President Donald Trump's decision to cancel planned military strikes on Iran last weekend was shaped by multiple converging pressures, according to new reporting. CNN, citing sources, reports that munitions shortages, concerns over Iranian retaliation, and the potential for civilian casualties were among the key factors that persuaded Trump to stand down. This account adds significant context to earlier claims by economist Steve Hanke, who asserted that Saudi Crown Prince Mohammed bin Salman compelled the cancellation by threatening to liquidate the kingdom's U.S. Treasury holdings. Together, the reports paint a picture of a decision driven by both military constraints and diplomatic intervention.

Hanke, a professor of applied economics at Johns Hopkins University, described the potential Saudi bond sale as a "credible threat," stating that Mohammed bin Salman understood the kingdom had "enormous leverage" and that "Trump received MBS's message loud and clear." Hanke argued that had the strikes proceeded, Iran would have counterattacked, potentially crippling Saudi Aramco and throwing global energy markets into chaos. The Strait of Hormuz blockade has disrupted a waterway handling about one-fifth of global oil and liquefied natural gas supplies. Aramco CEO Amin Nasser previously warned that such disruption could delay the energy market's recovery until 2027. The cancellation aims to secure a deal reopening the Strait of Hormuz and ending Tehran's nuclear program.

Market Reaction

Financial markets responded positively to the de-escalation, with equity indices rising and energy prices falling due to lowered geopolitical risk:

In contrast, Asian markets traded lower amid broader anxiety. South Korea's KOSPI fell 5.29% to 6,246.76, and Japan's Nikkei 225 declined 1.85% to 63,171.03. The U.S. dollar index fell 0.30% to 99.504, while natural gas futures rose 0.58% to $2.763 per MMBtu.

Diplomatic Uncertainty Persists

Despite the pause in hostilities, the path to resolution remains unclear. Iranian Foreign Ministry spokesperson Esmaeil Baqaei denied requesting the halt, clarifying that a recent shipping agreement with Oman does not guarantee the reopening of the Strait of Hormuz, describing it as "a necessary condition, but not a sufficient one." The semi-official Fars news agency dismissed the cancellation, claiming Trump has "run out of steam." Investors remain cautious as the lack of confirmed terms from Tehran leaves room for continued volatility.

Analyzing Saudi Leverage

While Hanke emphasizes the Treasury threat, Reuters confirmed Saudi pressure for de-escalation but did not report a specific bond sale threat. The Associated Press reported that Mohammed bin Salman warned further attacks could provoke retaliation against Gulf allies and severely damage the global economy. Treasury data suggests Saudi Arabia held $140.3 billion in Treasuries in May, representing about 1.5% of all foreign holdings and roughly 0.35% of the United States' nearly $40 trillion federal debt. While a rapid sale could lift yields during stressed trading, these figures indicate Riyadh alone may not dictate the world's largest government-bond market.

Americans now trust the Democratic Party slightly more than the Republican Party to manage the economy, according to a new Reuters/Ipsos survey. The poll reveals that 37% of registered voters believe Democrats have a better economic strategy, surpassing the 36% who favor Republicans. This shift ends nearly a decade of Republican advantage in this metric, which persisted through most of Donald Trump’s first term, Joe Biden’s tenure, and into Trump’s second term.

The survey also captured a dip in President Donald Trump’s approval rating, which fell to 35%, down from 37% in a similar poll conducted last month. This decline coincides with rising energy prices fueled by ongoing conflict with Iran. U.S. gasoline prices crossed $4 a gallon in July, with experts warning that prices could remain above $4 per gallon beyond the first week of August.

Political Fallout and Market Odds

Despite growing dissatisfaction with the administration, Polygon-based Polymarket prices a 56% chance that Republicans will retain their Senate majority after the midterms. Conversely, Democrats are the frontrunners to take control of the House, with 86% odds in their favor. Overall, the balance of power tilts slightly toward Democrats, with a 48% chance that they sweep both chambers of Congress.

Broader Trends

The shift in public opinion reflects a broader trend rather than a one-off fluctuation. A July AP-NORC poll recorded 33% approval and 66% disapproval for Trump’s handling of the presidency. Furthermore, approval of Trump’s handling of the Iran conflict fell to 28%. Independents in the Reuters/Ipsos poll favored Democrats over Republicans by 12 percentage points, highlighting a significant swing among undecided or non-aligned voters.

What the Numbers Show

The divergence between polling data on economic management and market odds for congressional control suggests a complex political landscape. While Democrats have gained a slight edge in perceived economic competence, the structural advantages or incumbency factors may still favor Republicans in the Senate, as indicated by Polymarket’s pricing. This disconnect highlights the nuanced nature of voter sentiment versus electoral outcomes.