This could hurt the American payments incumbents. The rise of “sovereign” systems, especially in Europe, a big source of Visa’s and Mastercard’s international business, could erode their enviable operating margins of over 50%. In their latest annual reports, both brought up “preferential” treatment of domestic payments systems as a risk to business. That may be one reason why investors have lately been lukewarm about the duopoly, despite healthy earnings. After a sustained rise starting in 2023, their share prices have been choppy in the past year (see chart). Oliver Jenkyn, Visa’s president of global markets, says he has been travelling the world to reassure governments that the firm is sensitive to local concerns. In May the firm unveiled a €500m ($571m) investment in European infrastructure, including a technology centre in Poland set to open in 2027. In April its bosses said they were teaming up with UnionPay, a Chinese firm, to offer real-time payments in China. Mastercard is also rushing to protect its business from geopolitical shifts. “A European payment network exists today operating for Europe’s benefit. That network is Mastercard,” wrote Kelly Devine, the president of Mastercard’s business on the continent, in 2025. To back up such claims, the firm is building three data centres in France at a cost of €250m, adding to the dozen it already has in Europe.
The turn towards sovereignty may cause problems for more than just card giants. The Financial Stability Board, an international group that has monitored cross-border progress, reckons that fragmentation will probably prevent the G20 group of large economies from achieving international payments goals—particularly faster and cheaper remittance payments—that it set out in 2020. But the more serious risk, Mr Lipsky notes, is that countries’ pursuit of payments sovereignty may one day mean various regional systems become incompatible. That would increase financial fraud and sanctions evasion. It would also harm the global economy. A report sponsored by SWIFT (and compiled by Economist Enterprise, our sister company) estimates that, if current patterns continue, financial fragmentation could shave 2.6% off global GDP by 2030. Countries may find that the price of payments sovereignty is higher than they think. So may America.■ For more expert analysis of the biggest stories in economics, finance and markets, sign up to Money Talks, our weekly subscriber-only newsletter. This article was downloaded by zlibrary from https://www.economist.com//finance-and-economics/2026/07/12/storm-clouds-gather- over-americas-financial-supremacy
Finance & economics | Distilled distress America’s Hormuz brinkmanship is worsening a global fuel crunch Rising oil prices are only part of the problem July 16th 2026 On july 13th President Donald Trump said America would reinstate its naval blockade on Iran and charge a 20% fee on cargo passing through the Strait of Hormuz. Brent crude, the global oil-price benchmark, jumped by 10%, to $83 a barrel. That night America launched air strikes on Iran, which responded by hitting two Emirati tankers with missiles. Yet Brent is still a quarter below April’s peak, even though the truce signed in June looks dead and Hormuz traffic has nearly stopped.
One reason prices have not risen further is that oil markets still deem it likely that, with America’s midterm elections four months away, Mr Trump will cave. On July 14th he dropped his plans for a transit fee, which is to be replaced by unspecified Gulf investments in America. A bigger factor is that the world’s supply of crude currently outpaces demand—not because production has surged, but because idled refineries are consuming less. At 79m barrels per day (b/d), the global output of refined products remains 7m b/d below pre-war levels (see chart 1, top panel). As a result, even as crude abounds, refined products remain scarce. Their prices are between 35% and 60% higher than before the war (see chart 1, bottom panel) and traders are wagering billions that they will rise further. The International Energy Agency, an official forecaster, warns that the crunch will get much worse unless flows through Hormuz resume. The margin that refiners in Europe make on diesel is the highest since at least 2011; in America “3-2-1” crack spreads—a measure of profitability for turning crude into petrol and diesel—are hitting a record. In Asia a barrel of jet fuel fetches around $150, up from $100 or so before the war. How bad will it get? That depends on the prospects for exports from three places: the Gulf, China and Russia. Those are uncertain at best. The Gulf used to be the largest exporter of “middle” distillates, such as diesel and jet
fuel. Since February, with Hormuz mostly closed, supplies have cratered (see chart 2) and refineries’ throughput has dropped by 30% (or 3m b/d). Although crude can leave the Gulf in pipelines bypassing the strait, no such route exists for refined products. Exports picked up a bit as Hormuz partially reopened, but now only Iranian crude is getting out. Worse, since the war began Iranian strikes have knocked out 1.4m b/d of Gulf refining capacity. The exact extent of damage remains unknown. Sarah Raffoul of Argus Media, a price-reporting agency, expects fuel exports to recover in three to four months—if Hormuz reopens. Chinese refineries are processing 3m b/d fewer than in February. China is usually a huge exporter of petrol and diesel, but the government prohibited state-owned refiners from selling abroad during much of the war. That ban was lifted in July, as long as refiners’ stocks did not drop below the pre-war levels of late February. China’s big oil firms have tentatively increased their collective export target to roughly two-thirds of what they were selling a year ago. But with tensions in Hormuz rising, a proper lifting of export restrictions now looks a long way off, says Frédéric Lasserre of Gunvor, a trading firm. A full ban could return at any point.
