.”

Mohammed Jameel, on the other hand, hasn’t been following the news – but the building contractor has been tracking prices of building materials instead. The 59-year-old believes that, based on his experience, once the price of the materials goes up, they never come down.

“I have worked in construction for more than four decades now, and throughout this entire period, building material prices have consistently risen,” Jameel said. “We have never witnessed a price drop. So, I advise those who have paused their construction to resume, as today is always better than tomorrow.”

Jameel said that he has been forced to reduce his rates and cut profit margins on major contracts to keep some work.

“My experience tells me it is normal for owners of homes and projects to pause work until they adapt to the new prices,” he added. “But eventually, construction labourers’ wages will rise, and the total cost of building will increase.”

Jameel feels for the plight of construction labourers, but he views this as a temporary phase and believes the suffering will ease once work picks up again. “We are all in the same boat, not just the daily wage labourers,” he said. “But we hope things will get better.”

Iraqi Prime Minister Ali al-Zaidi is leading a high-level delegation to Turkiye, in his first visit to the neighbouring country since taking office in May.

Accompanied by ministers and senior officials, al-Zaidi’s visit on Tuesday will focus on “strategic cooperation” between the two countries, as well as issues related to security, water and the economy, according to government spokesman Haider al-Aboudi.

Relations between Iraq and Turkiye have fluctuated over the past decade but remained a priority for both sides, particularly for Iraq in relation to oil and water resources.

And the launch of the US-Israel war on Iran in February and the subsequent closure of the Strait of Hormuz have elevated Ankara’s importance for Baghdad, prompting it to press Turkish authorities to resume and increase the exporting of oil through the Iraqi-Turkiye pipeline after years of suspension.

New oil agreement

The two countries are seeking to sign an oil pipeline agreement that governs the export of Iraqi oil after the expiration of the previous deal on Monday.

A source from Iraq’s Ministry of Oil told Al Jazeera that a technical delegation arrived in Ankara late last week to finalise a one-year extension of the old oil-exporting agreement until a new deal is concluded.

“The new Turkish terms regarding a new agreement are very difficult to be accepted by Iraq. For this reason, no one other than the Iraqi council of ministers is to take such a decision regarding this issue,” said the official on condition of anonymity.

”Turkiye wants to increase the interest from $1.35 for each barrel to $7, and the export capacity must not be less than 1.5 million bpd [barrels per day], whether Iraq can reach this level or not,” the source added.

Part of al-Zaidi’s plan is to find new energy deals and secure alternate routes to export Iraqi crude via Turkiye and Syria and to the Mediterranean Sea.

Iraq signed energy deals estimated at $200bn with US companies during al-Zaidi’s visit to the United States earlier this month, and the government aims to increase its oil and gas production, as well as to diversify exporting options.

“There is an urgent need to find new export outlets away from the Strait of Hormuz, which no longer meets Iraq’s requirements. We must expedite and shorten the timeframe for negotiations and contracting in order to establish new export routes,” said Iraqi Oil Minister Basim Khudair.

Development Route 

During his visit, al-Zaidi is also expected to pursue the establishment of strong trade, development and economic ties while seeking to draw from Turkiye’s experience across different industries.

A government source told Al Jazeera that the prime minister will highlight the importance of utilising Turkish expertise in the energy, infrastructure and transport sectors to boost Iraq’s development initiatives.

Among the main projects is the so-called Development Route – a vital transport project that connects Iraq’s al-Fao port in the south all the way north to the Iraq-Turkiye-Syria border triangle through a 1,200km (746-mile) rail and a highway network that passes through 10 Iraqi provinces.

Abd al-Jabar Ahmad, a professor of political science, said continued attacks by armed groups “have effectively derailed” the project.

He also cast doubt al-Zaidi visit’s will yield major results in relation to it, pointing to Ankara’s involvement in a transport corridor seeking to link Turkiye to Jordan through Syria and then Saudi Arabia.

“In my view, the Saudi project stripped Iraq’s Development Road Project of much of its economic and investment appeal,” he added.

Water and security   

Water management is also expected to be prioritised during al-Zaidi’s discussions in Turkiye.

Iraq blames Turkiye for building dams that have affected the flow of water from its two main rivers – the Tigris and the Euphrates – which originate in Turkish territory.

“Iraq views it as an issue that impacts the future of millions of Iraqis,” said the government source.

But the most complicated and sensitive issue concerns security – particularly, the presence of Turkish forces on Iraqi soil to fight the Kurdistan Workers’ Party, or PKK, which Turkiye, the US and European Union have designated as a “terrorist” group.

Military estimates suggest that Turkiye has about 50 small and big bases in three Iraqi provinces – Erbil, Duhok and Nineveh – hosting some 5,000 soldiers and weaponry, including artillery and armoured vehicles, as well as heavy and medium arms.

In mid-2025, the PKK announced it had taken its first steps towards disarmament as part of a wider peace deal with Ankara to end 40 years of war against the Turkish state in a conflict that has killed more than 40,000 people. Still, Turkiye continues to view the armed group’s presence in different mountainous areas in northern Iraq as a national security threat.

But despite the challenges, there is wide support in Iraq to strengthen relations with Turkiye, driven by the belief that ties with the neighbouring country remain important and serve Iraq’s national interests.

“There is a strong Iraqi desire to deepen relations with Turkiye in many aspects, especially in oil as Turkiye becomes one of the most important countries in the region in terms of transit routes for exporting oil to Europe and the rest of the world,” said Issam al-Faily, a political science professor.

“The problem lies in the nature of the Iraqi political climate, which is affected by the ongoing power struggles. The covert Turkish–Iranian rivalry may be one of the reasons that could prevent al-Zaidi from achieving his aspirations in relations with Turkiye. He should balance these very critical issues, if he wants this visit to be successful,” added al-Faily.

Tehran, Iran – Iran and the United States have returned to mediated talks, and their military action is temporarily suspended, but the war continues to impact international maritime corridors beyond the Strait of Hormuz as well as domestic markets.

The near-total closure of the strategic waterway, disruptions in the Red Sea by the Iran-aligned Houthis in Yemen and Ukraine attacking an Iranian vessel in the Caspian Sea have all kept tensions high.

Iran’s government is also facing more tough choices, including a potential fuel price hike amid high social and economic discontent, as the US military enforces a naval blockade of the country’s southern ports for a second time.

The Ministry of Petroleum said on Saturday that Iran has sold $11.5bn of crude oil during the war without specifying the exact dates and $6.5bn during the period of the now-suspended memorandum of understanding (MoU) signed with the US last month. It said the combined figure represented 60 percent of the full-year oil revenue target in the budget.

The signing of the June 17 MoU led to the partial reopening of the Strait of Hormuz and lifting of the US naval blockade on Iran, which eased some of the pressure on global oil markets and allowed Iran to export oil stored on supertankers waiting to sail from its territorial waters. Iran’s Petroleum Ministry said increased oil prices generated about $3bn in additional value in the first half of the year and $11bn from the yields has so far been transferred to government coffers despite US embargoes.

During the previous blockade that was imposed on April 13 and lasted a little over two months, Iranian authorities attested to near-zero crude exports. A prolonged second blockade risks further reducing Iran’s export revenues and piling pressure on Kharg Island, through which about 90 percent of Iran’s crude oil exports pass, and other Iranian storage and export sites, which could in turn affect production at petrochemical plants and make an eventual restart costlier and slower.

The US military’s Central Command (CENTCOM) said that as of Saturday, soldiers had redirected 12 commercial vessels trying to run the blockade that has been in place since mid-July, disabled two that did not comply and boarded two “to ensure total compliance”.

The US military also showed footage of heavily armed soldiers rappelling down from a helicopter onto the deck of the Charminar, an Iran-linked oil tanker subject to US sanctions since last year for allegedly being part of the Shamkhani network. The US says Iranian oil magnate Mohammad Hossein Shamkhani plays a central role in Iranian and Russian shadow fleet operations.

Iran has also said it has been redirecting multiple ships each day to keep the strait closed as its armed forces emphasised that they will not bow to pressure. On Sunday, Iranian media reports said a vessel blew up after hitting a naval mine in the Strait of Hormuz.

Still, CENTCOM has stopped extensive bombing strikes against Iran for two nights with US Ambassador to the United Nations Mike Waltz saying President Donald Trump is giving talks with Tehran “some space”.

Iran has also stopped retaliatory attacks across the region while Ministry of Foreign Affairs spokesman Esmaeil Baghaei said discussions with Oman on reopening the Strait of Hormuz have been productive.

The domestic picture

The oil export constraints, however, are still adding to Iran’s existing economic woes, which are linked to domestic structural issues and mismanagement as well as years of harsh sanctions.

Iran’s infrastructure has also suffered significant damage during the war launched by the US and Israel in late February and may fare worse if the conflict escalates.

The government said last month that about 230 million cubic metres (300 million cubic yards) per day of Iran’s pre-war natural gas output of roughly 650 million cubic metres (850 million cubic yards) was lost due to US and Israeli bombing, worsening electricity and petrochemical shortages.

Sekhavat Asadi, managing director of the Pars Special Economic Energy Zone, said on Sunday that Iran expects to restore more than 100 million cubic metres (130 million cubic yards) per day of that lost production capacity within the coming months.

