Guest Commentary by Mike Castle
Senior Commodities Economist
August 26 – Stock futures are pointing to a mixed open to start the day, with a dearth of economic data to parse through this morning and various geopolitical developments catching attention. The VIX remains in a relatively tight range near the low-end of what we’ve seen for most of 2026, starting the day around the 15.7 level. The dollar is up 0.2% on the day, hovering just above 99.11 at the time of writing, maintaining a quiet week after last week’s sharp drop. Crude oil is looking to extend its slide this week amid a renewed potential movement toward normalization of flows through the Strait of Hormuz, with nearby WTI down 0.5% to trade near $80.70 and nearby Brent down 1.4% to trade near $86 at the time of writing. Treasury yields are looking at a quiet move higher to start the day, though the bigger rises are at the front-end of the curve, which should put the U.S. Department of Treasury in a good mood this morning. 2-year yields are up to 4.224%, 10-year yields are up to 4.66%, and 30-year yields are trading at 5.185%--off notably from their recent peak above 5.33%. The ags are mostly higher to start the day, with the wheat complex seeing double-digit gains following fresh strikes on vessels in the Black Sea from both sides, coinciding with Tunisia announcing a tender for 125,000 metric tons of optional origin milling wheat, warning that suppliers may not invoke force majeure due to the escalations in the Black Sea, which draws more focus to the impact this conflict may have on global wheat trade.
Iran and Oman issued a joint statement yesterday following talks in Tehran, announcing agreement on a framework that “includes the establishment of a joint temporary navigational corridor through the Strait of Hormuz and an agreement to implement a joint project to clear the Strait of mines.” This is welcome news to the market, allowing crude prices to fall sharply yesterday and add to those losses this morning, but it’s important to not overstate the progress. Shipping data does show an uptick in inbound vessels through the Strait, as well as an uptick in loadings at several major Gulf ports, but this does not automatically mean the Strait is fully reopened. If anything, this agreement would formalize Iranian control over the Strait, though Iran is clearly attempting to pull in Oman to take some of the pressure off themselves, which may help provide the optics needed for both sides to declare victory to their respective bases, but the U.S. has been clear in their intention to maintain freedom of navigation through the Strait without Iran having discretionary control. This week’s threats of secondary sanctions on third-party nations doing business with Iran complicates their ability to collect compensation for movement through the Strait, but maybe the joint control could also allow for quiet carveouts. Long story short, plenty of details remain to be worked out, and behind-the-scenes peace talks between the U.S. and Iran appear to remain somewhat far apart, but the market today is happy to take any potential good news regarding a normalization of commodity movement through the Strait of Hormuz.
Canada announced their retaliation to new U.S. tariffs yesterday, with dollar-for-dollar tariffs of their own ranging from 15% - 50% on various products. The bulk of the new package is aimed at metals, industrial goods, home appliances, electronics, and other consumer products. From a commodity market perspective, Canada largely spared bulk U.S. agricultural products, though the dairy sector was targeted relatively aggressively, with cheese, milk powder, concentrated milk/cream, and whey products generally being hit with anywhere from 25% - 50% tariffs. What’s also interesting to note is that certain agricultural equipment was targeted, but big-ticket items like combines and balers do not seem to be included—however, it may make American parts harder and/or more expensive for Canadian farmers to source to make repairs to existing equipment. Critically, Canadian energy and fertilizer remain exempt, keeping some of the more impactful sectors largely unaffected. It’s also important to note that these measures are not scheduled to go into effect until September 8th, giving the two sides time to come to an agreement before then. Given everything going on in the world today, it would be beneficial to both sides to put these disagreements behind them and allow certainty to return.
July headline PCE inflation came in just slightly above expectations, rising 0.2% month-over-month and 3.7% year-over-year, both 0.1% above their respective average analyst estimates. In month-over-month terms, that’s an uptick from the -0.1% seen in June but well below the 0.4% - 0.7% rises seen from February through May; in year-over-year terms, that’s even with the 3.7% seen in June but still notably cooler than the recent peak of 4.1% seen in May. Stripping the numbers down to core PCE, July saw a 0.2% month-over-month and 3.3% year-over-year increase, both matching analyst estimates exactly. Not seeing a surprise to the upside is welcome news, but these numbers obviously remain conspicuously above the Fed’s 2.0% mandate. It’s also important to keep in mind that these are backward-looking, with the market increasingly focused on what comes next. Crude oil prices corrected from July into August, but consumers do not buy crude oil—they buy refined products, which have continued to see elevated prices, raising the risk of downstream increases throughout the supply chain.
The U.S. economy expanded at an annualized rate of 1.5% in the second quarter of 2026 per this morning’s final reading, matching the preliminary estimate. This is a decline from the 2.1% growth seen in the first quarter and significantly below the 3.8% growth seen in the second quarter last year. Overall, that headline growth may look somewhat weak, but many of the underlying portions remain relatively strong, with second quarter net imports shaving roughly 1% off the headline growth; a 2.5% print would likely have given the market a boost in sentiment. Importantly, this surge in net imports was in part driven by capital goods, including telecom equipment, semiconductors, and industrial machinery, all a sign of strength in underlying business investment. Personal consumption expenditures saw their strongest increase since the third quarter of last year, rising 3.4%, with goods spending up 4.3% and services spending up 3.1%. Fixed investment also showed solid growth, rising 7.0%, primarily concentrated in nonresidential investment (+8.5%), though it is worth noting that residential investment saw a 1.3% increase, the first growth since the fourth quarter of 2024.
