Geopolitical Shocks and Tax Tensions: Risks to Liquidity and Market Confidence

This Weekly Economic Commentary from Northern Trust, authored by chief economists Carl Tannenbaum, Ryan Boyle, and Vaibhav Tandon, explores the financial implications of Israel’s strike on Iran, liquidity trends in money markets, and the global ramifications of proposed U.S. tax legislation.

• Middle East conflict poses modest but rising oil market risks, with global investors closely watching Strait of Hormuz developments.

• Money market fund demand remains robust amid debt ceiling concerns, though investors are preparing for potential volatility.

• Section 899 of the OBBBA threatens foreign investor confidence by potentially taxing U.S. securities income—raising uncertainty around U.S. debt financing.

Read the full report for a detailed analysis of emerging cross-border tensions and their implications for portfolio positioning and liquidity strategies.