If further evidence is needed to support Nomura analysts' view that Europe's 18-month election cycle, which is kicking off now, will accelerate the continent's shift toward potential right-wing political victories, look beyond years of nation-killing mass migration under progressive governments. The real-time deindustrialization of Europe, or the death of Europe, particularly in Germany, is quickly eroding the left-wing establishment's popularity and providing much-needed momentum to the right-wing Alternative for Germany party.
The latest horror story emerging from Germany, Europe's top economic engine, is a warning from Volkswagen Group labor representatives that the struggling automaker could ultimately eliminate as many as 140,000 jobs.
VW CEO Oliver Blume and VW brand chief Thomas Schäfer will unveil a turnaround plan for the automaker later today that will detail workforce reductions and the potential shutdown of some production lines.
We first previewed the incoming announcement over the weekend:
Volkswagen is Germany's largest manufacturer by revenue, and the warning of massive job cuts underscores the deepening crisis inside the country's industrial core. VW's earnings have been crushed by sliding sales in China, high labor and energy costs in Germany, and a flood of Chinese EVs undercutting domestic brands across the continent.
Bloomberg reported that VW management is considering cutting another 500,000 vehicles from annual European production capacity, reducing white-collar workers, cutting costs, and eliminating unpopular models and equipment variants.
The outlet quoted Christiane Benner, head of Germany's largest industrial trade union, IG Metall, who called the CEO's plan to cut massive numbers of workers and lift margins to 9% "cloud cuckoo land."
The economic misery spreading across Germany and the rest of Europe, as left-wing governments hollow out the continent's industrial base, is igniting a massive backlash. Nomura analysts expect Europe to "lurch right" during the coming 18-month election cycle (read report).
Tyler Durden Tue, 08/25/2026 - 08:05The Trump administration's "Operation Economic Outcast" has expanded the sanctions campaign across China and Hong Kong, targeting dozens of individuals and businesses while intentionally holding off on sanctioning major Chinese banks that keep Tehran connected to the global financial system. Beijing, meanwhile, signaled earlier Tuesday that it would not retreat from its economic relationship with Iran, raising the risk that Trump's economic war against Tehran could evolve into a direct confrontation with China, the largest buyer of discounted Iranian crude.
Late Monday afternoon, Treasury Secretary Scott Bessent unveiled nearly 60 Iran-linked sanctions under what he called Operation Economic Outcast, a campaign designed to sever Iran's remaining trade, technology and financial lifelines.
At the center of the new financial war is Hong Kong-based Sweet Ocean Industrial Ltd., which Treasury accused of helping procure laser equipment and other sensitive goods for Iran's Malek Ashtar University of Technology, a UN-sanctioned institution linked to the country's defense-industrial base.
However, Trump's decision to spare China's large banks suggests the administration is still trying to increase pressure on Tehran without sparking another trade war or prompting Beijing to restrict exports of critical metals, a move that has already triggered panic in the tungsten and germanium markets.
Treasury also designated Chinese nationals Li Na, Tian Jianbai and Zhang Limei for allegedly coordinating procurement activities supporting Iran's nuclear research and missile-development programs. Several related technology, trading and logistics firms in Hong Kong and Shenzhen were also targeted.
"Sanctions against specific entities are meaningless, as entity-specific sanctions can't be applied quickly enough to match the speed at which substitute entities can be created," said Derek Scissors, a senior fellow at the American Enterprise Institute who tracks Chinese trade, according to Bloomberg.
Scissors said some sanctioned entities could create pop-up shell companies to evade Treasury sanctions, adding that the dozens of entities named by the US "exist in a universe of tens of thousands."
"No one is above the reach of US sanctions," Bessent warned during Monday's press conference.
.@SecScottBessent: "This is a sustained campaign to collapse every last option for Iran. Let there be no ambiguity as to the position of the United States: an economic engagement of any kind with this murderous regime will expose those responsible to the full reach of American… pic.twitter.com/tlx2gcNs1d
— Treasury Department (@USTreasury) August 24, 2026Earlier Tuesday, Chinese Foreign Ministry spokesman Lin Jian told reporters that Beijing rejected Trump's unilateral sanctions, warning that the measures could intensify the conflict rather than usher in a peace deal.
"China's cooperation with Iran has always been conducted within the international framework and should not be interfered with or undermined," Lin said. "China is closely monitoring relevant developments and will take all necessary measures to firmly safeguard its own interests."
Financial Times reports that Beijing could retaliate if Chinese firms are included in any expansion of the economic war against Iran.
Most importantly, Treasury stopped short of targeting large Chinese banks because doing so could have derailed next month's summit between Xi Jinping and Trump.
Tyler Durden Tue, 08/25/2026 - 07:45Bessent is on a roll: first his attempt to send yields sharply lower by announcing an aggressive TSY buyback expansion, failed spectacularly, and then today, the US “economic D-Day” against Iran and unviled by Bessent, turned out to be "less Normandy and more Grenada", according to Bloomberg. But maybe, just like in the case of last week's "failed intervention", Bessent doesn't actually have to do much - in that case, all the Treasury secretary needs to do is spark a short squeeze (as noted earlier, Treasury CTA shorts are the highest on record), while Iran appears to be having some big problems of it own without Bessent even having to do much.
According to Bloomberg, Iran is facing mounting fuel shortages as the US squeezes its access to imports, stretching supplies of a commodity that previously sparked bouts of unrest in the country.
The state-run Hamshahri newspaper on Sunday reported long queues at petrol stations in Tehran because of fears of price hikes, with many drivers filling up tanks before they’re even half empty.