Authorities are also managing a fuel imbalance as the country faces a deficit of more than 20 million litres (5.3 million gallons) per day of petrol. The shortage is managed through limited but costly imports, blending fuel components, tapping inventories stocked before the war and repeatedly asking citizens to consume less.

The Petroleum Ministry said tighter monthly fuel consumption caps may be imposed if the imbalance persists.

The government said this week that it is seriously considering doubling the price of a third tier of monthly petrol quotas allocated to individuals.

Another petrol price hike was made in December, weeks before the country was swept by a wave of nationwide protests, in which thousands of people were killed in a government crackdown in January. An overnight fuel price increase in November 2019 also triggered deadly nationwide protests.

The capital, Tehran, and cities across the country are facing rolling electricity cuts, which also create water and communications disruptions. President Masoud Pezeshkian said he has ordered industries not to be cut off until late September to avoid further inflaming a bruised jobs market.

The closure of the Strait of Hormuz has also hit Iran’s commerce with China, its largest trading partner and buyer of oil, which has considerably curtailed its overall crude oil imports to adapt to conditions created by the war.

But nonoil trade with China has also deteriorated since the start of the war, falling by 75 percent in March and June when compared with a year before, according to Chinese customs data.

Two near-total internet shutdowns imposed by the authorities, first during the January protests and then during the war, only worsened conditions for Iran’s economy this year as it battles chronic inflation and a rapid dwindling of public purchasing power.

A report last year by the Saba Pension Strategies Institute, a think tank affiliated with Iran’s state-run pension fund, found that while a little more than 30 percent of Iranians lived below the poverty line five years ago, that rate was projected to have reached 45 percent this year – and was still rising.

Spread to Bab al-Mandeb, Caspian Sea

After repeated Iranian threats that escalating the war could spread the scope of maritime disruptions to the Red Sea, the Houthis in Yemen last week declared a blockade against Saudi Arabia, turning back or hitting vessels transiting near the strait of Bab al-Mandeb while also bombing Saudi oil facilities.

Dozens of commodity vessels have still continued their transit through the strait, including Chinese supertankers, but war-risk premiums have increased, raising import and insurance costs for all.

Saudi authorities, who lead a coalition backing Yemen’s internationally recognised government against the Houthis, have responded by launching major air attacks across Yemen.

And farther north, Ukraine has confirmed that it struck a vessel in the Caspian Sea with President Volodymyr Zelenskyy alleging it was carrying Iran-linked military cargo.

Iran’s authorities said it was a commercial vessel importing iron from Astrakhan, a port on the Volga River in Russia, and bound for Bandar Anzali in northern Iran. They said one sailor was killed and three were wounded.

The Iranian Ministry of Foreign Affairs summoned Kyiv’s charge d’affaires in Tehran to deliver a strong protest and a warning that “the act will not go unanswered”.

The incident has raised concerns that the Caspian Sea, a waterway previously used safely for trade, could also become the scene of more military confrontations.

Iran’s Caspian trade is primarily with Russia, Kazakhstan, Turkmenistan and Azerbaijan. It imports essential goods, such as wheat and other grains, corn, barley and animal feed as well as timber and fertiliser.

The country’s exports through the northern maritime route include construction materials, steel products, agricultural goods and some refined petrochemical products.

The war’s expanding disruptions have only prompted hardline state-linked analysts to advocate closer strategic partnerships with China and Russia.

“We can now say that the two war fronts in the Middle East and Ukraine are increasingly intertwined,” Mahdi Kharratiyan, a political analyst linked with Iran’s Islamic Revolutionary Guard Corps, wrote on X on Sunday.

The island has weathered a US oil embargo since January and is enduring one of its worst economic crises ever.

Cuba’s president has accused the United States of carrying out “genocide” against his people and seeking to seize the Caribbean island nation.

President Miguel Diaz-Canel lashed out during a rally on Sunday commemorating the start of the Cuban Revolution in 1953. His anger was a reaction to Washington’s continued pressure, which has included a crippling oil embargo that has produced regular blackouts and economic hardship.

“I denounce that Cuba is the victim of a cold-bloodedly calculated genocide,” Diaz-Canel said in Pinar del Rio at the event marking the 73rd anniversary of the uprising against former dictator Fulgencio Batista.

US relations with the communist-led island have long been tense, but have deteriorated further under US President Donald Trump.

Washington imposed an oil embargo on Cuba on January 29, causing daily blackouts of more than 20 hours.

The US, Diaz-Canel said on Sunday, was engaged in “economic strangulation” through its actions.

Employers have been forced to reduce workdays, industrial production has stopped, and water and medicine shortages are hitting a country already suffering from previous US sanctions and financial reforms that caused inflation.

Payment companies Visa and Mastercard, Spain’s Melia hotel chain, and Air Canada and Air France have all exited the country amid the crisis.

“Cuba is today waging a historic battle … against the walls of a genocidal policy whose objective is to suffocate an entire people in order to appropriate the country,” Diaz-Canel said.

Trump said he would “take over” Cuba, following the US abduction of former Venezuelan president and Cuban ally Nicolas Maduro in January.

Last week, a US State Department report accused Cuba’s government of running an espionage and influence network against Washington and Latin American neighbours.

In May, the US indicted former president and revolution leader Raul Castro – brother of Fidel – of murder and other crimes for his alleged part in the downing of two civilian airplanes operated by Miami-based exiles off the Cuban coast in 1996.

Cuba’s government has rejected the accusations and denounced Trump’s rhetoric. Talks between the two countries have largely stalled, Cuban officials said in June.

The Cuban Revolution, led by brothers and later leaders Fidel and Raul Castro, culminated in the Batista government’s fall in 1959. Former President Raul, 95, was unusually absent at Sunday’s rally.

Five years after Tunisian President Kais Saied suspended parliament and attained sweeping powers, the country remains sharply divided, grappling with a severe economic downturn and a worsening political deadlock.

Saied’s supporters continue to view the measures taken by him in July 2021 – when he suspended parliament and dismissed Prime Minister Hichem Mechichi – as a necessary “correction” to save the country. The opposition says that since then, state institutions have collapsed, promises have gone unfulfilled, and there has been an unprecedented concentration of power in his hands.

Speaking to Al Jazeera’s Ma Waraa al-Khabar (Behind the News) programme, political and economic experts debated the legacy of Saied’s five-year rule, painting a picture of an economy hindered by a poor business climate, populist policies, and a lack of clear vision.

An economy in free fall

Since Saied assumed near-total control of the levers of power five years ago, Tunisia’s economic indicators have largely plummeted.

Ridha Chkoundali, an economics professor at the University of Tunisia, said that the investment rate in the country has dropped from an average of 20 percent of the gross domestic product (GDP) between 2015 and 2019 to just 8 percent in 2023.

Chkoundali attributed this sharp decline to an environment that drives away investment, exacerbated by a significant burden from taxes, which have risen by five percentage points since 2015.

Taxation, he argued, is no longer used to stimulate investment but simply to collect revenues at the expense of economic growth.

The crisis has hit ordinary Tunisians the hardest. Food inflation has reached nearly three times the general average, severely eroding purchasing power. Meanwhile, unemployment has surged, particularly among university graduates, pushing many to leave the country for better economic opportunities abroad.

Mohamed Abbou, a former minister of state and former secretary-general of the Democratic Current party, argued that the crisis is rooted in Saied’s style of governance, adding that the rule of law has been replaced by a climate of intimidation and threats.

“Tunisia has lost all credibility,” Abbou said. “Everyone fears the situation in Tunisia because there is no rationality… there is no stability in laws, taxes, or anything else.”

Abbou particularly criticised Saied’s approach to international finance, pointing out that the president rejected a deal with the International Monetary Fund (IMF) purely to maintain a populist image. At the same time, he quietly implemented many of the IMF’s harsh austerity demands, such as halting public sector hiring and reducing imports.

However, supporters of the current government argue that it is unfair to blame Saied’s administration entirely for an economic crisis that predates his rule.

Political analyst Souhaib Mezrigui says the current situation is the result of an absence of any clear economic or social vision over the past 10 years. He placed blame for the current crisis squarely on the political class that has ruled Tunisia since the 2011 revolution.

Protests and political prisoners

Tunisia’s economic stagnation has manifested into tangible anger on the streets. Coinciding with the five-year anniversary, thousands of Tunisians rallied in the capital’s Habib Bourguiba Avenue on Saturday, protesting against deteriorating living conditions, rolling water and electricity cuts, and a backsliding in democracy.

Organised by a coalition of opposition parties and the “Nafas” civil initiative, the crowds called for Saied to “leave” and revived the 2011 democratic revolution’s rallying cry: “The people want the fall of the regime”.

A central demand of the protests was the release of political prisoners, who have filled Tunisia’s jails since Saied began his crackdown on dissent. Among the most prominent detainees is Rached Ghannouchi, the 85-year-old former parliament speaker and Ennahdha leader, who was recently sentenced to life in prison.

