Minutes from the US Federal Reserve's June 16-17 meeting revealed that policymakers were divided over the future path of interest rates, discussing scenarios that could justify rate cuts if inflation slows, while also considering the possibility of further hikes should price pressures persist.

The meeting was the first chaired by Kevin Warsh following his appointment as head of the Federal Open Market Committee. During the post-meeting press conference, he described the discussions as "a family disagreement," which ultimately ended with a unanimous decision to leave the benchmark interest rate unchanged at 3.50%-3.75%, where it has remained throughout 2026.

Even so, the minutes showed no signs of deep divisions, instead presenting the range of views expressed by participants without pointing to any clear consensus within the committee.

They also indicated that the Summary of Economic Projections' dot plot, in which Warsh did not participate, leaned narrowly toward one additional rate hike this year, followed by rate cuts in each of the following two years.

The minutes noted that a significant number of participants believed the appropriate policy rate at year-end would be within or slightly below the current target range.

Meanwhile, another sizable group of participants judged that the appropriate year-end policy rate would be above the current range.

The minutes emphasized that all participants agreed future policy decisions would depend on incoming economic data.

Shift toward shorter policy communications

The 14-page meeting minutes were slightly shorter than usual, reflecting Kevin Warsh's preference for reducing the Federal Reserve's forward guidance on the future direction of monetary policy.

The post-meeting statement was also about one-third shorter than previous statements, a change that received broad support from participants.

According to the minutes, several members believed the time was right for substantial changes to the post-meeting statement, while the majority viewed a more concise statement as offering clear advantages.

The committee also removed language that had previously suggested a bias toward future interest rate cuts after most participants indicated they no longer wished to retain that wording.

In addition, the statement dropped several standard paragraphs describing current economic conditions and the committee's approach to achieving its dual mandate of price stability and maximum employment.

The beginning of Warsh's tenure

The release of the minutes comes less than two months after Kevin Warsh assumed the role of Federal Reserve Chair following his nomination by US President Donald Trump.

Trump had spent years criticizing former Fed Chair Jerome Powell for refusing to cut interest rates.

Since taking office, Warsh has pledged sweeping reforms to the central bank's operating framework.

During his press conference following the June meeting, he announced the formation of five working groups to review several areas, including the Fed's communication strategy with financial markets. The minutes also noted that some participants welcomed the opportunity to reassess the communication tools and practices used by the Federal Open Market Committee.

Since then, Warsh has appeared publicly only once, at the European Central Bank's forum in Portugal, where he largely refrained from offering clear signals about the future direction of monetary policy, remaining consistent with his preference for limiting forward guidance.

Control of the Strait of Hormuz has become what Iran's leadership describes as its "golden weapon," a strategic asset that now takes priority over the country's nuclear program, for which Tehran has endured decades of international sanctions, according to Reuters, citing informed Iranian sources.

According to the report, the strait has become so central to Iran's strategy that vessels transiting it without Tehran's approval came under fire this week, triggering an exchange of fire with the United States and threatening the temporary peace agreement reached last month.

Iranian officials, who for years avoided disrupting the passage of nearly one-fifth of global energy supplies through the Strait of Hormuz, now view control of the waterway as their strongest leverage against the West. They also believe it was the primary factor that forced Washington to bring the war to an end.

Tehran sees control of the strait as its strongest bargaining chip against Washington

Ebrahim Azizi, a member of Iran's parliamentary National Security and Foreign Policy Committee, addressed the United States in a social media post, saying: "Recognize the new Iranian order in the Strait of Hormuz... it is the only path forward."

Two senior Iranian sources told Reuters there is near-unanimous support within Tehran's decision-making circles for this policy, despite recognition that it could become a long-term point of contention with the international community.

One of the sources said Iranian leaders debated whether they might be overplaying this card, but the prevailing view was that no rational country would willingly give up such a powerful source of leverage.

"The Strait of Hormuz, Iran's golden weapon, is something they now want to take away from Iran, and that is simply impossible," the source said.

Although the temporary agreement signed by US President Donald Trump last month to end the war allowed shipping traffic through the strait to increase, it left the future governance of the waterway unresolved.