A top official in charge of domestic energy supply said the gasoline market had a daily deficit of 14-15 million liters due to record demand, damage incurred in the war and “changes in the national budget’s priorities.”
“We have to do something to bring consumption down to domestic production levels,” Esmaeil Saqab Esfahani, head of the Energy Optimization and Strategic Management Organization, said last week, according to the semi-official Iranian Students’ News Agency.
Needless to say, growing fuel shortages - and mounting popular unrest - will test Iran’s ability to keep the economy moving as the US launches what Treasury Secretary Scott Bessent described on Monday as “the single greatest financial offensive ever marshalled against an adversary.”
People line up to fill up their cars at a gas station in Tehran on Feb. 28.As Bloomberg notes, gasoline prices are a highly sensitive issue in oil-rich Iran, where state subsidies mean consumers benefit from some of the cheapest petrol in the world. Or should.
Past efforts to raise prices have led to deadly protests, most notably in 2019, when hundreds of Iranians were killed by security forces. Throw in rampant inflation and a worsening currency crisis now crushing millions of ordinary households in Iran, and a spike in gasoline prices could be the lit match that sparks a new explosion in public anger, similar to the deadly protests in January.
For their part, Iranian officials have been warning the public for months that price hikes may be inevitable because Israeli and US strikes on fuel storage sites and other energy facilities have compounded a longstanding supply-demand imbalance. Trump's blockade on Iranian ports has only made the situation worse by preventing imports that Iran normally relies on to offset shortages.
President Masoud Pezeshkian, who has become an impotent figurehead, appealed to the public for support as far back as May, as he mooted the possibility of rationing and urged people to use public transport where possible. But the warnings don’t appear to have worked.
Last week, Iran’s parliament speaker and lead negotiator in the war, Mohammad Bagher Ghalibaf, said the US and Israel planned to exploit any rise in gasoline prices as part of their military operations against the Islamic Republic. Officials previously blamed an unspecified “foreign country” for a 2021 cyberattack on the country’s fuel network.
In an attempt to mitigate the shortage, the government has tried to encourage drivers of the roughly 4.5 million dual-fuel cars on the road to switch to using compressed natural gas. Iran’s biggest oil processing plant, the Persian Gulf Star Refinery, also said it was using methanol to boost gasoline production, ISNA reported on Sunday. Esfahani, the energy official, said the government is looking at three possible ways to manage the shortage.
Currently, Iran has a tiered quota system that provides each car with a monthly allowance of discounted gasoline. The first 60 liters costs 15,000 rials ($0.008) per liter, followed by 30,000 rials each for the next 50 liters and 50,000 rials for sales beyond that.
Last week the government abruptly abandoned a pilot program in the southern city of Kerman that would have increased the overall quota but applied a much higher price of 872,000 rials per liter ($0.46) for purchases above it.
Officials blamed mismanagement of the pilot for its failure, but the higher rate had also triggered widespread alarm in Kerman and stoked fears that the government was planning similar price hikes for the rest of the country.
And speaking of surging prices, Iran’s currency plummeted to new lows on Monday as the US announced further sanctions on the Islamic republic, whose citizens are now rushing to exchange lines to save their cash.
The rial dropped to 2.02 million to one US dollar when the currency markets opened on Monday, meaning the currency is now worth about half of what it was at the start of the year.
The continued plunge during nearly six months of war has led Iranians in Tehran to sprint for the exchange markets in hopes of getting US bills before their rial falls even further.
“There is no hope for a deal and peace,” Sadegh Mahmoudi, 73, told the Associated Press as he waited at an exchange line in downtown Tehran.
Iran’s rial has been in a free fall since last November due to years of Western sanctions and persistently high inflation, factors that have only gotten worse during the war.
Iranian hyperinflation has led to a collapse in the rial.While Iran’s official Central Bank rate stands at 1.5 million rial to the dollar, the market rate is what the average Iranian pays.
“President Trump decimated Iran’s economy to a point where the rial has never been weaker and inflation has rarely been higher,” US Treasury Secretary Scott Bessent wrote Sunday in an opinion piece in the Financial Times.
“The regime’s final refuge now lies in the self-deception of fearful nations that still believe accommodating aggression can secure a durable peace,” he added.
Bessent warned that the additional financial penalties to come would effectively “collapse the regime,” with Trump echoing the same threat on social media.
“IRAN IS COMPLETELY COLLAPSING!!!” the president wrote on Truth Social.
In a tweet later in the day, Bessent said that "Iran’s currency keeps plummeting: today, crashing through the exchange rate of 2 million rials to the U.S. dollar. Over the weekend, Iran's Central Bank Governor Abdolnaser Hemmati said that the simultaneous drop in Iran’s oil revenues, tax income, and social security contributions has affected every part of Iran's economy. 3 million, here we come!"
Iran’s currency keeps plummeting: today, crashing through the exchange rate of 2 million rials to the U.S. dollar.
Over the weekend, Iran's Central Bank Governor Abdolnaser Hemmati said that the simultaneous drop in Iran’s oil revenues, tax income, and social security… pic.twitter.com/ZjOczci1Xi
With the United Arab Emirates, Iran’s largest trading partner, suspending all trade with Tehran, officials within the Islamic republic have threatened retaliation over the economic blows.
“Any escalation of this situation will undoubtedly bring about consequences,” Iranian Foreign Ministry spokesperson Esmail Baghaei told reporters on Monday. “Our hands are not tied.”
Tyler Durden Tue, 08/25/2026 - 06:55