Ghannouchi’s health has rapidly deteriorated in detention. He recently fainted in Mornaguia prison, where temperatures reportedly reached 52 degrees Celsius (126 degrees Fahrenheit). Rights groups and families of detainees, such as opposition politician Ahmed Nejib Chebbi, have repeatedly warned about the dire conditions inside the detention facility and the toll it is taking on elderly inmates.

Imed al-Khamiri, a spokesman for the Ennahdha party, told Al Jazeera that the continued detention of political figures and opposition leaders remains a “disgrace to the Tunisian state”.

US lawmaker calls for sanctions

Saied’s consolidation of power has also drawn renewed international condemnation. Marking the anniversary, US Representative Joe Wilson issued a scathing statement, accusing Saied of transforming the Arab world’s only constitutional democracy into a “one-man dictatorship”.

Wilson accused the Tunisian regime of phenomenally increasing corruption, destroying opportunities for the youth, and shifting its alliances to become a close associate of Russian President Vladimir Putin, Iran, and Hezbollah.

Noting that Saied’s government has even jailed US citizens, Wilson urged the US State Department to issue a “Level 4: Do Not Travel” advisory for Tunisia.

“I will also continue to work to pass the Tunisia Democracy Restoration Act imposing sanctions on Saied and his inner circle,” Wilson stated on the social media platform X, adding: “Democracy in Tunisia will win in the end. Madmen tyrants will not last.”

The delay, filed in court on Friday, can cost Paramount $1.7bn in fees if the deal is not closed by next June.

Paramount Skydance has agreed to pause its $110bn acquisition of Warner Bros Discovery until after a federal judge rules on states’ challenge to the deal, according to court papers.

The delay, filed in court on Friday, could cost Paramount Skydance about $7m a day in fees it agreed to pay Warner Bros shareholders if the merger does not close by September 30.

“We look forward to proving our case at trial,” Paramount’s spokesperson said.

Twelve states, led by California, sued on July 13, arguing the deal would “extinguish competition” in Hollywood and lead to fewer choices for consumers, particularly moviegoers and cable customers. Paramount has called the states’ claims meritless and pledged to “vigorously defend” its merger.

“Halting this merger while our case proceeds is a critical victory in our efforts to uphold the law and protect the film and television industries,” said New York Attorney General Letitia James, who is suing to block the deal.

Friday’s move arrives just days after US District Judge Araceli Martinez-Olguin granted a temporary restraining order requested by the states to freeze the transaction for several weeks.

The companies agreed to pause the deal until five days after the judge rules on the merits of the case, or June 1, 2027, whichever comes first. Paramount could owe as much as $1.7bn in ticking fees to Warner Bros shareholders if the deal is delayed until then.

Similar merger challenges have taken an average of eight months for a judge to rule, a review of recent cases by the Reuters news agency has found.

There have also been concerns over a media stranglehold as the merger would have brought CNN, currently owned by Warner Bros, under the umbrella of Paramount. The latter already owns CBS, which has seen a fair amount of turmoil amid allegations of bias in favour of US President Donald Trump under the leadership of CEO David Ellison, whose father, tech billionaire Larry Ellison, is a Trump ally.

While the company is known for offering a more luxurious travel experience for passengers in business and first class seats, Emirates has now revealed a brand new upgrade for economy travellers

When it comes to travelling in comfort, Emirates is often praised for the comfort it provides passengers on long-haul flights, and the company has even been named one of the most luxurious airlines in the world. However, the extra bells and whistles are likely to cost you, as they are mainly offered to passengers in business or first class.

But that doesn’t mean its cheaper, economy class is uncomfortable. The airline has upgraded economy seats in its newer A350 planes to provide more legroom. The on-screen entertainment system has also been given an upgrade. Passengers can also choose to pay an extra fee to enjoy Wi-Fi services on their flight – something budget airlines like Ryanair don’t always offer.

But now, the airline has revealed one more upgrade to their economy seats, and claims to be the first in the world to have upgraded seats’ pillows to provide more support for the passengers’ heads.

Emirates upgrades economy class seats

Taking to Instagram, the airline shared a video with the reveal, writing in the caption of the post: “Emirates just added something to Economy that no other airline has.

“Introducing the U-Dream adjustable headrest – just one of the many ways we’re continuing to invest in Emirates Economy. From thoughtful comfort to award-winning in-flight entertainment, every detail is designed to make your journey even better.”

The clip showed a female passenger seated in an economy seat aboard an Emirates plane, before pulling down two sections of cushioning behind her head, one on either side, creating a makeshift travel pillow that makes nodding off on the plane considerably easier. The clip went on to explain that, while the carrier is widely recognised for its more premium offerings in business and first class cabins, it is equally committed to delivering a comfortable journey for those travelling in economy.

Branded the U-Dream, the ground-breaking adjustable headrest boasts flexible inward-folding wings designed to cradle the head and neck, enabling passengers to unwind in comfort throughout their journey.

To date, the headrests have been fitted on three A350 aircraft, with plans to install them across all of the airline’s A350s and the majority of its Airbus A380s and Boeing 777s.

Fans have different responses to the news

Viewers were quick to flock to the comments section to share their opinions. While the majority seemed to be happy with the upgrade, some also pointed out some of their worries with the headrests, such as how hygienic they would be.

“Personally, I will never use this new tool as they are never cleaned,” one person wrote. Another said: “U dream: Pre-seasoned headrests, comes with free dried drool flavor from previous passengers.”

Some flight attendants have previously revealed that the seats on planes don’t get cleaned as often as you make think, making these worries very valid.

Someone else also pointed out: “This doesn’t address the root issue. When people sleep/doze on the plane, their heads fall forward, not sideways; therefore, they really need something that supports the front of their neck and head/face.”

But despite the skepticism, the majority of fans seemed to be excited about the upgrade, with one person saying: “THANK YOU EMIRATES.”

Someone else said: “@emirates taking things up a level AGAIN!” A third person also commented: “”Honestly a simple but beautiful solution.”

London, United Kingdom — On his fourth day as prime minister, Andy Burnham did not stay at Downing Street in London. Nor did he go to Manchester, the home of Number 10 North. He went to Glasgow.

Hours before King Charles and Queen Camilla opened the 2026 Commonwealth Games, Burnham held his first in-person meetings with Scotland’s First Minister John Swinney and Wales’ First Minister Rhun ap Iorwerth. The talks were meant to demonstrate, in Burnham’s own words, that growth is needed “in every postcode across the whole of the UK”. A meeting with Northern Ireland’s First and Deputy First Ministers, Michelle O’Neill and Emma Little-Pengelly, is pencilled in for a wider UK tour in August.

Notably absent from the agenda, at Burnham’s insistence, was any discussion of a second Scottish independence referendum.

Just days after being appointed prime minister, Burnham is testing a proposition that will define his premiership. He’s selling a vision that the office itself can be partly relocated out of London to Manchester, the city he governed as mayor from 2017 until his return to UK Parliament in the Makerfield by-election last month.

What Number 10 North actually is

Stripped of rhetoric, Number 10 North is a written ministerial statement. On July 21, Baroness Smith of Basildon, Leader of the House of Lords and Lord Privy Seal, confirmed on the government’s behalf that devolution and local growth policy functions are moving out of the housing ministry and the Treasury and into a new Manchester-based operation. There, civil servants will work inside a restructured Office for the Prime Minister and the Cabinet, led by Cabinet Secretary Dame Antonia Romeo.

The interim headquarters is Heron House, in the New Islington area of Manchester, chosen partly for its proximity to a planned Manchester Digital Campus.

Caroline Simpson, the outgoing chief executive of the Greater Manchester Combined Authority, has been named Burnham’s deputy chief of staff, and will be in charge of day-to-day office operations. Downing Street says Burnham himself expects to work from Manchester “at least one day a week”, though officials caution his diary may change, and insists the arrangement carries no additional cost to taxpayers.

Burnham calls it “the nerve centre of a rewired Britain” and rejects suggestions it is symbolic. “Not a gimmick,” he told his first Cabinet meeting about Number 10 North.

Plumbing, but no water

Number 10 North “establishes the plumbing, but the water isn’t flowing yet”, said Mirte Boot of the Institute for Public Policy Research (IPPR) North. The institutional architecture is firming up, but fiscal devolution – ie, the transfer of money and tax-raising power – that would make such a policy meaningful doesn’t yet exist, she added.

Still, she calls it “a step in the right direction” after what she describes as “too much power condensed into one postcode”. Leaving Westminster isn’t enough; Number 10 North will need “strong political leadership aside from the prime minister”, she added.

The verdict that Number 10 North contains vision and ambition but currently lacks a detailed plan and delivery mechanism is a recurring response from independent voices.

Jonathan Carr-West of the Local Government Information Unit calls Burnham’s devolution agenda “the most ambitious statement … from a senior politician in a generation”, while warning that English councils are so financially hollowed out that the vision “requires a vehicle” it does not yet have.

Malcolm Morgan, a transport researcher at the University of Leeds, puts it more bluntly: genuine devolution means spending, taxation and regulatory power, not just relocated functions, and “devolution does not create more funding”.

That funding question sits unresolved alongside the national one. The 2026 English Devolution and Community Empowerment Act expanded mayors’ control over transport, planning and housing, but left fiscal devolution to a separate Treasury “roadmap” due alongside the autumn budget. According to Centre for Cities, a UK urban policy think tank, the UK remains the most fiscally centralised country in the G7: some 95 percent of tax revenue flows straight to Whitehall.

