The US federal budget posted a $120 billion deficit in June, with tariff refunds eating into revenue even as monthly borrowing climbed to $155 billion. Separately, President Trump formally notified Congress of a new war authorization against Iran, opening a 60-day window for military action, and announced both a naval blockade of Iranian ports and a 20% tariff on all cargo transiting the Strait of Hormuz. The fiscal year 2026 deficit is now projected at $2 trillion.
A $2 trillion deficit trajectory puts persistent upward pressure on Treasury yields, which raises borrowing costs across the economy and compresses valuations on equities, especially long-duration growth stocks. The Hormuz tariff and blockade directly threaten global oil supply routes, meaning energy prices could rise sharply while simultaneously slowing trade flows that affect shipping, manufacturing, and consumer goods companies. Investors holding bonds, oil-sensitive equities, or broad market ETFs need to price in both the fiscal deterioration and the geopolitical escalation at the same time.
July 16: Federal Reserve Beige Book release. Late July: Q2 earnings season peaks for major energy and shipping companies. August 4: 60-day war authorization window midpoint. Next FOMC meeting: July 29-30.
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