Inflation is at risk of remaining above target despite the U.S. and Iran agreeing to end their war in the Middle East, a top European central banker warned on Tuesday.

Speaking to CNBC’s Annette Weisbach on the sidelines of the European Central Bank’s Forum on Central Banking in Sintra, Portugal, Bundesbank President Joachim Nagel said there is a probability inflation “will stay at an elevated level.”

“The energy price shock… is still in the system. I suspect the inflation rate will stay significantly above our target,” he said.

U.S. President Donald Trump said on Monday that delegations from Washington and Tehran would meet in Doha, Qatar, on Tuesday, as a fragile ceasefire between the two sides came under pressure amid weekend hostilities.

Earlier this month, the ECB raised its key interest rate for the first time since 2023, citing inflationary pressures arising from the U.S.-Iran war.

Nagel said on Tuesday that the hike was the right decision, but it is too soon to make a call on the trajectory of monetary policy, with much uncertainty still lingering around the situation in the Middle East.

“Now we have to wait, the situation is still very opaque,” he said. “Is it stable or not in the Middle East? We do not know. There are peace talks, there are 50 days more or less left, then we will see how reliable this whole situation is.”

The U.S.-Iran war, and the subsequent blockade of the Strait of Hormuz – a critical oil shipping route – sparked an energy shock that pushed inflation higher in several major economies. In the euro zone, inflation rose to an estimated 3.2% in May, driven by double-digit energy price growth.

ECB President Christine Lagarde told an audience in Sintra on Monday that policymakers could now go “back to basics” after 15 years of “extraordinary pressures” — including the sovereign debt crisis and the Russia-Ukraine war — that required unconventional responses.

“We no longer need to reach for unconventional instruments. While we have them at hand, we can now focus on stabilizing inflation with policy rates as our primary tool,” she told attendees at the event on Monday. “We no longer need to act with the same force. We can make measured adjustments to rates, calibrated to the shocks we face.”

But Lagarde added that “the world in which we apply these basics is fundamentally different from that which came before,” with “a charged geopolitical environment” driving more frequent economic shocks. Examples of this included the Trump administration’s targeted tariffs regime and the Iran war, she said.

“Shocks fall more often on the supply side, and Europe has built considerable resilience in response to those difficult [15] years,” Lagarde added.

“Yet the world we now face is no less demanding, and we must continue to change with it. The basics have not changed. But what it takes to apply them has changed.”

Markets are currently pricing in another interest rate hike from the ECB in September, according to LSEG data.

Every June, policymakers, regulators, bankers, investors, and financial executives gather in Shanghai for the Lujiazui Forum, China‘s premier financial policy conference. If Davos is where global elites discuss the future of the world economy, Lujiazui is increasingly where Beijing signals how it intends to shape that future to serve its own interests. As Americans, despite all the ways that our current focus is divided, I believe that this year’s forum deserves our attention.

At this year’s Lujiazui Forum, Chinese officials unveiled a series of measures designed to expand offshore renminbi (RMB) finance, deepen Shanghai’s role as an international financial center, create new liquidity facilities for foreign central banks and sovereign investors, expand cross-border RMB trading, and further open portions of China’s financial sector to international participation.

It is true that we have heard much of this before and, for skeptics and many observers, it is understandable if there are doubts about its sincerity or achievability. Is China finally ready and serious about posing a challenge to the U.S. dollar? The answer is that China is unquestionably serious about challenging aspects of dollar dominance, but it is also the wrong question.

I would argue that the world’s focus should not be on whether China will achieve its very real goal of having the renminbi replace the dollar. The world should focus more on the fact that Beijing continues, bit by bit and step by step, to methodically build the financial infrastructure necessary to reduce its dependence on a dollar-centric global system and create alternatives to American financial power for other countries. In other words, China is serious, but it may not be able to achieve its goals, at least not quickly. What it is doing, however, is positioning itself as a serious contender and disruptor of dollar dominance.

This is not primarily a monetary story. It is a geopolitical one.

For nearly eighty years, the United States has enjoyed extraordinary advantages from the dollar’s central role in the global financial system. Dollar dominance has provided Washington with tools of statecraft that previous great powers could scarcely imagine. The United States can impose sanctions, restrict access to dollar clearing, shape international compliance standards, influence capital flows, and leverage its position within the world’s financial architecture to advance national security objectives. China understands this reality as well as anyone and, like many countries, has bristled at this enormous concentration of power for decades.

Today, it is in a better position than ever before to do something about it.

Two-decade renminbi internationalization plan reaches new stage

The Chinese leadership has spent nearly two decades attempting to…

The White House on Wednesday asked Congress for $87.6 billion in supplemental spending to pay for the Iran war and a host of other things including aid to U.S. farmers, and Ebola response.

