Our scepticism on Hormuz last week proved correct as the US and Iran traded impractical conditions for reopening the strait. Prospects for an imminent deal look slim and oil and gas prices have climbed as a result. This is just one element of failing US diplomacy in the region, with Israel's rejection of the Hamas disarmament deal touted by Trump. We also cover this week the new defence pact between Saudi Arabia, Pakistan and Turkey, a direct indication of the lack of trust in US guarantees. With tensions rising within the US administration too, it may not be long before something has to change in Washington.

Beyond the Middle East, Ukraine and Russia continue to intensify and extend the reach of their conflict. Last week we reported that Russian oil refineries were running a third below previous years' averages. This week Ukraine has continued their offensive, striking deep into Russian territory. Expect Russian and Central Asian economies to feel the pain. On the other side, Russia continues to hit Ukraine hard with ballistic missiles (including those supplied by North Korea), and Zelensky is becoming increasingly desperate for Western air defences depleted by the Iran conflict.

Resource Security·Middle East & North Africa

Iran and the US harden their terms, and Hormuz stays shut

Iran set out its price for reopening the Strait of Hormuz on 8 August. Tehran has demanded the American naval blockade lifted, sanctions removed, US forces withdrawn from the region, war reparations paid and frozen assets released. Trump replied on 10 August by demanding compensation from Iran for 50 years of deaths, and said the US Navy alone controls the strait. Talks between Iran and Oman on new shipping lanes continue and have produced a route map, but it won't be implemented until the US and Iran negotiate a reopening. Brent rose almost 12% over the week to about $88 a barrel. That unwinds the fall that followed last week's deal reports. US Central Command says it has redirected 55 commercial vessels since reimposing the blockade in July and disabled at least two. There is still a big distance between the US and Iran even if Iran needs the blockade lifted to export oil again and Trump does not want high petrol prices going into the midterms. With continuing aggressive rhetoric and almost no trust from either side in negotiations, we remain pessimistic for real progress this summer.

Defence & Security·Middle East & North Africa

Saudi Arabia, Turkey and Pakistan sign a mutual defence pact

The three governments signed the Mecca Joint Defence Agreement on 7 August. It states that an armed attack on any one of them counts as an attack on all three. Turkish Foreign Minister Hakan Fidan said it will run through committees of ministers, politicians and military officers, plus a permanent secretariat expected to sit in Saudi Arabia. The agreement extends the Saudi-Pakistani defence pact of September 2025 to include Turkey. Riyadh already holds similar commitments with Pakistan and with the Gulf Cooperation Council. Neither has produced a NATO-style response in practice. Pakistani officials have confirmed the agreement carries no nuclear guarantee. It gives Riyadh another channel to Tehran and demonstrates a lack of confidence in American security guarantees. But the broader implications could be significant, with India "closely following the development" and Israeli-Turkish tensions high. Whether this diplomatic agreement survives military and political reality when tested remains to be seen.

Trade & Supply Chains·Global

US sets a 15% tariff and a price floor on polysilicon and solar imports

President Trump signed a proclamation on 6 August putting a 15% tariff on polysilicon and named derivatives, including solar cells, modules and certain semiconductor devices. It takes effect on 4 December. The proclamation also sets a minimum import price. It is set at $21 a kilogram for polysilicon, $100 a kilogram for ingots and wafers, and $0.22 a watt for solar cells. Chinese producers hold almost all of the world's polysilicon capacity and the price floor is likely to cut out cheap supply from the market. The measure is framed as chip policy, though semiconductors take only a small share of polysilicon demand compared to solar developers, who will carry the cost. We expect a rush of imports before 4 December, then a step up in installed cost from the first quarter of 2027.

Also this week

Israel rejects the 15-point Gaza plan. Netanyahu told his cabinet on 9 August that Israel rejects the US-led 15-point document, and that no withdrawal happens until Hamas is genuinely disarmed. Israel votes on 27 October, so mediators have little to work with before then. Politics & Governance · Middle East & North Africa

Syria and Russia settle the future of Tartus and Khmeimim. Damascus and Moscow agreed a memorandum on 9 August after 18 months of talks. Syria takes over Khmeimim airport and the commercial berth at Tartus, while military sites become joint training centres within three months. Russia keeps a Mediterranean foothold on much reduced terms. Defence & Security · Middle East & North Africa

Houthi missiles kill six on a ship in Bab al-Mandeb. Houthi forces fired three ballistic missiles at the Egyptian-owned Tihamah on 11 August, then struck the rescue operation. Four crew and two rescuers died. These are the first Red Sea shipping deaths in over a year, and further war-risk premiums for the route will follow. Conflict & Instability · Middle East & North Africa

Every cargo of Belgian gas in July came from Russia. While Belgium has reduced total volumes by more than 40% against last July, Qatari shipments stopped when Hormuz closed. This has left Russia as Belgium's only liquefied gas supplier through July. The EU ban on Russian gas is still scheduled for next year, and Brussels says the date holds. Sanctions & Export Controls · Europe & Eurasia

Ukraine strikes 2,000 kilometres inside Russia. Ukraine hit a Russian petrochemical plant more than 2,000 kilometres from the border on 10 August, its deepest reported strike of the war. Refining and petrochemical assets far from the front can no longer be treated as out of range and Russia's energy challenges look set to continue. Conflict & Instability · Europe & Eurasia

Hungary elects a former chief justice as president. Parliament elected Andras Baka, a former head of the Supreme Court, on 11 August by 140 votes to six, with Orban's Fidesz boycotting. The post is largely ceremonial, but Baka can return bills to parliament or refer them to the Constitutional Court. He is sworn in on 19 August. Politics & Governance · Europe & Eurasia

North Korea fires its second missile in under a week. Pyongyang launched a ballistic missile on 12 August, days before US and South Korean forces begin their annual exercise. The tests will likely continue through late August. At the same time, reporting from Ukraine highlights Russia's use of North Korean missiles. Defence & Security · Asia-Pacific

Colombia's new president promises all-out war on narco-terrorism. Abelardo de la Espriella took office on 7 August and used his first speech to break with his predecessor's negotiated approach to armed groups. Firms operating in Colombia should expect a harder security posture and more disruption in the coca-growing departments. Politics & Governance · Americas

DR Congo's Ebola outbreak began three months before it was declared. Genetic sequencing places the start of the outbreak about three months before the May emergency declaration, the World Health Organization said on 10 August. Even considering the undetected period, this outbreak is one of the largest and fastest growing on record. Conflict & Instability · Sub-Saharan Africa