A Week Shaped by War's Return and Its Price at Home

Fire in the Strait

The week opened with the sound of a month-long pause breaking. U.S. forces struck two Iranian rocket launchers on Larak Island in the Strait of Hormuz on Sunday, the first American military action against Iran since July 29. Officials said the strikes were intended to keep Iran from laying sea mines in the waterway. Iran answered with attacks on U.S. targets in the United Arab Emirates and Jordan, and Brent crude topped $90 per barrel. Treasury Secretary Scott Bessent signaled additional sanctions targeting banks that handle Iranian transactions, and NPR reported that weeks of U.S. threats had preceded the strikes.

The economic transmission was immediate. By Tuesday, oil above $91 had helped push government bond yields to multi-decade highs across major markets. Japan's 10-year yield crossed 3% for the first time since 1996, U.K. borrowing costs reached their highest level since 2008, and weakness in U.S. Treasurys rippled from Tokyo to London. Higher energy prices revived inflation fears and reinforced expectations of monetary tightening, raising the odds of a Federal Reserve rate hike at the central bank's September meeting.

By Friday, the conflict had reached American gas pumps. Average U.S. diesel prices hit $5.85 per gallon, an all-time high that topped the previous record set in 2022, according to AAA, while regular gasoline rose to $4.15. Farmers, truckers and freight companies are absorbing the higher costs, which feed into the price of moving goods nationwide. Together, the two benchmarks put this weekend on pace to be the most expensive Labor Day for fuel in U.S. history.

The week's economic picture was not uniformly grim. The Labor Department reported Friday that U.S. employers added 162,000 jobs in August, well above forecasts, with unemployment steady at 4.1%. The report ended a summer of lackluster hiring that had rattled forecasters -- and, like the oil shock, it raised expectations that the Fed will hike rates this month.

Washington's Turbulent Interior

The conflict abroad coincided with turnover at the Pentagon. Army Secretary Dan Driscoll formally submitted his resignation Monday after months of tension with Defense Secretary Pete Hegseth, leaving the Army without a Senate-confirmed leader during wartime. Officials told Axios that Driscoll resigned over blocked modernization initiatives and what they described as chaos created by Hegseth; The Hill reported the departure capped a months-long turf war between the two officials. Driscoll, the youngest person ever to serve as Army secretary, left roughly 18 months into the post, Fox News reported.

Congress, for its part, bought itself time. President Trump signed a stopgap funding bill Wednesday, averting a government shutdown and keeping federal agencies funded until at least December 11. The measure also paused an Office of Management and Budget effort to rewrite how federal research grants are funded -- a move Ars Technica described as blocking political control of grants -- aligning that dispute with the next funding deadline.

The midterm map shifted, too. Sen. Ed Markey, 80, won Massachusetts' Democratic Senate primary Tuesday, routing Rep. Seth Moulton, 47, who had argued the party needed new leaders. The result bucked a broader push for younger Democratic leadership, NPR reported, and establishment Democrats swept progressive and generational challenges across the state, according to Fox News. Then on Thursday, the Missouri Supreme Court unanimously blocked a Republican-drawn congressional map designed to net the GOP an additional House seat, a ruling President Trump called "ridiculous," Fox News reported. The same evening, Maryland's highest court restored a Democratic-led redistricting referendum to the November ballot -- twin rulings that settled two contested map disputes two months before the midterms.

Diplomacy, Disaster and Departures

As the week closed, the administration's other foreign-policy track came into view. Steve Witkoff and Jared Kushner arrived in Moscow this weekend carrying a plan to restart stalled peace talks between Russia and Ukraine, with Kyiv next on the itinerary -- their first such trip since President Trump's reelection. The effort they lead has produced little progress in recent months. The urgency was evident midweek: Russia hit Kyiv for a sixth straight day in a coordinated airstrike that killed 12, and Germany concluded Russia was behind a failed explosive drone attack on Leipzig/Halle Airport, prompting EU and NATO vows to step up pressure on Moscow.

At home, disaster struck one of the country's most visited landmarks. A flash flood tore through the Grand Canyon's Bright Angel corridor, killing at least one person, and the National Park Service said approximately 15 people may be unaccounted for -- a count it stressed is still an estimate. Rescue crews evacuated more than 60 hikers from the canyon's depths. Hikers told the BBC the flood struck suddenly on a clear day. Abroad, a State Department official said roughly 85 Americans remain unaccounted for after flash floods in Nepal and Tibet, where the death toll has passed 900.

The week also marked a series of endings. Tim Cook handed Apple's CEO role to John Ternus after 15 years, a tenure in which the company added roughly $4 trillion in market value. Lionel Messi, 39, retired from Argentina's national team after six World Cups, including the 2022 title. Novak Djokovic, also 39, fell in the first round of the US Open, his first opening-round Grand Slam exit since 2006. And in Las Vegas, a jury convicted Duane "Keffe D" Davis in the 1996 shooting of Tupac Shakur, closing one of music's most infamous cold cases after nearly 30 years.

Science delivered milestones of its own: IBM and University of Chicago researchers ran a quantum computation on 70 error-corrected logical qubits that classical methods could not practically reproduce, the world's largest dark matter search recorded an unexplained particle event consistent with a long-hypothesized WIMP, and a U.S. man reached a record nine months living with a gene-edited pig kidney.

The Week Ahead

Labor Day closes U.S. markets, banks and federal offices on Monday, marking summer's unofficial end -- this year, with record fuel prices greeting holiday travelers on the road.

Later in the week, the U.S. observes the 25th anniversary of the Sept. 11 attacks with somber commemorations nationwide.