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Already US officials have signaled they may just abandon hard-hit bases in the Middle East altogether, in the wake of Iran's retaliation as a result of Operation Epic Fury, and a conflict that's dragged on for nearly six months.

On Tuesday The Washington Post reviews the damage control underway, as the Pentagon 'evaluates' its future military footprint. All of this is framed as if Washington has a choice and full control over the matter, when it seems that all along the Trump administration was woefully underestimating what an Iranian response would look like.

"The Pentagon is evaluating its military footprint in the Middle East in an early sign of the Iran war’s potential to transform the U.S. presence in the region, according to eight people, including officials and others familiar with the matter," Washington Post writes.

"One of the key areas the Defense Department is assessing is whether to pull back troops from the Persian Gulf, where America’s large overseas military bases have been battered by months of Iranian strikes, two people familiar with the ongoing analysis said," it adds, further calling this a "once-in-a-generation" chance for the Pentagon to alter its presence in the region.

The whole thing is being reported as if the 'smart people' are in the room and in control, and also as if the US hegemon in the region didn't already take a massive reputational hit following 'forever wars' and occupations in Iraq and Afghanistan. Over 20 years after the initial invasions, the Taliban remains in firm control of Kabul and Afghanistan, and Shiite pro-Iranian politicians run Baghdad.

And now a half-year into a war where the response should have been entirely anticipated (having been predicted by years and decades of Persian Gulf war-gaming and intelligence papers), this is where things stand:

“The war really did highlight the vulnerability ... of U.S. forces in the region,” said Michael Ratney, a former diplomat who served as the U.S. ambassador to Saudi Arabia and the deputy chief of mission in Qatar.

Moving troops and equipment further west to Jordan, Israel or the Red Sea coast of Saudi Arabia could help alleviate some of the pressure, he argued, while noting the added distance wasn’t a “perfect solution to this problem.”

Iran has already demonstrated it can strike faraway targets in Jordan and Israel. Last month an Iranian attack on Jordan killed four U.S. service members.

Anyone with eyes to see knows that this is already happening. For months at this point, dozens of US refueling aircraft have clogged up Tel Aviv's Ben Gurion airport, for just one example.

For smarter and more legitimate analysis, one can turn to Amerikanets, which one month ago was chronicling Tehran's successful campaign of 'debasification':

The broad picture of the Iranian air war in this phase has been a steady wave of concentrated missile and drone strikes sweeping its way across the region. In contrast to the previous hot phase of the war, in which Iran targeted bases across the entire theater simultaneously, this wave started with the targets close to Iranian shores, and has progressed steadily to the Israeli border. After destroying much of the radar network protecting regional US Axis bases in the previous hot phase of the war, Iranian planners have prioritized targeting fuel storage, drone hangers, refueling tankers, and barracks.

The American response has been to pull assets back ever further from Iran, to bases in Israel and Jordan. We’ll call this process debasification. Iran’s debasification strategy takes advantage of the inherent asymmetry between the vastly different force structure and capabilities of Iranian rocket forces and US Axis air forces.

A concluding section predicted the dilemma laid out in WaPo concerning a grand Pentagon evaluation of its force posture in the Middle East:

By all available evidence, the Iranian debasification campaign appears to be working. The US force in the region is likely incapable of generating the same combat power in its air operations against Iran as it could when the war started, and things are trending ever further in a negative direction. Even worse, there’s no clear solution on the horizon. The most obvious lever for American planners to pull is to accept more casualties and losses of personnel and airframes, but this is an unprecedented step the modern incarnation of the US military has never faced.

"The Iranian debasification campaign appears to be working.

The US force in the region is likely incapable of generating the same combat power in its air operations against Iran as it could when the war started, and things are trending ever further in a negative direction.…

— Alex Shams (@alexshams_) July 21, 2026

What's worse is that the Iranians know all of this full well - and probably earlier than the Western public - and they smell blood in the water. Hence, this week they've been strongly signaling a new 'offensive' military posture, and have vowed to hit harder in whatever next waves of conflict come.

So will the US rebuild bases battered by Iranian strikes? Well, Tehran is now saying that in essence it won't let that happen. The WaPo article operates under the illusory assumption that US planners have some big array of options set before them, when increasingly American forces are in obvious retreat and no one can do anything about it. Also, what happened to Pete Hegseth's rah rah Epic Fury press briefings on all the 'winning' and chest-thumping? It's been a while.

