Bitcoin (BTC) saw a slight pullback to $64,612 on July 16; meanwhile, the U.S.-Iran conflict and two major macro factors—Fed policy signals—moved market sentiment in tandem. The Wall Street Journal reported that U.S. officials said Trump is leaning toward expanding military operations inside Iran, considering options including expanding airstrikes, dispatching ground forces to seize Khark Island, and bombing the “Hammer Mountain” underground tunnel facilities, but Trump has not yet made a final decision.
U.S.-Iran conflict escalates: Trump considers seizing Khark Island and bombing Hammer Mountain
According to the Wall Street Journal, late Tuesday night Trump held a meeting in the White House “situation room” to discuss the following specific options: using U.S. forces to seize Khark Island (Iran’s core oil export facility) and other strategic areas along the Hormuz Strait coast; bombing the “Hammer Mountain” underground tunnel facilities (related to Iran’s nuclear activities, which the U.S. had not attacked previously); and expanding the scope of airstrikes on additional targets in Iran (including energy facilities).
U.S. forces carried out two rounds of airstrikes against Iran on Wednesday and prevented multiple ships from approaching Iran’s coast; in one of the operations, a ship attempting to sail toward Khark Island refused to comply with return warnings, and U.S. forces fired a “Hellfire” missile at its smokestack, rendering it unable to continue operations. The WSJ noted that U.S. officials said Trump has not made a final decision on next steps.
Fed chair Congressional hearing: Inflation exceeds the mark for 63 months, FOMC rate-path disagreement
Per the report, Fed Chair Warsh repeatedly defended the Fed’s independence during hearings in the House on Tuesday and the Senate on Wednesday, saying it is “sacrosanct.” Key points included: inflation has been above the Fed’s 2% target for 63 straight months; June CPI and PPI show inflation has eased somewhat, but Warsh said these are only “imperfect indicators” for measuring underlying inflation; disagreements emerged within the FOMC regarding the interest-rate path, with Waller and Williams both recently saying it may be necessary to raise rates this year.
Warsh said he breakfasts weekly with Treasury Secretary Bessent and communicates frequently, but emphasized that the interest-rate decision will be made independently by him. Warsh also said a working group has been formed to re-examine how the Fed thinks about inflation and to review Fed balance-sheet policies.
FAQ
Have the Khark Island seizure and “Hammer Mountain” bombing plans Trump is considering been approved for execution?
Based on the Wall Street Journal’s account citing U.S. officials, Trump has not yet made a final decision on these plans. The article also notes that Trump has walked back his toughest threats multiple times in public, and that these options may also be a strategy to pressure Iran back to the negotiating table; any concrete actions depend on official statements from the U.S. government.
What is Fed Chair Warsh’s stance on raising rates during the year?
According to the report, Warsh said the Fed’s interest-rate decision will be made independently by him. Within the FOMC, Waller and Williams have both recently said it may be necessary to raise rates this year; the Trump administration, meanwhile, said it respects Warsh’s views on Fed management issues but overall still hopes for rates to move lower. Warsh did not clearly state his personal position on raising rates during the year; it will depend on decisions made at the FOMC’s subsequent meetings.
What does inflation exceeding the 2% target for 63 straight months mean for the market?
Based on Warsh’s comments in the hearing, inflation has been above the Fed’s 2% target for 63 straight months. June CPI and PPI show inflation has eased somewhat, but Warsh said all of this is only “imperfect indicators,” and he does not treat it as grounds for optimism too early. Internal FOMC disagreements indicate that uncertainty about where rates will go this year is increasing. Specific policy decisions will be based on official announcements from the Fed.