Meanwhile Russia’s refineries are under assault. Ukraine’s drone campaign against them has shifted up several gears since April. Drones are hitting more targets, more often, and farther into Russia (a mega-plant in western Siberia, 2,500km from the front, was struck on July 6th). These include sophisticated units within the refineries that upgrade crude-oil fractions into high-value products. Some can take months to repair. In June Russia’s refineries processed 3.8m b/d of crude, 1.5m b/d down from the level in January, estimates JPMorgan Chase, a bank. Most petrol and kerosene usually stays in Russia; now shortages, in the middle of holiday season, are causing chaos. In some regions drivers have queued for days, sales have been rationed and pump prices are up to 50% above normal. Farming, utilities and logistics are being disrupted, too. Nearly half of Russia’s diesel, and almost all its fuel oil, used in shipping, is usually exported. Russia is the world’s second-largest supplier of diesel (with 12% of global exports) and the leader in fuel oil (16%). Exports have slumped and the government has prohibited further diesel shipments. That affects more than merely the few buyers braving Western sanctions against Russia. Turkey, the main one, will now keep its refined diesel at home, starving the rest of the Mediterranean, notes Mick Strautmann of Vortexa, a ship-tracker. Brazil is replacing Russian diesel with American supply, further squeezing Atlantic buyers. The loss may ripple across other products, as refiners prioritise diesel output over jet fuel and petrol, says Benedict George of Argus. If the shooting stops in the Gulf and Hormuz reopens reliably, Asian refining resurges and Russian output recovers, supply will return just as the summer ends. But those are big ifs. A less benign scenario would oblige America— the world’s swing exporter—and importers to draw down already low stocks. Eventually product prices would jump further, squashing demand and encouraging refineries to produce more (in which case crude prices would also rise). The biggest oil shock in history is not over. The mood of motorists in America and Europe still hangs on battles thousands of miles away.■ For more expert analysis of the biggest stories in economics, finance and markets, sign up to Money Talks, our weekly subscriber-only newsletter.
This article was downloaded by zlibrary from https://www.economist.com//finance-and-economics/2026/07/14/americas-hormuz- brinkmanship-is-worsening-a-global-fuel-crunch
Finance & economics | Peak surplus China’s trade gap is narrowing. And other surprises The world’s second-biggest economy is stumbling into fiscal austerity July 16th 2026 China’s GDP growth figures are often suspiciously smooth. Last year the government set a target of 5%—and the sprawling $19trn economy duly grew by just that amount, as if the combined endeavours of 760m workers and 30m corporations could be choreographed by a committee. This year the government has permitted itself half a percentage point of drama, setting a target range of 4.5-5%. Few think the official outcome will depart far from this interval. The GDP numbers for the second quarter, released on July 15th, therefore raised a few eyebrows. The economy grew by 4.3%, year on year. That is
hardly a disaster. But it was slower than expected and the weakest since 2022, when China was still imposing citywide lockdowns to fight covid-19. Even that disappointing number would not have been possible without help from abroad. Last year’s trade surplus exceeded $1.2trn (see chart 1). And in June goods exports surged by more than a quarter in dollar terms, year on year. As containerfuls of merchandise chug towards their destinations, China’s trading partners, especially the European Union, are bracing themselves for a second “China shock” akin to the upheaval after the country’s entry into the World Trade Organisation in 2001. But a closer look reveals something different. “China’s trade surplus has peaked,” concludes Adam Wolfe of Absolute Strategy Research, a firm of analysts. In June imports rose faster than exports, by 36%. The surplus in the first half of 2026 was lower, in dollar terms, than a year before. The Iran war is only partly responsible for the turning-point. China is, of course, paying more for oil than it did last year. But it has softened the blow by dramatically cutting the volume of its imports. In explaining the diminishing surplus, crude matters less than chips. China is both a big exporter and a big importer of semiconductors. Its imports of integrated