The agreement states that Iran "will make its utmost effort to ensure the safe passage of commercial vessels without imposing any fees" for a period of only 60 days.

Tehran interprets that wording as a US acknowledgment of its right to manage the strait, provided it does not impose tolls or other charges during the two-month period.

The United States and Gulf states reject that interpretation, arguing that the agreement grants Iran no authority over the waterway and merely obliges it to ensure the safe passage of commercial shipping without using force or imposing restrictions.

Nuclear program slips down the list of priorities

The report said one of the main reasons behind Iran's tougher stance on the Strait of Hormuz is its loss of trust in the United States, a sentiment that deepened after President Donald Trump's 2018 withdrawal from the nuclear agreement, his return to military action this year despite a previous ceasefire, and the launch of military operations while diplomatic negotiations were still underway.

One of the Iranian sources said any concession by Tehran on the Strait of Hormuz would encourage Washington to broaden its demands to include Iran's nuclear program and conventional missile arsenal.

"Backing down would mean surrender, and that is not an option," the source said.

For years, Iran repeatedly threatened to close the Strait of Hormuz, with officials describing such a move as "easier than drinking a glass of water." Privately, however, they acknowledged that they viewed it as a last resort because of its economic and political consequences.

The concern was that closing the strait would deepen Iran's international isolation, provoke its Gulf neighbors and major energy-consuming nations, and inflict serious damage on Iran's own economy.

According to the report, Iran's calculations changed after US and Israeli attacks that began on February 28 and resulted in the deaths of Iran's Supreme Leader and several senior officials. Iranian leaders concluded at that point that they had little left to lose.

Iran subsequently closed the strait to all vessels except its own, triggering what the report described as the largest disruption to global energy supplies in history.

After initially hesitating because of the impact on oil prices, the United States imposed a blockade on Iranian ports in April.

As the economic costs of the closure mounted for both sides, Washington and Tehran ultimately agreed to a temporary deal. Iran now believes it succeeded in forcing the United States back to the negotiating table through its control of the Strait of Hormuz and is seeking to formalize that new reality.

"Both sides became increasingly concerned about the immediate economic consequences, but each believes it emerged victorious. As a result, both think they only need to push a little further to get what they want," said Ali Ansari, Professor of Modern History at the University of St Andrews in Scotland.

The report added that Iran is now placing greater emphasis on the Strait of Hormuz than on its nuclear program, believing that Washington has effectively accepted its right to enrich uranium and retain its stockpile of highly enriched uranium within the country.

Although Iran's nuclear program has been the biggest source of tension with the United States for roughly 25 years, serving as the main reason for international sanctions and the principal public justification for the war launched by Trump, the temporary agreement ending the conflict postponed discussions on the issue to future negotiations.

The two Iranian sources said Tehran refuses to begin any talks over its nuclear program until the United States formally recognizes Iran's full right to administer the Strait of Hormuz.

Wall Street's major indexes fell on Wednesday after US President Donald Trump declared that the temporary agreement aimed at ending the war with Iran was "over," while gains in Broadcom helped cushion losses in semiconductor stocks that have come under heavy pressure in recent days.

Investors reassess geopolitical risks as oil surges and Fed minutes loom

Speaking at the NATO summit, Trump said he no longer wanted to continue dealing with Iran, while warning that Washington could launch additional strikes against the country later on Wednesday.

Trump's remarks added another chapter to a conflict that has swung repeatedly between military escalation and diplomatic efforts, unsettling investors who had repeatedly bet on the prospect of a lasting agreement only to see those hopes quickly fade.

"The key question now is whether these developments mark a complete collapse of negotiations and a return to military confrontation, or whether they are simply a temporary setback," said Matthew Ryan, Head of Market Strategy at Ebury.

In the technology sector, Broadcom shares climbed 3% after Apple announced plans to spend more than $30 billion under a chip supply agreement signed with the company earlier this week.

The gains in semiconductor stocks helped limit losses in the tech-heavy Nasdaq, while the Philadelphia Semiconductor Index (SOX) rose 1.4%.

Meanwhile, oil prices extended their rally following Trump's comments, with both Brent and US West Texas Intermediate crude futures climbing more than 5%.