Devolution, or recentralisation?

For Scotland’s SNP government, the Number 10 North framing is beside the point. First Minister Swinney responded that “rhetoric alone will not cut it” and argued that four consecutive Holyrood elections have handed his party a mandate for Scottish self-determination, something Westminster keeps ignoring, he said. In Glasgow, Burnham declined to engage with that argument directly.

Meanwhile, Wales’ Ap Iorwerth struck a more cooperative note but still said he expected “that Number 10 North would not become Whitehall with a different postcode”.

He also used the meeting with Burnham to press for a new Wales Bill granting policing and justice powers, and a replacement for the Barnett Formula funding mechanism, which Westminster uses to calculate annual changes to the block grants allocated to the UK’s devolved governments, so Wales would have funding parity with Scotland.

Reform UK’s Nigel Farage, from the opposite political direction, warned that a Number 10 in the south and one in the north would simply “fight against each other”.

What it means in Manchester

In Bury, Greater Manchester, Scottish-born Debe Conway sells children’s books at markets and has lived in the area for 56 years, but remains unconvinced about the new prime minister.

Her biggest concern is immigration, which she called Burnham weak on. And as for Number 10 North, she wants to know how it’s being paid for, and asks how long it will last, considering that the UK has had seven prime ministers in the last 10 years.

Rich Carver, who has run pizza restaurants in Manchester for 15 years and is currently “soaking up the energy in the city”, says he cares more about what will happen in the next 10 years.

He’s also tired of the succession of governments and wants this one to last. He likes Burnham and is optimistic enough about the city’s trajectory that he is opening a new restaurant in the coming weeks, something he would not have done five years ago.

“We are all one country,” he says, hoping the rest of the UK (and the media) give the new prime minister time and the chance to implement his vision. Whether that time produces growth, or just relocated offices, is the question Number 10 North still has to answer.

EDITOR’S ANALYSIS

Houthi blockade for now is shaping who moves Saudi crude, not whether it moves, analysts say, even as oil prices soar.

As oil prices hit $100 a barrel on Thursday, experts say they are watching to see which vessels Yemen’s Houthis allow to pass through in the Red Sea as that will indicate how the crude market trends.

Brent futures rose $6.58 or 6.96 percent, to $100.65 a barrel, exceeding $100 for the first time since late May.

That was on the back of the Iran-aligned Houthis saying they were cutting off the passage Riyadh had been using to ship parts of its crude oil once Iran closed the Strait of Hormuz to retaliate against United States and Israel attacks.

On Monday, the Yemeni group declared a naval blockade on shipments from Saudi Arabia and said they would target Saudi, Israeli, and United States-linked tankers in the Bab el-Mandeb, which links the Red sea to the Indian Ocean.

On Thursday, the Houthis attacked two Saudi Arabian oil tankers, the group said, with a Saudi news agency later confirming that one of the two vessels was set ablaze.

It is not clear if the second one was also hit, according to marine analysis firm, Windward.

“The Houthis are quite mercurial and there is no complete clarity on what the blockade means,” said Michelle Bockmann, a senior maritime intelligence analyst at Windward.

“We’re watching now the ability of Chinese-owned tankers at [Saudi port] Yanbu if they are allowed to go through Bab el-Mandeb. Two have gone through but those had been loaded before the blockade was announced.”

The Houthis have previously relied on China for help, including for drone components, and “the Chinese have previously had a free pass”, said Bockmann, including between 2023 and 2025 when the Houthis attacked cargo ships aligned with Israel and the US in the Red Sea in the wake of the war on Gaza.

Windward tracking shows the cargo that moved through the Bab el-Mandeb chokepoint on July 20 was Saudi in origin but Chinese in crew and destination, and it drew no interdiction. The two vessels passed through the same corridor that Western- and Saudi-linked operators were being warned to avoid.

The enforcement is calibrated to affiliation rather than cargo and the blockade is shaping who moves Saudi crude, not whether it moves, Windward said.

“No one has ever been able to predict their actions… but they know you don’t have to do a lot to get the oil markets to react,” said Bockmann referring to the rise in benchmark oil prices on Thursday.

Rachel Ziemba, adjunct senior fellow at the Center for a New American Security, underscored that the standoff in Bab el-Mandeb is happening while crude buffers have nor been replenished after the peak of the Hormuz crisis earlier this year.

“The multiple chokepoints are new and an example of littoral states looking to use their leverage,” Ziemba said.

Diesel also impacted

For now, both the Houthi threats and the continued closure of the Strait of Hormuz through which nearly one-fifth of the world’s oil transited before the US-Israel war on Iran, has sent prices soaring, including at the pump in the US reaching the national average of $4.09 per gallon (3.4 liter).

“Today’s rise in oil prices could cause $0.10 to $0.20 rise over the next week or two per gallon average price in US,” said Patrick De Haan, head of petroleum analysis at GasBuddy.

But De Haan is looking beyond the two straits and says he’s watching the availability of diesel as price per gallon averages $5.34.

“Diesel prices are being impacted more significantly,” he told Al Jazeera.

One reason behind that is that Ukrainian drone attacks have taken offline some of Russia’s oil refineries. The shortages are being felt domestically leading to Russia banning diesel exports, De Haan said.

“Oil exports are one story, but supplies of diesel gasoline, jet fuel is another story,” he said.

Another unknown in the mix is the role of China which, historically has been a major importer but slashed those imports in the past few months, helping stabilise global prices as some pressure on demand eased.

“It’s been one of the reasons that oil prices haven’t gone up dramatically – that china slashed its imports, and no one predicted that,” De Haan said. “For now, we don’t know if china is using its own strategic reserves or if it will start import again.”

Between those geopolitical plays and the upcoming hurricane season in the US, there is “another wildcard ahead for global refining capacity” and prices, De Haan said.

With existing 10 percent levies set to expire, Trump issues new tariffs on 60 countries under forced labour provision.

President Donald Trump is going ahead with new double-digit tariffs on dozens of trading partners of the United States just as the clock runs out on Friday on stopgap levies he announced after a stinging defeat at the Supreme Court.

The US will slap levies of 10 to 12.5 percent on imports from 60 countries accounting for 99 percent of US imports, charging that they have inadequately enforced bans on goods produced by forced labour.

“The United States has had a forced labor import ban for nearly a century, and rigorously enforces it; it’s well past time for our trading partners to do the same,” US Trade Representative Jamieson Greer said in a statement on Thursday.

“Today’s action will begin to correct what is both a human rights abuse and distortive trade practice to improve the welfare of workers everywhere.”

The new tariffs will take effect just as the temporary 10 percent worldwide tariffs expire at 12:01am on Friday in Washington, DC (04:01 GMT). Trump had turned to the temporary levies after the Supreme Court struck down his biggest and boldest tariffs in February.

Now he is tapping more durable tariffs under Section 301 of the Trade Act of 1974, which permits the president to impose import taxes and other sanctions against countries found to engage in “unjustifiable”, “unreasonable”, or “discriminatory” trade practices.

Trump used Section 301 to impose big tariffs on China in his first term, and they survived court challenges.

More Section 301 tariffs are likely coming: Greer’s office has launched a probe into whether 16 countries — accounting for 70 percent of US imports — have overproduced goods, pushing down prices and putting US companies at a disadvantage in global markets.

The administration has yet to complete that investigation.

Trump, who argues that high tariffs will revive US manufacturing, last year overturned decades of US policy that favoured lower tariffs and freer trade.

Invoking the 1977 International Emergency Economic Powers Act (IEEPA), he imposed double-digit tariffs on imports from almost every country, saying that the US’s longstanding trade deficit amounted to a national emergency.

But the Supreme Court ruled that IEEPA did not authorise tariffs. The decision forced the Trump administration to pay refunds to importers that had paid the levies.

In response, Trump announced 10 percent worldwide tariffs under Section 122 of the Trade Act of 1974. But he can only use Section 122 levies for 150 days, and the time runs out on Friday.

The announcement by the head of Yemen’s Presidential Leadership Council, Rashad al-Alimi, to resume oil exports starting July 20 following a halt that began in late 2022 has revived hope that the Yemeni government’s most important source of foreign currency will be restored. The government, struggling economically and facing continued Houthi rebel control over Yemen’s northwest, needs the money – and has pledged to direct the revenues towards paying salaries, improving services, and supporting economic stability.

However, the flow of oil from Yemen’s fields to global markets does not depend solely on a decision made by politicians; it requires creating a security environment, after years of war, that allows for the protection of facilities, pipelines and ports, in addition to restoring the confidence of shipping and insurance companies, as well as international buyers.

With Yemen’s war threatening to escalate after a four-year period of calm, the stability the country needs to resume oil exports may be elusive.

The export test

Yemen has proven oil reserves estimated at about three billion barrels, primarily concentrated in the Masila, Marib and Shabwa basins. While the United States Energy Information Administration (EIA) indicates that the country still holds sufficient resources for production and export, the security environment hinders their extraction and transport to global markets.