White House Office of Management and Budget Director Russell Vought made the request in a letter to House Speaker Mike Johnson.

“I urge the Congress to take action on these important and urgent requests as soon as possible,” Vought wrote.

The request includes $21 billion for the Defense Department to “support critical capabilities, munitions procurement, and strengthen the U.S. industrial base,” $1.4 billion for Ebola response and $768 million for the Energy Department for nuclear and other energy security.

Defense Secretary Pete Hegseth in March had said the Pentagon may request $200 billion to fund the war that began Feb. 28.

The request could put vulnerable Republicans in a difficult position months out from the 2026 midterm elections if they’re forced to vote on additional funds for an unpopular war. And the request met with immediate opposition from congressional Democrats. Congress would need to appropriate money to fulfil the White House’s request.

“President Trump launched a reckless and costly war with Iran — without authorization from Congress or the support of the American people — that he should never have started, and now, instead of doing anything to help families get by, he is asking taxpayers to pick up the tab and give him billions more to wage wars overseas,” Sen. Patty Murray, D-Wash., the top Democrat on the Senate Appropriations Committee, said in a statement.

“And he is making this request for more funding as the Pentagon already has a historic annual budget and sits on over $100 billion in unspent funding Republicans provided in their Big Ugly Bill,” Murray said, referring to the 2025 GOP tax and spending package known as the One Big Beautiful Bill.

Vought’s letter also requests $10 billion for farmers, who have struggled in the last year and a half in part because of Trump’s trade policies, $500 million for restoration and construction projects in Washington, and $1 billion to renovate of Penn Station in New York City.

—Emily Wilkins contributed to this report.

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Oil extended losses on Wednesday as concerns over potential supply disruptions eased, while investors monitored developments in the strategically vital Strait of Hormuz.

International benchmark Brent crude futures for August fell 1.7% to $75.79 per barrel, notching its lowest level since Feb. 27, a day before the start of the U.S. and Israeli-led war against Iran.

U.S. West Texas Intermediate futures for August were last seen 1.7% lower at $71.98 per barrel.

U.S. President Donald Trump on Wednesday criticized oil companies for not lowering gasoline prices in line with the recent decline in crude prices.

“The big Oil Companies are not dropping their price at the pump commensurate with the sharply lower prices they are paying for Oil. Those prices are dropping like a rock!,” Trump wrote in a Truth Social post.

“In other words, customers are being “gouged.” I have instructed the DOJ to immediately start looking into this. Gasoline prices better start going down a lot faster than what I’m seeing!,” he added.

CNBC has contacted the U.S. Department of Justice for comment and is awaiting a response.

Karen Young, a senior research scholar at the Columbia University Center on Global Energy Policy, described the post as “political theater,” noting “that’s not really how gasoline prices work in the U.S.”

“There are state and local taxes, which are applied to the price of gas at stations in the United States,” Young told CNBC’s “Access Middle East.”

“It really is up to refiners, and it takes a couple of weeks before crude prices drop, and then prices at refineries, and then on to consumers before they can really respond.”

Investors were also encouraged by signs that maritime traffic through the Strait of Hormuz could begin returning to normal.

More than 11,000 seafarers stranded in the Persian Gulf will begin exiting through the Strait of Hormuz after safety guarantees were secured, according to the International Maritime Organization.

“We have secured the necessary safety guarantees and have thoroughly verified the conditions for safe navigation to support these operations,” IMO Secretary-General Arsenio Dominguez said in a statement.

Dominguez added that it will be carried out “in close cooperation with Iran, Oman, all other coastal States in the region, the United States and the maritime industry.”

Supply chain pressures have increased due to longer transit times for vessels trapped in the Strait of Hormuz and disruptions to air freight capacity, CEO of DHL Global Forwarding Greater China Aditi Rasquinha said on CNBC’s ‘Squawk Box Asia.’

“With the Strait opening up, potentially a lot of that should ease,” Rasquinha said, but noted that it would take some time for the supply chain to…

Senate Majority Leader John Thune, R-S.D., said Tuesday that he expects Congress would likely vote on any broader Iran deal that emerges from the Trump administration’s 60-day negotiating window, though he said he does not yet know what form that vote would take.

“If there is some deal that is struck, I would expect at some point Congress would have some sort of vote on it,” Thune told reporters. “Whether that’s a resolution of disapproval or something, I don’t know the answer to that,” he added.

Asked what role Congress should play in approving whatever comes out of the talks, Thune said many senators are still “anxious to hear more” from officials involved in the negotiations.