Jefferies analyst Lloyd Byrne wrote in a note on Monday that surging refined-product margins, stronger gas-fired power demand, and improving earnings estimates are providing clear tailwinds for energy stocks, even as valuations and technicals appear stretched.

Byrne showed that the clearest source of strength in the energy market is refining. The six-month New York Harbor diesel-to-crude spread topped $100 (HOCL1 Index on Bloomberg) and has moved in close tandem with the Energy Select Sector SPDR Fund (XLE).

Included in the "10 Charts That Mattered" report that Byrne published for clients on Monday is chart No. 9, titled "Energy & Materials Among High-Quality, High Real Rate Favorites."

He makes the case that rising refined-product margins and a high-real-rate environment favor several energy and materials stocks. Materials do not benefit from refining margins, but rather from the higher rate environment.

On the energy side, he outlined how Valero is the top crack-spread play because it directly benefits from higher refining margins. He then pointed out that ConocoPhillips and EOG are upstream producers, which means they benefit mainly from higher crude oil and natural gas prices, not higher refining margins, while CF Industries, Avery Dennison, and Crown Holdings are materials stocks that benefit in a higher rate environment.

He posted a chart showing the 10-year Treasury inflation-protected yield at about 2.5%, placing real interest rates in the 79th percentile since 1997. In other words, inflation-adjusted borrowing costs are extraordinarily high.

Byrne sees energy and materials as attractive havens for investors in a high-real-rate regime, but only Valero has direct exposure to the diesel crack-spread blowout.

Diesel crack hits record $102. This is absolutely unprecedented.

Industrial economy either grinds to a halt or consumers about to be hit with the biggest energy pass through in history pic.twitter.com/OtAdgrCvb3

— zerohedge (@zerohedge) August 17, 2026

He then pointed to ETF flows, which only indicate that investors are favoring cyclicals.

Materials ETFs have received net inflows equal to 28.6% of assets year to date, followed by industrials at 16.7% and energy at 14.1%. Technology, on the other hand, stands at only 4.1%.

Conversely, investors have been dumping semiconductor stocks.

The key takeaway is that investors are rotating out of semiconductors and into cyclicals, particularly materials and energy. Energy's robust year-to-date inflows remain intact, with widening refining margins and positive earnings revisions, which may only suggest further rotations into cyclicals.

Professional subscribers can read more about crack spreads, the Gulf energy crisis, and US consumers here on our new Marketdesk.ai portal. 

Via The Cradle

Iraq's plan to build a pipeline to export oil through Syria and partially bypass the Strait of Hormuz ?will likely take four years to complete and cost $15 billion, Reuters reported on Monday.

Iraq urgently seeks new outlets for its oil exports, which have plummeted since Iran closed the Strait of Hormuz in response to the US-Israel war on the Islamic Republic that started in February.

In July, Baghdad exported only 35.5 million barrels through its Basra ports via the Strait of Hormuz, according to the state-run oil firm SOMO. Before the war, Iraq exported about 108 million barrels of oil per month.

The fall in exports has created a budget crisis, as Iraq relies on oil revenues to fund 90 percent of its spending.

Iraq and Syria signed a memorandum of understanding in Washington in July to revive a historic pipeline linking the Kirkuk fields to the Syrian port city of Banias on the Mediterranean Sea.

A separate agreement was signed with a consortium including Chevron, UCC Holding, and TI Capital to undertake technical and financial studies for the pipeline's reconstruction.

The pipeline is expected to transport 2 million barrels per day to the Syrian port, where the crude can then be shipped to Europe by tanker.

But a planned pipeline to export via Syria may not provide an alternative to Hormuz as soon as Iraqi officials had hoped.

"Both sources said the plan would require laying entirely new infrastructure rather than rehabilitating the existing pipeline and cost at least $15 billion," Reuters reported.

Rebuilding the pipeline could take as long as four years because it has been unused since the 1980s and is extensively damaged.

Even the intact sections of that pipeline would have to be replaced as they are not compatible with newly developed specifications, one of the sources said.

An entirely new integrated crude oil pipeline system linking Iraq's southern and northern fields to a central hub in ?Haditha, in western Iraq, would also have to be built, the second source stated.