Yemen’s oil production reached a historical peak of about 439,000 barrels per day (bpd) at the beginning of the millennium, but it has gradually declined due to the depletion of some old fields. This decline accelerated with the outbreak of the war in 2014 and the targeting of oil infrastructure, settling at a level of 19,000bpd in 2024, according to the International Monetary Fund (IMF).

A report published by S&P Global estimated actual production, following the halt in exports, at about 7,000bpd to 10,000bpd in 2023 and 2024, almost all of which was for domestic use.

Yemeni Minister of Oil and Minerals Mohammed Bamqaa said that export revenues would be deposited in the Central Bank as part of a government directive to bolster the state’s financial resources, pointing out that there are oil stockpiles exceeding 1.7 million barrels ready for export.

Bamqaa added that total production will initially reach about 60,000bpd. He explained that the ministry has directed oil companies to prepare timelines to increase production and develop the fields, in a way that raises production capacity by up to 25 percent during the first month after exports resume.

Professor of financial economics at Hadramout University, Mohammed al-Kasadi, told Al Jazeera that while he expected oil production to meet the 60,000bpd figure mentioned by Bamqaa, the figure does not reflect the actual volume of exports, as the local market consumes about 20,000bpd to operate refineries and power plants, which makes the quantities available for export likely to hover at about 40,000bpd.

Hassan Mohammed Moghalis, an expert in Yemeni affairs, told Al Jazeera that most of the fields located in government-controlled areas remain capable of production. At the forefront of these are the Masila fields in Hadramout and the al-Uqla fields in Shabwa, which represent the fundamental base for any anticipated resumption. Moghalis explained that crude oil can be transported via pipelines to Arabian Sea ports.

However, Moghalis pointed out that resuming exports does not simply mean opening the valves, as some fields require maintenance and restoration after a long period of suspension. Additionally, pipelines and pumping stations require technical reviews to ensure their readiness before resuming regular operations.

Market confidence

Despite the importance of restarting production at the oilfields, experts believe bigger obstacles await after the oil reaches Yemen’s ports. Houthi attacks targeting export ports in Hadramout and Shabwa in late 2022 made shipping and insurance companies more wary of handling Yemeni crude, pushing up insurance costs and weakening buyers’ willingness to enter into contracts.

The Houthis have conditioned the resumption of exports on them receiving a share of the revenues to cover public sector salaries.

Al-Kasadi, of Hadramout University, says that the government’s success in pumping oil to the port does not automatically guarantee a successful export process. Maritime transport and insurance companies primarily assess the level of security risks and the likelihood of ports or tankers facing renewed attacks – currently a particular concern in light of Houthi attacks on shipments tied to Saudi Arabia, which supports the Yemeni government.

Al-Kasadi added that the oil market relies heavily on trust and stability. Therefore, any export operation requires buyers to be convinced that shipments will depart safely and that export activities will not suddenly halt again.

Moghalis, the expert, believes that providing military protection for ports and pipelines is the first step, but not the only condition. It is also imperative to restore the confidence of insurance companies and international buyers, as oil does not reach markets solely through production, but rather via an interconnected system of transport, financing and insurance.

He added that any new attack on the ports, even if it does not cause significant material damage, could be enough to send the sector back to square one, given shipping companies’ sensitivity to risks in conflict zones.

But, as al-Kasadi pointed out, a resumption in exports is vital. He argued that the halt in exports was not merely an oil sector crisis, but rather developed into a comprehensive financial crisis. The government lost its most crucial source of foreign currency, which negatively impacted the Yemeni rial’s exchange rate and the state’s ability to finance basic services.

Economic pressure

Despite the importance of resuming exports, Yemeni affairs expert Abdul Karim al-Ansi warned against overstating its immediate impact on the Yemeni economy.

He told Al Jazeera that the resumption of exports will undoubtedly provide a vital source of foreign currency and afford the Central Bank greater leeway to support monetary stability. However, it will not be enough on its own to end the economic crisis, as the Yemeni economy faces broader challenges related to the division between government- and Houthi-controlled areas, weak non-oil revenues and declining economic activity.

Al-Ansi added that the extent to which Yemenis benefit from oil revenues will ultimately depend on how these funds are managed and the government’s ability to channel them into salaries and basic services, rather than solely on the volume of exports.

And while successful initial shipments could send a positive signal to markets and investors, al-Ansi stressed that the real test would be whether exports can be sustained. Yemen’s economy needs a steady flow of foreign currency, rather than sporadic shipments that stop whenever security conditions deteriorate.

The suspension of oil exports has not only deprived the government of its most important source of revenue, but also intensified pressure on the foreign exchange market. As dollar inflows from oil sales have dried up, demand for foreign currency has remained high to finance imports of essential goods, particularly food, fuel and medicine. The resulting shortage has weakened the Yemeni rial and contributed to rising inflation.

These pressures have been compounded by the monetary division between the Central Bank in Aden and the Houthis in Sanaa, which has created two separate financial systems and exchange rates. The split complicates monetary policy and limits the authorities’ ability to use oil revenues in a coordinated way to stabilise the economy.

Al-Kasadi said that Saudi financial support for the government had recently helped contain currency volatility in government-held areas. However, he stressed that such support was no substitute for a steady and sustainable flow of oil revenues – which needs a period of stability, something that may be difficult if the conflict escalates in Yemen, as it is currently threatening to do.

Tariffs apply to Canadian wine, hockey sticks, cement, and other products, sparking fears of escalating trade tensions.

US President Donald Trump will impose new 50 percent tariffs on many Canadian goods, claiming “discriminatory treatment” by Ottawa against US alcohol, automobile and dairy products.

The tariffs, ordered by Trump on Monday, will take effect in 30 days and cover a range of items, including wine, hockey sticks, and cement, according to a White House fact sheet.

Trump, who saw many of his tariffs struck down by the Supreme Court earlier this year, is using an untested legal provision for the new duties: Section 338 of the Tariff Act of 1930.

The latest duties will not apply to energy, potash, and goods already impacted by sector-specific tariffs, the White House said.

Crucially, however, they will hit products covered under the US-Mexico-Canada free trade agreement (USMCA).

The tariff announcement quickly raised concerns of escalation among some businesses.

While Trump has slapped sweeping duties on US trading partners since returning to the presidency last year, the orders generally exempted goods entering his country under the North American free trade pact.

His latest actions threaten to further strain ties with the second-largest US trade partner and come just days after he threatened Canada with increased tariffs over a wave of wildfire smoke that descended on the US.

The White House, in announcing the new tariffs, said Canada was one of only two countries – along with China – to retaliate against Trump’s tariffs last year.

It also took aim at the fact that most Canadian provinces have stopped buying US alcohol, boycotting the products over Trump’s tariff threats and repeated calls for annexation of Canada as America’s “51st state”.

“Canada has taken US alcohol products off Canadian shelves, given better market access to dairy products from the European Union, and has put a cap on US vehicle exports to Canada from companies reshoring to the United States,” US Trade Representative Jamieson Greer charged in a statement.

The tariff announcement aims to “hold Canada accountable for its retaliation and discrimination”, he added.

Azerbaijan’s relationship with Germany is shifting beyond energy, with the two countries deepening ties across industry and logistics as Europe works to diversify its supply chains away from Russia.

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“Azerbaijan is gradually ceasing to be perceived by Germany solely as an energy supplier and is increasingly becoming part of a new Eurasian industrial and logistics architecture,” said Orkhan Yolchuyev, director of the CASPIA Analytical Center.

Bilateral trade between the two countries reached around €1.7 billion in 2025, driven by German exports of industrial equipment, machinery and transport systems, Yolchuyev said.

Over 250 German companies now operate in Azerbaijan, spanning manufacturing, construction, logistics and energy.

The shift has accelerated since Azerbaijan began supplying gas directly to Germany and Austria in early 2026, part of a wider European push to reduce dependence on Russian energy following Moscow’s full-scale invasion of Ukraine.

Beyond energy

The real change, Yolchuyev said, is not in the trade figures but in what they represent.

“[They] indicate that bilateral relations are evolving toward a higher level of industrial cooperation,” he said, pointing to Germany’s need for new export markets and more resilient supply networks.

German companies already active in Azerbaijan could soon be drawn into its reconstruction programmes and expanding industrial zones, particularly in engineering, transport, renewable energy and advanced manufacturing.

Much of this shift runs through the Middle Corridor, the transport route linking China and Central Asia with Europe via the Caspian Sea, Azerbaijan, Georgia and Turkey.

Russia’s war in Ukraine has given the route new urgency, as European firms hunt for alternatives that insulate their supply chains from disruption.

Azerbaijan sits at its logistical centre, with sea and rail links increasingly central to the transcontinental route.

Yolchuyev said the corridor’s value lies less in cargo volumes than in what it carries.

“The higher the share of high value-added products, such as automotive components, industrial machinery, electrical equipment, electronics or chemical products, the greater the economic efficiency of the route,” he said, pointing to the expansion of the Port of Baku and the Alat Free Economic Zone as drivers of new manufacturing and logistics investment.

Energy still at the core

Energy remains central despite the widening scope of cooperation. Azerbaijan has positioned itself as a dependable gas supplier and, since early 2026, has been sending gas directly to Germany and Austria.

