“If I were someone planning with that kind of horizon, I’d plan for higher rates coming ahead,” George told Fortune’s Catherina Gioino. George, when asked directly whether she would cut rates, answered almost as quickly as the predictions for Warsh have come rolling in: “No I would not.”

“Inflation is a problem right now, and it’s been a problem for a while in the United States,” she said. “The real choices they’re looking at is, can we hold and see inflation fall? Are we going to have to raise rates? And I think there’s probably a good chance that you’ll have to talk seriously about raising rates, not cutting.”

Context: President Trump has long called for interest rate cuts and his nomination of Warsh came with that exhortation. If the Fed hikes, expect Trump to react negatively.

• The contrarian view for Fed rate cuts: Payrolls will weaken, inflation will plunge, and Kevin Warsh was ‘largely performative’ in his hawkishness - Jason Ma

THE MARKETS

Wall Street holds its nerve despite ships being droned by Iran

Global stocks were mixed this morning and the price of oil declined—a relatively calm reaction to Iran striking two ships with drones in the Strait of Hormuz and the inevitable counterstrikes that followed. Traders seem to be looking instead to reports that the U.S. and Iran have agreed to cease hostilities, again, and to talk more on Tuesday. 

• S&P 500 futures were up 0.77% this morning. The index closed flat in its last session and is down 1.98% over the last month. 
• In Europe, the Stoxx 600 was flat in early trading and the U.K.’s FTSE 100 was down 0.19% before lunch.
• Asia: South Korea’s KOSPI was down 0.2%. Japan’s Nikkei 225 was up 0.15%. India’s Nifty 50 was down 0.39%. China’s CSI 300 was up 1.21%. 
• Brent crude fell to $72 per barrel this morning from a high of $75 the day before.
• Bitcoin declined to $59.8K.

Coming this week: New Fed chair Kevin Warsh makes a speech on Wednesday at an ECB event in Portugal … The U.S. will report nonfarm payrolls (the “jobs number”) for June on Thursday.

IRAN

Missile strikes aside, traffic through the Strait of Hormuz is improving

Iran’s drone strike on the "Ever Lovely" tanker in the Strait of Hormuz—and the U.S.’s counter strike against Iran’s drone launching sites—“is a reminder that [Iran] retains both the capability and the willingness to hit the reset button if its demands are not met,” Deutsche Bank’s Jim Reid advised clients. Iran struck a second ship a day later, too.

If ship attacks continue, President Trump threatened that the U.S. “will be forced to militarily complete the job that we very successfully started. If that happens, the Islamic Republic of Iran will no longer exist!”

And yet, traffic is broadly increasing, as this chart shows.

“Oil prices have reacted little to news of [the] Singaporean-flagged cargo ship being attacked,” UBS’s Paul Donovan noted. “Investors never assumed reopening the strait would be a straight line.”

• Markets feel relief as the U.S. and Iran agree to a ceasefire on their earlier ‘ceasefire’ that was looking at lot like a war over Hormuz - Jason Ma

MORE FROM FORTUNE

Harvard’s housing report has a darker message than affordability—the middle-class home was always a historical accident - Nick Lichtenberg

Anthony Scaramucci on America 250: where have you gone, Joe DiMaggio? - Anthony Scaramucci

Social Security is headed for a day of reckoning, and Congress is running out of time to save boomers. Lawmakers are proposing some hard choices - Jason Ma

One in three Gen Zers is letting AI do their homebuying homework, but they still trust realtors with the closing process - Marco Quiroz-Gutierrez

David Protein CEO says ‘diet trends are over’ because of GLP-1s: ‘What’s next is really hard to predict’ - Sasha Rogelberg

Even Apple supply chain maestro Tim Cook couldn’t dodge the memory chip ‘RAM-ageddon’ crisis. Here’s why PC prices are soaring this summer - Alexei Oreskovic

CHART OF THE DAY

Yes, AI is killing jobs, Goldman Sachs says

Goldman Sachs used a question mark in a recent bulletin—”An AI job apocalypse?”—but the data within it isn’t very reassuring. The tech sector’s share of all jobs began to decline almost instantly with the launch of ChatGPT. Industries where AI is now commonly used are shedding 11,000 jobs per month.

NUMBER OF THE DAY

$687.69

The cash per share that OpenAI is offering in an internal tender offer to its employees ahead of the IPO. But Willy Lee, a principal at SuRo Capital (which is invested in OpenAI) thinks many will decline to sell and wait for the IPO, believing the price will rise further.

“OpenAI is actually testing that right now with their employee tender, and I'm not sure if all the employees at OpenAI want to sell shares at last round valuation,” he said in an email to Fortune. “I think the valuation is much higher than that. There's a testing of that right now, and I think what will people will be surprised about is valuations are much higher than that.”

THE FRONT PAGES TODAY

Volkswagen’s brutal jobs cull sparks prospect of sale of crown jewels - FT

Putin details Russia’s fuel shortages after Ukrainian drone strikes - CNBC

Behind the scenes: How shared fear of Iran led to an Israel-Lebanon deal - Axios

The Trillion-Dollar Borrowing Binge Lifting the Stock Market to Risky Heights - WSJ

Aramco Helicopter Crash in Ras Tanura Kills All 14 on Board - Bloomberg

Chaos Came to CBS News. What’s in Store for CNN? - NYT

ONE MORE THING

'Endless Shrimp' was allegedly a conspiracy that drove Red Lobster into bankruptcy

If you like conspiracy theories, then you’re going to love this Fortune story about Red Lobster’s “Endless Shrimp” promotion, and a shareholder lawsuit that alleges it tanked the company. As you probably know, Red Lobster’s “Endless Shrimp” offer was exactly that: For about $25, diners would be served all the shrimp they could eat. Ostensibly, the intent was that customers would order more pricey dishes, too. But that’s not what happened. They just ate the shrimp. The problem was that the shrimp offer lost the company money. (I mean, in hindsight, of course it did!) 

Endless Shrimp was also a logistical nightmare. Restaurants were “immobilized” as they ran out of shrimp, a lawsuit claims. Yet, year after year, Red Lobster repeated the promotion, losing money every time. The chain filed for bankruptcy in May 2024, hurting shareholders. 

Why did Red Lobster persist with Endless Shrimp when it was economic suicide? A lawsuit alleges that Red Lobster’s largest shareholder was also its sole supplier of shrimp: a company called Thai Union. After Thai Union backed new CEO Paul Kenny in 2022, Kenny made Endless Shrimp a permanent part of the menu—juicing the sales of Thai Union's shrimp.

Seeing the writing on the wall, Thai Union divested its stake in Red Lobster before the bankruptcy, the suit alleges.