Markets Now Face Two Wars And Two Economic Wars

By Michael Every of Rabobank

Two wars and two economic wars

Friday’s Jackson Hole speech from Fed Chair Warsh would traditionally be the big event this week but that’s arguably no longer true: the action is not with central banks but elsewhere. I don’t mean the ECB’s Lagarde going to work for the WEF. Rather, markets now face two wars and two economic wars.

Dawn in the US will see what Treasury Secretary Bessent calls ‘Economic D-Day’ designed “to sever every economic lifeline that sustains the tyrannical regime until Tehran stands alone.” Until the regime collapses – and everyone must either stand with the US or against them. Iran has likewise stated that any country joining new US sanctions would be “considered an enemy.” Yes, Iran’s (powerless) president said the US MoU is still the best path out of this mess, as Pakistan’s army chief is to visit Tehran again today; then again, Iran also claims Saudi Arabia, Turkey, and Pakistan invited it to join their new defence pact, which just failed to defend the Saudis from attacks by the Houthis instigated by Iran.

Indeed, as the Iranian parliament advances plans for Hormuz ‘service fees’ and the US says it’s shuttling more oil through Hormuz, the risk is Tehran opts to attack the GCC and US bases in Europe. Greece is moving a Patriot missile system to Crete. The UK is having to face that Iranian hackers just shut down one of its power plants for four days. As if that were not enough, worrying signals about Turkey-Israel clashes in Syria have prompted deescalation efforts, yet regional tensions remain very high. Towards the western edge of the MENA region, Spain has rejected Morocco’s calls for talks on Ceuta and Melilla sovereignty.

Today marks Ukraine’s Independence Day, with EU officials in Kyiv to celebrate. With Russia testing its readiness for military mobilisation, France is promising help with missile interceptors for Ukraine, Germany a €12bn missile program, and the UK has handed over its Storm Shadow missile blueprints alongside plans to build them there. The Kremlin has warned there will be consequences for these actions and is allegedly already sabotaging weapons factories across Europe. Putin also says Ukraine opened a ‘Pandora’s box’ with its strikes vs. economic targets, and Zelenskyy says Russia refused a Black Sea shipping truce, ensuring more destruction to trade.

Canadian PM Carney stated his country is now in an “economic war” with the US after USMCA negotiations collapsed. He will be matching US tariffs dollar for dollar from 8 September. The alleged list of US demands made on Canada include scared cows like dairy and parts of the auto industry, weakened domestic cultural protections, and binding defence commitments, but also tougher trade rules of origin and restrictions on Canada’s sovereignty to sign trade or investment agreements with other nations.

Canada presumed this was just an FTA discussion. The US — as was abundantly clear — is only interested in forging a tight-knit Fortress North America bloc as part of its Grand Macro Strategy. Against that backdrop, what is Canada’s Grand Macro Strategy?

Canada is 1/10 the size of the US economy. 90% of its population sits two hours drive from the US border. It’s deeply integrated into the US economy. It runs mostly north-south, not east-west trade, with internal tariffs. As KPMG notes, “Tyler Durden Tue, 08/25/2026 – 08:20

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