Farid Shukurlu, a non-resident fellow at the Research Institute for European and American Studies, said Russia’s invasion marked a turning point.

“Traditionally, economic relations between Azerbaijan and Germany were concentrated in a limited number of sectors, including heavy machinery, automobiles and pharmaceuticals,” he said.

“However, Russia’s full-scale invasion of Ukraine fundamentally reshaped the bilateral economic relationship.”

Within five months of Azerbaijan’s first crude shipment to Germany, the country had exported 360,300 tonnes of crude oil and petroleum products worth approximately $210.9 million (€196mn), Shukurlu said.

He believes Azerbaijan could eventually become a transit route for Kazakh oil and Turkmen gas bound for Germany and other European markets.

Germany’s shift carries weight given its past reliance on Russian gas. Italy remains the largest European buyer of Azerbaijani gas via the Trans Adriatic Pipeline, but Germany is now moving in the same direction.

Manfred Scherer, mayor of the Verbandsgemeinde Sprendlingen-Gensingen, a collective municipality in Germany’s Mainz-Bingen district, recalled meeting Azerbaijan’s current energy minister, Parviz Shahbazov, during his time as ambassador to Germany.

“Economic relations between Germany and Azerbaijan have developed positively in recent years. There is strong potential to further strengthen cooperation,” Scherer said.

“I have fond memories of the visit of the current minister of energy, Parviz Shahbazov, to our municipality during his time as ambassador of Azerbaijan to Germany,” he continued.

“At that time, we discussed opportunities to deepen our relations through a municipal partnership and to strengthen cooperation between our regions.”

A wider European shift

Germany’s pivot fits a broader European turn toward the South Caucasus and Central Asia, partly in support of the Armenia-Azerbaijan peace process, which could unlock further energy diversification and regional connectivity.

The high-level visits have piled up. European Commission President Ursula von der Leyen said the partnership with Azerbaijan “matters greatly to the European Union” and had “real momentum”.

European Council President António Costa travelled to Baku for talks on deeper EU re-engagement, while EU foreign policy chief Kaja Kallas visited in May.

Italian Prime Minister Giorgia Meloni and Slovak President Peter Pellegrini have also held high-level talks with President Ilham Aliyev.

ONE of the world’s largest airlines is launching new seats for economy passengers – and they’re a game-changer.

Emirates has revealed ‘U-Dream Headrest’ seats for economy passengers which have headrests that turn into neck pillows.

The seat means you won’t need to bring your own onboard, as the headrest is adjustable in a number of ways.

It will also be padded, as well as able to move up and down and tilt, for different heights.

The design of the headrest means that it will support passengers’ necks and heads, making it easier to fall asleep.

The new seat will be on all of the airline’s A350s as well as most of its Airbus A380s and Boeing 777s.

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The first planes to get the new headrest will be the A350s by the end of this year.

The airline also previously ordered 270 new Boeing 777Xs, which will all have the headrest.

And then next year, the airline will install the headrest on its Airbus A380s and existing Boeing 777s.

Sir Tim Clark, President, Emirates Airline said: “Emirates never rests on its laurels when it comes to customer experience and we have found a way to significantly improve the comfort for Economy Class passengers, especially those travelling long-haul.

“The U-Dream changes the game if the person wants to sleep – by supporting the neck in full. No more neck pillows needed.

“It’s another innovation that shows our commitment to customers and cements our Economy Class as the best.”

It isn’t the only upgrade set to come to the airline, with suggestions of the world’s first ever private bathrooms onboard.

You’ll have to start saving though, as these will only be for First Class passengers.

Andy Burnham, who becomes the United Kingdom’s next prime minister on Monday, faces a roster of challenges as the country’s seventh leader in a decade.

Burnham was overwhelmingly backed as Labour leader on Friday after current Prime Minister Keir Starmer resigned last month.

It has been a whirlwind month for the former Greater Manchester mayor, with his vision for the country and his cabinet still unclear.

“This has gone faster than he thought. It’s only been four weeks since he won the by-election. I don’t think he knows all of the answers yet; he hasn’t had the thinking time,” Sunder Katwala, director of the British Future think tank, told Al Jazeera.

Experts say the incoming prime minister will inherit an economy that has barely grown in two decades and a challenging geopolitical environment. He also has to deal with a marked decrease in Labour’s popularity, with the party trailing the right-wing Reform UK in the polls for 18 months.

“Burnham has relatively little fiscal room for manoeuvre,” said Anand Menon, director of UK in a Changing Europe.

New spending will have to be raised via taxation rather than borrowing, though there may be scope for “hypothecated spending” tied to a clear purpose, such as defence bonds, Menon said.

“If you make it absolutely clear what these things are for, the markets will be more permissive. But the fiscal situation is tight,” he noted.

Manchester model

The government spent around 110 billion British pounds ($148bn) on debt interest in 2025-26 alone, about eight percent of all public spending. Borrowing has run higher than planned this year, and taxes are forecast to reach their highest share of the economy since World War II by the end of the decade.

Gareth Dale, associate head of Social and Political Sciences at Brunel University, points to Burnham’s record in Manchester, including the city’s fare-capped bus network, as proof that “meaningful reforms needn’t always come with a big price tag”.

Whether that scales up nationally will hinge on his willingness to confront the bond markets.

“What Burnham did in Manchester might be harder to do at a national level,” warned Menon. “He’s got to get the balance right between showing he’s aware of the fact that there’s a country outside of London and that isn’t just Manchester.”

Menon doubts fiscal manoeuvring alone will shift the public mood. He says that living standards have stagnated and services have eroded since 2008 so “people don’t just want to listen to what you’re saying, they want to see changes for the better in their lives”.

Burnham’s in-tray is complicated further by a diplomatic dispute that flared days before he is slated to take office. The government fully nationalised British Steel’s Scunthorpe works, a year after taking control of the loss-making plant when Chinese owner Jingye Group said it planned to close it.

Jingye has vowed to pursue “full compensation through legal means,” while China’s Ministry of Commerce accused London of undermining Chinese investor confidence.

It leaves Burnham managing a strained relationship with China from day one, after Starmer went to great efforts to reset relations between the two countries.

Beyond borders

Menon argues that much of what shapes a prime minister’s fortunes lies outside their control and outside Britain’s borders.

“Sometimes the drivers of political success and failure are utterly out of your hands,” he said. He cited the war in Ukraine, Brexit and the COVID-19 pandemic as reminders that a “medium-sized open economy” is exposed to forces it cannot direct.

That extends to Washington, where personal chemistry with US President Donald Trump will matter “at least for a while, until he goes off people”, Menon said.

Dependence on the US for defence and technology rules out any dramatic reconfiguring of British-US ties.

Menon expects European Union relations to get less attention than under Starmer, predicting Burnham to be “more avowedly domestic” focused.

This could still be tested by Gaza, where Burnham has apologised for the previous government’s stance. Menon cautions that turning words into policy “depends heavily on events”.

“He’s given some hints he’ll be less knee-jerkly supportive of Israel than Starmer was, but whether that carries over into power, we’ll have to wait and see,” explained Menon.

He also doubts whether Burnham would risk a rupture with Washington regarding US bases in Britain, which could be used, indirectly, in US-Israel war on Iran.

Defence first

Reports suggest that Burnham is likely to put defence above welfare spending, which will again rankle some in his party.

“He’ll probably prioritise arms spending over welfare… while dialling down the ‘net zero’ programme,” warns Dale, with Burnham expected to allow for new North Sea oil and gas drilling.

“And he voted to make the asylum system more brutal. If he does set policy in these directions, it’ll put wind in the sails of the far right, and probably accelerate the shift of voters from Labour to Green,” Dale said.

Burnham has moved from Labour’s Blairite wing to its soft left, but “commands widespread support among Labour MPs” and “gets on with various factions”, he noted.

But that unity masks deeper erosion: Labour’s vote fell from 12.9 million in 2017 to 9.7 million under Starmer.

The centre-left party’s support base is also “narrowing towards wealthier, less diverse parts of the electorate, with the Greens now drawing disillusioned voters on the left”, said Dale.

Political divides

That erosion is bound up with a wider polarisation in the country that Katwala says no government can avoid.

“I don’t think it’s enough to say we’d like to talk about jobs and devolving power and therefore we won’t talk about identity, immigration, race,” says Katwala.

He argues that fairness should be framed as universal rather than a concession to certain groups of society.

“Whether it’s tackling anti-Semitism, Islamophobia or racism generally, these are issues for everybody in society. It’s not for the minority group itself to work out how to challenge the prejudice it faces,” Katwala said.

“The people who are hostile to Muslims are the people who know the least Muslims and live furthest away. It’s the government’s job to get to that really tough end of attitudes and perceptions that are making people feel less safe.”

Menon sees a narrow opening on the right-wing narratives popularised by the Reform UK party.

Labour entered government in 2024 with 33 percent of the vote against Reform’s 14 percent, a gap that has since collapsed following the right-wing party’s links to George Cottrell, a convicted fraudster.

Recent polls put Reform around 24-26 percent and Labour close behind it, a marked turnaround from polling earlier this year.