Nine of the 11 major sectors in the S&P 500 traded lower, with only the energy and information technology sectors posting gains.

Travel stocks decline as IMF cuts global growth forecast

Travel-related stocks came under pressure as higher oil prices fueled concerns over rising fuel costs and weaker demand.

United Airlines shares fell 3.2%, Southwest Airlines declined 1.1%, and Delta Air Lines lost 1.9%.

Cruise operators also traded lower, with Carnival falling 3% and Norwegian Cruise Line Holdings slipping 1.8%.

As of 10:10 a.m. ET, the Dow Jones Industrial Average was down 514.42 points, or 0.97%, at 52,410.73.

The S&P 500 fell 34.32 points, or 0.46%, to 7,469.53, while the Nasdaq Composite dropped 78.12 points, or 0.31%, to 25,739.43.

The latest developments threaten to derail the rally that has lifted the S&P 500 nearly 10% since the beginning of the year, despite the sharp losses it suffered earlier in 2026 following the outbreak of the war with Iran.

Analysts believe the renewed surge in oil prices could bring inflation concerns back into focus, further complicating the US Federal Reserve's monetary policy outlook.

The CBOE Volatility Index (VIX), often referred to as Wall Street's fear gauge, climbed to its highest level in more than a week before rising a further 0.99 points to 17.12.

In a separate development, the International Monetary Fund once again lowered its global growth forecast for 2026 to 3.0%, warning that risks stemming from the conflict in the Middle East remain elevated.

Investors are also awaiting the release of the Federal Reserve's June meeting minutes later in the session for clearer insight into policymakers' assessment of inflation risks and the economic outlook.

"Historically, Fed minutes haven't been major market movers, but I think this time could be different," said Art Hogan, Chief Market Strategist at B. Riley Wealth.

According to CME Group's FedWatch tool, markets are currently pricing in at least one Federal Reserve interest rate increase by the end of 2026.

On the market breadth front, declining stocks outnumbered advancers by a ratio of 2.6-to-1 on the New York Stock Exchange and 2.03-to-1 on the Nasdaq. The NYSE also recorded 19 new 52-week highs and 43 new lows.

Aluminum prices continued to recover after recently touching their lowest levels in four months, supported by the return of Chinese buyers to the market as lower prices encouraged demand, according to ING analysts Warren Patterson and Ewa Manthey.

The analysts noted that aluminum prices came under pressure last week after production capacity in the Middle East returned more quickly than expected following the ceasefire, easing concerns over supply disruptions.

Even so, they maintained that the market remains on track to record a supply deficit this year, saying, "We continue to expect the market to remain in deficit this year."

The report added that expectations of a continued supply deficit are providing fundamental support for the recent recovery in prices, even as supply conditions in the Middle East improve.

Another key factor supporting prices has been the continued decline in China's spot aluminum inventories.

"China's spot aluminum inventories have fallen for a twelfth consecutive session to 1.09 million metric tons, more than 25% below the peak reached in April," the analysts said.

The persistent decline in inventories points to stronger demand or continued supply tightness in the Chinese market.

The report also noted that renewed attacks on vessels near the Strait of Hormuz have heightened concerns over shipping risks, adding another layer of uncertainty to regional supply flows.

Speculative appetite weakens despite improving market fundamentals

Despite improving market fundamentals, the report said investor appetite for speculative positions in aluminum has continued to weaken.

Citing the latest Commitments of Traders Report (COTR), ING analysts said speculative sentiment continued to deteriorate.

They added that net long positions in London Metal Exchange (LME) aluminum contracts fell by 14,891 contracts for a fourth consecutive week, reaching 53,923 contracts in the week ended July 3, the lowest level since May 2019.

The continued decline in net long positions reflects growing caution among speculative investors, despite expectations of a supply deficit and falling inventories in China.

The report said the market is currently balancing two opposing forces. On one hand, the faster-than-expected recovery in Middle Eastern production has eased supply concerns. On the other, signs of tight supply continue to emerge in other parts of the world.

ING analysts concluded that declining inventories in China and rising shipping risks through the Strait of Hormuz should continue to support aluminum prices, even as investors reduce their bullish positions in financial markets.