The comments came shortly before the Senate voted 50-48 to adopt a House-approved Iran war powers resolution directing an end to U.S. hostilities, a bipartisan rebuke that underscores growing congressional unease with Trump’s Iran policy.

Republican Sens. Bill Cassidy of Louisiana, Susan Collins of Maine, Rand Paul of Kentucky and Lisa Murkowski of Alaska joined most Democrats in voting for the resolution. Sen. John Fetterman, D-Pa., joined most Republicans in opposition.

The vote marked a notable escalation in Congress’s effort to reassert its role over both the military and diplomatic tracks of Trump’s Iran policy. Lawmakers in both parties have pushed for limits on further U.S. military action against Iran, while also demanding more information about the administration’s memorandum of understanding with Tehran.

There is growing Republican pressure on the White House to involve Congress and potentially submit any final Iran agreement to the legislative branch for review.

Several GOP senators have praised Trump’s effort to end the conflict and reopen the Strait of Hormuz, but they have also raised concerns about possible sanctions relief, frozen Iranian assets, a proposed reconstruction fund and whether Tehran will accept enforceable limits on its nuclear program.

Last week Thune told reporters that nuclear components of the deal could trigger congressional notification requirements.

The U.S. and Iran met last weekend in Switzerland along with representatives from Pakistan and Qatar to discuss terms for a final deal and an end to fighting in Lebanon involving Israel.

Vice President JD Vance defended President Donald Trump’s interim peace deal on Thursday, insisting the United States is not paying the Islamic Republic and that any economic benefits for Iran depend on full compliance with the agreement.

“The United States isn’t giving up a cent of money to Iran,” Vance said.

His comments came as the White House faced Republican backlash over whether Trump gave Iran too much in a 14-point memorandum of understanding that includes sanctions relief, access to frozen funds, and a proposed $300 billion reconstruction plan.

“The only way the Iranians get any of these resources … is if they comply fully” with the terms of the deal, Vance said.

Vance said Iran’s “nuclear program has been completely destroyed,” framing the agreement as the next stage of Trump’s pressure campaign rather than a concession to Tehran.

“Now we see whether they are willing to comply with the next step of the president’s peace plan,” Vance said.

The deal, signed by Trump and Iranian President Masoud Pezeshkian, ends military operations for now, reopens the Strait of Hormuz for at least 60 days to open a negotiating window for a final deal. Vance said that the 60-day period, which can be extended, began on Thursday.

Vance argued the agreement could reshape the region if Iran follows through.

“If they do change their behavior, they are going to have a transformative relationship with the Middle East,” Vance said.

He also suggested that more pragmatic forces inside Iran are gaining ground.

Pragmatists in Iran “are winning the argument,” Vance said. “The United States wants them to win the argument.”

This is a developing story. Please refresh for updates.

The oil supply shock caused by the Iran war has eroded global demand for crude — but a lasting resolution to the conflict could drive a surge in supply volumes and trigger a major oil overhang next year, the International Energy Agency said on Wednesday.

In its latest monthly oil market report, the IEA slashed its 2026 demand outlook to 1.1 million barrels a day year-over-year in 2026. That’s a 700,000-barrel-per-day downgrade from last month’s estimate, after deliveries plunged by 5 million barrels per day in the second quarter, the IEA said.

Global supply, meanwhile, slumped to 94.5 million barrels a day in May, down 600,000 barrels a day month-on-month. That dragged output to 13.6 mb/d, well below pre-war levels.

The IEA said global supply is now expected to drop by 3.9 mb/d year-on-year in 2026 to 102.4 mb/d, before rebounding strongly to 110.3 mb/d next year.

The drop in demand reflects the combined pressure of elevated fuel prices and shortages of refined products, the agency noted, underscoring how the conflict has moved beyond a straightforward supply shock.

Brent crude, the international price benchmark, was last seen 0.7% lower on Wednesday at $78.44. U.S. West Texas Intermediate futures for July delivery were almost 1.1% down at $75.18.

“If the deal holds, exports and production from the Gulf should see a gradual recovery — not least because Iranian oil exports can fully resume once the U.S. blockade is lifted,” the IEA wrote.

Shares in BMW tumbled to their lowest level in over 5 years on Wednesday after the German carmaker cut its 2026 profit outlook, citing a slowdown in Chinese demand and disruption caused by the Iran war.

In a statement released Tuesday morning, the carmaker said that “positive volume developments in Europe and the USA cannot compensate for the sales decline in China and Asia Pacific.”

BMW added that elevated energy prices driven by the war in Iran are weighing on costs, as well as “negatively impacting consumer sentiment across markets around the world.”

The group’s pre-tax profit is now expected to fall “significantly,” the firm added. Its shares were last seen down 6.5%. 