By-election results also suggest a broad anti-Reform coalition and tactical voting exist, which should strengthen Labour.

“Even if 30 percent of people are willing to vote Reform, almost 70 percent are willing to do whatever it takes to stop them being elected,” Menon noted.

Whether that holds, he said, depends on how Burnham performs once the difficulties of government set in.

“It becomes a very different game when things are going badly, and if he ends up being a lucky general, then Reform self-destructs,” Menon said.

WASHINGTON — President Bush, formally abandoning the central pledge of his 1988 presidential campaign, declared Tuesday that preserving a healthy economy will require new taxes.

“It is clear to me that both the size of the deficit problem and the need for a package that can be enacted require” a series of measures including “tax revenue increases” as well as spending cuts, Bush said in a written statement issued after a breakfast meeting with congressional leaders of both parties.

He specifically mentioned the possibility of trimming “entitlement and mandatory” spending programs, a reference to Social Security, Medicare, Medicaid and other benefit programs. He did not specify the type of tax increase he had in mind.

With his statement, Bush abandoned his campaign pledge–”Read my lips, no new taxes”–and opened the door to a “grand compromise” with Congress that could narrow or even close the federal deficit. Richard G. Darman, Bush’s budget director, has been advocating such a compromise almost since the day Bush took office.

At the same time, however, Bush may have sparked a full-scale revolt among conservatives in his party, many of whom believe that higher taxes are far worse for the country than continued deficits. He may also have given up what many Republican strategists see as the party’s most important issue–low taxes.

Rep. Robert K. Dornan (R-Garaden Grove) said the President’s announcement that he would consider raising tax revenues set off a “firestorm” among conservative Republicans.

“I signed a letter today . . . that said, ‘Mr. President, we hope that (tax) rates are untouchable, that they are absolutely radioactive.’ ”

Rep. William E. Dannemeyer (R-Fullerton), one of the most fiscally conservative members of Congress, said, “The Democrat game plan all along in this Congress has been to break George Bush of his promise not to raise taxes and so to lay the foundation of a campaign against him by saying he broke his promise and he can’t be trusted.

“And frankly, I’d disappointed in Mr. Bush. I thought he was smarter than falling for that.”

Democratic leaders, by contrast, welcomed Bush’s new stance, which was prepared, word by word, during the breakfast meeting.

Administration and congressional negotiators, who have been meeting since May 9 to try to craft a deficit-reduction package acceptable to all parties, have discussed a host of potential tax increases.

Some proposals, such as increased “user fees” and hikes in tobacco and alcohol taxes, might be relatively easy for Bush to embrace. The Administration has already proposed roughly $20 billion in new user fees and other minor revenue increases.

But Tuesday’s statement was made necessary because Democratic leaders said that package was unacceptable. And while White House spokesman Marlin Fitzwater said it was up to the negotiators to decide what to do next, he pointedly refused to rule out broader tax increases.

Republicans, however, may find it difficult to accept Democratic demands to increase income taxes for the wealthiest Americans. “I can’t see Democrats agreeing unless there are (income tax) rate changes that ensure that (the final package) is not unfair to the poor and middle class,” said House Ways and Means Committee Chairman Dan Rostenkowski (D-Ill.).

Budget negotiators hope to work out a final package before Congress leaves Washington for its August recess.

Before Tuesday’s developments, said Senate Budget Committee Chairman Jim Sasser (D-Tenn.), the budget talks “were stalemated, going nowhere. The President broke an impasse.”

Bush himself told reporters at the White House Rose Garden Tuesday afternoon: “It is essential that these talks get moving and get moving faster. I want to see this economy grow. I want jobs. I want to see the deficit down.”

Democratic leaders had insisted when the talks began that they would not get involved in specific negotiations unless Bush publicly admitted that a tax increase would be needed.

At the time, the White House insisted that all issues were “on the table” and that Bush would impose “no preconditions” on the talks. But Democrats had insisted on a more explicit statement.

After Bush gave them what they had sought, Democratic leaders appeared solemn and reserved as they struggled to avoid seeming to take political advantage of Bush’s retreat.

“We hope this is not going to be the subject of a political campaign effort,” said House Speaker Thomas S. Foley (D-Wash.) “Someone who wants to complain about taxes being raised will have to complain against both parties.”

When the negotiations began, Democrats feared that Republicans would maneuver them into a corner–forcing them to call for a tax increase and then campaigning against them as “tax-and-spend” liberals.

Many Republican candidates for the Senate this fall already have been doing just that, much as Bush had done in 1988. In that year, Bush’s favorite line–”Read my lips, no new taxes”–formed the centerpiece of his standard stump speech.

Tuesday’s statement not only abandoned that pledge but also gave up on a central tenet of the Republican political philosophy for the past decade–that the deficit is caused by too much spending, not by too little revenue.

Fitzwater, explaining Bush’s decision, said that closing the deficit without new taxes would require spending cuts so large that they “would be unacceptable to all parties.”

The White House estimates that the federal deficit will be roughly $160 billion in fiscal 1991, which begins on Oct. 1. The Gramm-Rudman deficit reduction law would require about $100 billion in across-the-board spending cuts unless the President and Congress agree on a new budget plan.

To mollify conservatives, Bush aides spent much of the day circulating word that the White House was not agreeing to anything beyond the approximately $20 billion in new user fees and related taxes that Bush has already advocated.

“I’m not changing my mind at all” on taxes, Bush insisted during a 45-minute session with 15 Latino reporters from around the country.

Vice President Dan Quayle echoed the theme. “It should not be viewed as a change of policy,” he said in an interview in Los Angeles, where he was raising money for GOP candidates. “This is a deficit reduction summit, not a tax increase summit.”

Asked if he would now admit that Bush was breaking his campaign pledge against new taxes, Fitzwater responded with a laugh: “Are you crazy? . . . Everything we said was true then, and it’s true now. We feel he said the right thing then; he’s saying the right thing now.”

Democratic leaders reacted with some anger to the White House damage control efforts.

“The President’s statement is clear and unambiguous,” said Senate Majority Leader George J. Mitchell (D-Me.). “He said that it is clear to him that tax increases are required. This is a new statement by the President. Any attempt by White House officials or other Republicans to describe the statement otherwise are totally inconsistent with what occurred today.”

Even Fitzwater conceded as much as he listed a series of factors that had forced Bush to change his mind.

The most important was the weakening of the economy since Bush took office. Fitzwater noted that economic statistics continue to show interest rates higher and growth rates lower than the White House had hoped. Bush advisers and most Democratic economists hold deficits at least partly responsible, a point conservatives dispute.

Moreover, the mounting cost of the savings and loan bailout has swelled the deficit, Fitzwater said.

Not all members of Bush’s party, however, were willing to abandon their belief that new taxes are worse than continued deficits.

“Any tax rate increase now threatens recession,” Rep. C. Christopher Cox (R-Newport Beach) said in a statement. “Just the prospect of a tax increase is like a dagger pointed at the jugular vein of the American economy.”

Within hours of Bush’s statement, 90 Republican members of Congress signed a letter to Bush declaring “we were stunned by your announcement that you would be willing to accept tax revenue increases as a part of a budget summit package.”

Rep. Ron Packard (R-Carlsbad), who represents southern Orange County, said he was “a little bit disappointed and a little bit surprised, because I think it was in a way caving in on the issue.”

“A tax increase is unacceptable,” the GOP congressmen wrote. “We will not vote for a budget package that increases tax rates for the American people.”

Sen. Phil Gramm (R-Tex.), one of the authors of the Gramm-Rudman law, said that an agreement may not be worth having if it means a tax increase.

Times staff writers George Ramos and Robert W. Stewart in Washington and Cathleen Decker in Los Angeles contributed to this story.

GEORGE BUSH ON TAXES Oct. 12, 1987: “There are those who say we must balance the budget on the back of the workers–raise taxes again. . . . I am not going to raise taxes again.” Announcement of candidacy in Houston. Jan. 16, 1988: “I want to be the President who finally whips the budget into shape by holding the line on taxes.” Televised debate with five Republican rivals in Manchester, N.H. May 31, 1988: “I’m not going to propose a tax increase.” After meeting with campaign economic advisers at summer home in Kennebunkport, Me. June 14, 1988: “That’s the difference–as plain as day–between us. Tax cuts vs. tax hikes. I will not raise your taxes, period.” At Cincinnati rally, comparing his position with that of Democratic front-runner Michael S. Dukakis. June 24, 1988: “I’ve ruled them all out.” At a Cincinnati news conference, when asked if Bush included excise taxes or other “revenue enhancers” in his rejection of new taxes. July 9, 1988: “If you go to Yosemite Park with your trailer . . . you may have to pay a little more.” At Atlanta news conference, conceding that costs of some programs might rise for users but asserting that voters understood the difference between user fees and tax hikes. Aug. 18, 1988: “My opponent won’t rule out raising taxes, but I will, and the Congress will push me to raise taxes, and I’ll say no, and they’ll push again, and I’ll say to them ‘Read my lips: no new taxes.’ ” Acceptance speech, Republican National Convention, New Orleans. Jan. 31, 1990: “That budget brings federal spending under control. It meets the Gramm-Rudman target. It brings that deficit down further and balances the budget by 1993 with no new taxes.” State of the Union address, discussing budget he proposed to Congress. March 13, 1990: “You know my position and I have no intention of changing that position.” At White House news conference, when asked if he could promise no new taxes this year. May 24, 1990: “Things are complicated out there on this subject. . . . I’d like to do it exactly the way I propose. I’m now enough of a realist to realize that it might not be done exactly that way.” At White House news conference, when asked if he could fulfill his campaign promise. June 26, 1990: “It is clear to me that both the size of the deficit problem and the need for a package that can be enacted require . . . tax revenue increases.” Written statement after meeting with congressional leaders. PROJECTED IMPACT OF VARIOUS TAX INCREASES