Treasury Secretary Scott Bessent:

The Strait of Hormuz is never going back to the way it was because the Iranians have used, or tried to use it, as a choke point.

Over the next two years, the Strait of Hormuz is going to become irrelevant.

It is going to become just another… pic.twitter.com/6dmYCA8HkU

— Republicans against Trump (@RpsAgainstTrump) August 9, 2026

The four-year timeline is also well beyond the two-year period estimated by US Treasury Scott Bessent for Hormuz to become "irrelevant" due to the construction of new underground pipelines by the Gulf states.

The US housing market's top 10 hottest ZIP codes this year are all located in the Midwest and Northeast for the fourth consecutive year  - as tight inventories due to limited homebuilding has fueled competition, according to a Monday report from Realtor.com. 

The top 10 - as measured by buyer demand gauged by unique views and how quickly homes are selling are located in:

• Massachusetts
• New Jersey
• New York
• Connecticut
• Pennsylvania
• Wisconsin
• Illinois
• Michigan

The hot areas received up to 5.3 times as many views and sold substantially faster than the national average, by as many as 42 days. According to a July Realtor.com report, the national median time on market was 53 days in June.

Meanwhile, nine out of the 10 hottest ZIP codes sold at or above list prices in the first half of the year - vs the typical home nationwide which sold for about 2.3 percent below asking price, the Aug. 10 report shows.

As The Epoch Times notes further, tight inventory, driven in part by insufficient homebuilding, is fueling heightened competition in the hottest housing markets, the report notes.

Nationwide, inventory for sale remained 11.3 percent below pre-COVID-19 pandemic norms in June, according to the report. But in the hottest ZIP codes, inventory was 60.5 percent below pre-pandemic levels - more than five times the national gap.

By contrast, the report says that stronger homebuilding and slower price growth in the South and West over the past two years have reduced competition. As a result, the report says, "For the fourth year running, the South and West failed to produce a single entry on the [hottest ZIP code] list."

Meanwhile, the report shows that many of the hottest ZIP codes this year are located in outer-ring suburbs of major metropolitan areas, where buyers can get more space while remaining within commuting distance of city centers.

Peabody, Massachusetts - previously ranked third in 2021 - moved to the top of the list this year. Located about 20 miles north of Boston, the city has a median home price of $600,000, with 70 percent of views of its listings coming from the Boston metro.

Homes there spent a median of only 20 days on the market during the first half of the year, and typically sold for just over the asking price.

Montclair and Sewell, New Jersey, ranked second and third, respectively. Fairport, New York, and Westfield, Massachusetts, rounded out the top five. The remaining spots in the top 10 went to Livonia, Michigan; Lititz, Pennsylvania; North Haven, Connecticut; New Berlin, Wisconsin; and Wheaton, Illinois.

"This year's hottest ZIP codes tell us that buyers aren't simply chasing the lowest price tag anymore," said Hannah Jones, senior economist at Realtor.com. "They're chasing space, character and a manageable commute to a major job center, and they're willing to pay a premium to get it."

Jones added that buyers within these ZIP codes tended to be financially prepared, bringing larger down payments and stronger credit profiles to the table. On average, she said, down payments for homes on the hot list are 17.1 percent, compared with about 13.1 percent nationally. Looking at credit scores, the median for hot list homebuyers is 766, versus about 747 nationally.

Overall, the report concluded, buyers in the top ZIP codes are motivated and choose communities that offer the best blend of value, access, and quality of life.

"As mortgage rates remain high and inventory levels gradually recover, expect these kinds of high-performing, value-driven suburban areas to remain at the forefront of market activity," the report states.

Since last fall, we have repeatedly flagged the private credit sector’s growing vulnerabilities.

Earlier coverage detailed how the asset class ballooned into a $2-3 trillion opaque market after banks retreated from riskier lending, only to face a wave of high-profile defaults (First Brands, Tricolor), surging redemptions that forced gates at major vehicles, rising PIK usage, and AI-related risks to software-heavy portfolios.

In February, the red flag got about as red as it gets...