Deutsche analysts said in a note published Wednesday that BMW’s conference call left them with “more questions than answers”, and were left concerned by the lack of a “comprehensive update on the company’s structures and costs.” 

Upon the news, Citi analysts reduced their reduced China sales assumptions by over 50k units and anticipate total sales will fall below 500k by the end of the year. 

“With no obvious positive equity narrative, with full-year earnings still under downward pressure, with a structural thematic negative industry trend, with continued industry-punishing EU regulations, and with a limited number of investors in European value names, we think BMW’s undervaluation may persist,” the analysts added. 

The profit warning weighed on the broader European auto sector, with shares in BMW’s German rivals Volkswagen and Mercedes-Benz coming under pressure.

Volkswagen in April reported weaker-than-expected first-quarter profit, citing higher U.S. tariffs and intensifying competition from Chinese car brands.

Its CEO Oliver Blume cited “wars, geopolitical tensions, trade barriers, stricter regulations, and intense competition” as headwinds facing the group.

European carmakers continue to lose ground to their Chinese rivals. China has rapidly expanded its EV footprint throughout Europe, the U.K., Asia and Australia, exporting millions of competitively priced vehicles, building factories and widening supply chains.

The sector is increasingly turning to the defense industry, spotting an opportunity to collaborate and capitalize upon the continent’s rise in military spending. 

Ineos Automotive and Daimler Truck became the latest auto companies to announce their intentions to produce military vehicles this week.

Donald Trump has pledged further support to Kyiv and urged Moscow to “make a deal” to end the Ukraine war, as the president’s attention turns to Europe amid hopes the Iran conflict is nearing its conclusion.

Trump is meeting with leaders of the wealthy G7 countries in Evian, France, on Tuesday, as the U.S prepares to sign a Memorandum of Understanding with Iran on Friday to bring the nearly four-month war to an end. Talks with representatives of other countries and economies are also scheduled, including Ukrainian President Volodymyr Zelenskyy.

The president attended a meeting with G7 leaders plus Zelenskyy on Tuesday morning, which overan by around an hour. The president later held a separate conversation with Zelenskyy and U.S. Secretary of State Marco Rubio on the sidelines of the G7 summit.

Speaking to reporters ahead of a bilateral meeting with the Emir of Qatar on Tuesday, Trump said he had already “had a good meeting” with the Ukrainian leader.

“Russia should make a deal,” he told reporters. “Russia has lost tremendous amounts of people, and so has Ukraine.”

Trump added that he had spoken with Russian President Vladimir Putin on Sunday, with that conversation covering “the same thing.”

“This was the [war] I thought was going to be the easiest settled,” Trump said, but he added that “there’s a lot of dislike between the two leaders.”

Before returning to the White House for his second presidential term, Trump said he would be able to resolve the Ukraine war in a day.

“We were focused on Iran, that’s going to be in the rearview mirror,” he said on Tuesday as he told reporters that he would meet Zelenskyy again later on in the day.

Labeling the lives lost in the Russia-Ukraine war “ridiculous,” Trump added: “I’m going to do whatever I can.”

Zelenskyy said in a post on X on Tuesday morning that “substantive meetings” were underway.

“The schedule for the day is packed,” he said. “The key focus is to strengthen air defense for Ukraine and advance diplomacy, to make Russia end its war. Peace is needed.”

Trump’s European allies are using the high-stakes G7 talks to push for a renewed American commitment to supporting Ukraine’s war effort and for a diplomatic end to the war.

France currently holds the rotating G7 presidency. In a press briefing ahead of the summit, which enters its second day on Tuesday and will conclude on Wednesday, Macron said a key focus of the talks would be maintaining support for Ukraine.

“Europeans are currently providing almost 100% of the aid to Ukraine,” he said. “It is important that our other G7 partners, and in particular the United States, continue to do their part — at the very least, not weaken their position towards Ukraine.”

In a statement at the G7 summit on Monday evening,…

U.S. President Donald Trump said Tuesday that America will not invest money in Iran after a Memorandum of Understanding was agreed with Tehran.

“We are not investing any money in Iran, by the way, and with that rumor got out there yesterday was ridiculous,” he told reporters on the sidelines of the G7 summit in Evian, France. “We have the right to go in some day and do, if I want to do something, or if somebody wants to do something, but we are not investing any money.”

Leaders from the wealthy Group of Seven countries — the U.S., the U.K., France, Germany, Canada, Italy and Japan — are gathering in the Alpine town for the G7 summit, with representatives from the EU and Ukraine also among those invited to attend.

Hours before leaving the U.S. for France, Trump announced the U.S. and Iran had reached a deal to end their war in the Middle East.

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