Revenue Impac Proposal Next Year Fossil Fuels Tax fuels linked to global $23 warming Social Security Raise tax on benefits to 12 high earners Energy Impose 5% tax on wide range 14 of energy sources Gasoline Raise tax to 21 cents per 12 gallon from 9 cents Stock Market 0.5% tax on stock and bond 8 transactions Cigarettes, Raise 32 cents per pack and 10 Alcohol 25 cents per ounce Income Increase top income tax 4 rate to 33% Acid Rain Tax sources of air 3 pollution Estate Tax capital gains held 2 until death

t (in billions) Proposal Five Years Fossil Fuels $163 Social Security 100 Energy 80 Gasoline 59 Stock Market 58 Cigarettes, 51 Alcohol Income 42 Acid Rain 22 Estate 10

Source: Congressional Budget Office

PERSPECTIVE ON CHANGE–White House feared that Democrats would quit budget talks and blame Bush. A15

OTHER COVERAGE: A14

Tehran, Iran – The United States has reinforced its naval blockade on Iran’s southern ports, amid the escalating military confrontation between them.

The US blockade on Iran was first imposed in mid-April and remained for over nine weeks. It was only lifted after the two sides signed a Memorandum of Understanding (MoU) in June to end four months of fighting and reopen the Strait of Hormuz.

Iran immediately began exporting tens of millions of barrels of crude oil, much of it stored on supertankers anchored close to its oil terminals. However, after the recent resurgence in military strikes over control of the Strait of Hormuz, Washington rescinded oil and banking waivers issued as part of the MoU and prevented vessels linked to Iran from returning to port to load more Iranian oil.

Since the MoU effectively fell apart due to recent strikes, US Central Command (CENTCOM) has redirected several ships operating in the Strait of Hormuz. It also launched a strike to disable the Curacao-flagged supertanker Belma, which had allegedly been transporting Iranian crude during the war.

Iran has also been accused of striking ships in the waterway, leading to the US bombing Iranian coastal areas.

Iranian authorities have acknowledged the previous blockade drastically reduced Iranian crude exports. Iran’s parliament speaker and chief negotiator, Mohammad Bagher Ghalibaf, said in a TV interview at the end of June that “we did not export even one barrel” during the blockade.

Energy analyst Hamidreza Shokouhi told Al Jazeera that the new US siege means that at least 1.5 million barrels per day of Iranian oil exports will be taken off the market. That has contributed to pushing oil prices up to around $90 per barrel and sustained conflict could cause further increases.

“That means more pressure on global strategic reserves, which have already been tapped during the war and are facing unprecedented pressure,” he said.

Washington’s insistence on vessels using the southern route of the Strait of Hormuz close to the coast of Oman for the duration of the MoU has contributed to the current military escalation, the analyst said.

Shokouhi noted that Iran responded to the siege by trying to ensure that no other regional country could export their oil via the strait, piling pressure on the US and its allies.

“When the US acts this way, Iran also moves in the direction of not prioritising the economy and using the leverage at its disposal,” Shokouhi said.

A broadening conflict

Seven nights of tit-for-tat strikes between the US and Iran have quickly escalated and intensified as the week progressed.

The attacks left a trail of destruction in both Iran and countries across the region, with Kuwait and Bahrain heavily targeted by Iranian missiles and drones in recent days.

The US military has also heavily targeted provinces across Iran, particularly areas in the south closer to the strait.

Civilian infrastructure – including bridges and tunnels, ports and dock facilities, power stations and water plants – have been systematically hit, along with military sites. Some have speculated that could be in preparation for a ground invasion of Iranian coastal regions.

The Aq Tekeh railway bridge in the northern Iranian province of Golestan was among the first targets to be struck by US forces last week after the fighting re-erupted.

Iranian authorities said damage to the bridge was quickly repaired, but the strike signalled US willingness to attack potential import-export routes to exacerbate the impact of the naval blockade.

Aq Tekeh is on the Gorgan-Incheh Borun line, which connects Iran to the east, including Turkmenistan, Russia and China. It is where food and other essentials are imported from Central Asia and Iranian goods are exported, such as iron ore and polyethylene.

Rising inflation

The previous US naval blockade had also significantly impacted goods and markets in Iran, making everyday life for over 90 million people more difficult.

Although there were no widespread shortages of staples, Iran’s inflation rate – already one of the world’s highest – surged. The price of some basic foodstuffs, such as eggs, chicken and cooking oil, has more than tripled compared to a year ago.

Price increases have also damaged other sectors of the Iranian economy and industries.

“Our sales are very inconsistent. The market is struggling to find prices, there’s too much instability and uncertainty about the future,” said Borzou, a merchant dealing in industrial motors and equipment at Tehran’s Grand Bazaar.

“It looks like most distributors here are still tapping into imported inventories from before, we don’t know what to expect in a few months since many of these goods came through China and the UAE and not all can be imported through inland routes,” he told Al Jazeera.

Rial hits all-time low

There has also been intense pressure on the Iranian rial from the renewed military escalation and reimposition of the naval blockade.

The rial changed hands for over 1.93 million against the US dollar in Tehran’s open market on Saturday, the first day of the Iranian week, registering a new all-time low.

The Tehran Stock Exchange continued its downward trend over the past week, with its main index losing another 120,000 points or 2.4 percent on Saturday to stand at 4.77 million.

Iran’s armed forces have warned they will retaliate against any US strikes on Iran’s civilian infrastructure by attacking similar targets in regional countries hosting US military bases.

“Let’s not forget that the US and Israel started attacks against infrastructure, when they hit South Pars gas fields, Tehran’s oil depots and the petrochemicals in Mahshahr,” said energy analyst Shokouhi.

Utilising help from the Houthi group in Yemen, Tehran could also cause significant disruptions to shipping in the strategically important Bab al-Mandab strait off Yemen’s coast – if US President Donald Trump realises his threat to hit more civilian infrastructure in Iran such as power plants and bridges.

“Trump’s actions over recent months, and particularly over recent days, have only made the situation more intractable and the outlook more uncertain. The current situation cannot continue for much longer, but it is broadening the scope of the conflict and that is concerning,” Shokouhi said.

The deals include rebuilding the long-defunct Iraq-Syria crude oil pipeline, which could bypass the Strait of Hormuz.

Iraq has struck dozens of agreements and partnerships with American companies, many in the oil sector, during a visit to the United States by Prime Minister Ali al-Zaidi.

“A total of 48 agreements, memoranda of understanding, cooperation agreements and partnership declarations were signed between public and private sector entities in Iraq and the United States,” the Iraqi leader’s media office said on Saturday.

They include “cooperation and partnerships involving the ministries of oil and electricity … with ExxonMobil, KBR, GE Vernova, Shell and Halliburton”, as well as several deals related to the construction of a major crude oil pipeline between Iraq and Syria.

Iraq also signed a deal with Starlink, which dominates the global satellite communications sector, to introduce services to the country.

The preliminary deals, signed at a US-Iraq business summit at the US Chamber of Commerce in Washington on Friday, come as Baghdad seeks to move away from dependence on the Strait of Hormuz, where shipping and oil exports have been heavily disrupted due to the US-Israel war against Iran.

Iraq and Syria signed a cooperation agreement to reconstruct the long-defunct Iraq-Syria oil pipeline, which runs from the oil-rich Kirkuk region in northern Iraq to Syria’s Mediterranean port of Baniyas.

Iraq’s state news agency reported that major US energy company Chevron would carry out the project under the agreement.

The US Department of State said it welcomed Iraq and Syria’s plan to rehabilitate the pipeline, for which a “US-led international consortium” would “execute the technical and financial aspects”.

“Upon rehabilitation, this groundbreaking project will have an initial transport capacity of two million barrels per day of crude oil,” the department’s statement said. It described the pipeline as “a critical energy corridor linking Iraqi oil production to Mediterranean export markets and beyond”.

‘Make Hormuz an afterthought’

The US ambassador to Turkiye, Tom Barrack, said Iraq’s latest oil pipeline agreements would lead to a programme “that will make the Strait of Hormuz an afterthought”.

In addition to the Syria pipeline project, Chevron signed two other agreements with Iraq focused on boosting oil production, according to the company’s president of corporate business development, Jake Spiering.

In total, Iraq’s initial agreements with US firms, spanning the energy, healthcare and technology sectors are worth more than $60 billion, Reuters reported.

“We are using an open-door policy,” al-Zaidi ⁠⁠said at the business summit. “Everybody who has a project can come and talk to us. We will not make it difficult for anyone.”