• Private Credit Rocked By UBS Shock Outlook: Record "Cascading Defaults" And Widespread Contagion

But, as a wave of private-credit providers unleashed their PR teams - and the story slipped off the lips of the TV talking-heads - it remains top of mind for traders, as we most recently noted:

• Private Credit: The New Junk Bond Market

• Private Credit’s Problems Just Got Real 

• 777 Partners and the End of Private Credit, which highlighted insurance-sector contagion risks from PE/private-credit-controlled insurers and the difficulty of raising fresh capital.

Which leads us to a new story this morning from The Financial Times which underscores that the pressure is no longer contained.

“Strain is spreading across private credit portfolios, with some of the largest funds taking writedowns and warning about problem loans as the industry faces its biggest challenge in almost a decade,” the FT reports.

An analysis of Solve data shows that the value of troubled loans held by some of the biggest private debt investors has reached levels last seen in 2017, when the industry was dealing with a hangover from an oil price crash.

Loans placed on non-accrual status by the 20 largest publicly traded business development companies (BDCs) climbed to a median 2.8% of their cost in the second quarter, up from 2% at the end of March.

The non-accrual demarcation signals that borrowers have either stopped making payments or that a fund believes a borrower may soon default.

David Golub, co-chief executive of Golub Capital, told investors earlier this month that there was “elevated credit stress” as the industry grappled with a rise in defaults and problem loans.

“We’re in a credit cycle,” Golub said.

“Others denied it for a while. I don’t think there’s a lot of denial any more.”

Fitch Ratings warned last week that private credit defaults had hit a new record in July.

PitchBook LCD data showed the biggest publicly listed BDCs shrank again in the second quarter as funds were hit with impairments and as sales and repayments of loans outpaced commitments on new deals. Listed vehicles managed by KKR and Blue Owl, as well as Apollo’s MidCap Financial, were among those in which repayments outstripped new lending. FS KKR Capital Corp reported that 7.1 per cent of its loan book was troubled in the second quarter - still far above the industry average.

Much of the pain is concentrated in loans extended between 2020 and 2021, when rates were near zero and private equity valuations were elevated.

Higher borrowing costs have “starved some businesses from investing,” said Bryan High of Barings.

“They are using all the cash they are generating to pay interest to lenders and so growth for some businesses wasn’t as strong as it could be.”

Concrete examples include Blackstone and KKR marking down their loan to software group Medallia (Blackstone’s fund marked it at less than 50 cents on the dollar at end-June, down from 60 cents in March) after Thoma Bravo handed the business to lenders. Ares wrote down its loan to Cornerstone OnDemand, while Blackstone and KKR took over dental services company Affordable Care after default.

Industry titans acknowledge that bankruptcies and restructurings are moving back toward long-term averages.

“We are… conserving our capital, maintaining ourselves in a more defensive and risk-averse posture,” said Armen Panossian of Oaktree’s credit arm.

“We really want to be able to lean into the market on the back of what we think will be more volatility… Beneath the surface, there’s cause for concern.”

Others remain more sanguine.

Craig Packer of Blue Owl said “credit metrics are healthy and the issues we are managing remain isolated.”

Jim Miller of Ares noted that borrowers were in “solid” shape with interest coverage and leverage “generally consistent with our five-year average.”

Yet the FT confirms our ongoing warnings that some of this optimism “belies the complicated picture ahead,” particularly for software companies facing uncertain durability of growth amid the AI shift, and for funds still digesting the 2020–21 vintage.

The sell-off in BDC share prices has been sharp - KKR and BlackRock vehicles down more than 15% over the past year, Apollo’s down 14.5% - leaving some funds “priced for death,” according to Oppenheimer analyst Mitchel Penn.

BlackRock’s TCPC sold a $523 million block of loans and is exploring options that could include winding the vehicle down; KKR’s troubled vehicle has waived some incentive fees.

Penn’s research showed that on average over the past five years, bottom-quartile funds generated returns on equity below the yield on a 10-year Treasury.

“Underwriting wasn’t as good as it should have been,” he said. “They weren’t as picky.”

Taken together with our earlier reporting on redemption pressure, opacity, and early defaults, the FT data shows the credit cycle is firmly underway and the situation continues to deteriorate.

This latest report from The FT update builds on our prior observations: underwriting standards loosened during the boom, higher rates are now “starving” cash-flow coverage for many borrowers, and the liquidity mismatch between semi-liquid vehicles and illiquid loans is amplifying pressure.

The bottom-line is simple: the situation in private credit continues to worsen.