July 10 Member Morning Briefing: Fighting in the Middle East Flares Up Again; Warsh Calls for “Outside Experts” to Overhaul the Fed

1、【Middle East War Flames Up】The already fragile ceasefire between the US and Iran is collapsing completely. For two consecutive days, the two sides have been launching airstrikes and missile strikes at each other across the Strait of Hormuz. Meanwhile, Israel has publicly said it is ready to use force against Iran for a third time at any moment. On Thursday, Israel’s Defense Minister Israel Katz said at a military ceremony that the IDF has entered a state of readiness, prepared to restart military operations against Iran, “and if necessary, can strike a third time.” “If we have to go back, we will go back—with greater force.” At the same event, Prime Minister Benjamin Netanyahu said that Iran has been weakened by the first two rounds of strikes, and announced that over the next decade it will add about 350 billion shekels (about $116 billion) in defense budget, with most of the funds going to the air force and domestic defense manufacturing to reduce reliance on overseas arms procurement.

2、【Walsh Brings in “Outside Brains” to Reform the Fed】More than a month after taking office, the new Federal Reserve Chairman Kevin Walsh has released the lead list for five external working groups—venture capital titan Marc Andreessen, Harvard economist Raj Chetty, former Bank of England governor Mervyn King, and others are all listed prominently. In his statement, Walsh said that the U.S. economy has undergone tremendous changes over the past generation—“especially now”—and that each working group needs to examine whether policymakers’ “means and methods” and whether their “analytical tools and policy pathways” still have room for improvement. The Fed emphasized that these working groups will “operate independently,” with the mission to “follow the evidence, provide candid feedback, and draw rigorous conclusions,” and ultimately report to the Federal Open Market Committee (FOMC). No timeline has been officially provided, but Walsh has previously said that changes should be seen this year.

3、【US Exports to the US Surge 23%; Germany’s May Exports Grow Against Expectations】Data released by the German Federal Statistical Office (Destatis) on July 9 showed that, after seasonal and calendar adjustments, Germany’s May exports rose 0.9% month-on-month to €137.9 billion (about $158 billion), the highest level in more than three and a half years. This performance far exceeded market expectations—economists surveyed by Reuters had generally expected exports to fall 0.3% month-on-month. In the same period, imports fell 2.5% month-on-month to €118.8 billion, the lowest in three months, driving the trade surplus to expand from €14.7 billion in April to €19.1 billion, the largest scale since February.

The core driver behind the unexpectedly strong export performance came from the United States. In May, Germany’s exports to the U.S. surged 23.1% month-on-month to about €14.1 billion, keeping the U.S. firmly as Germany’s largest export market.

4、【OpenAI Launches GPT-5.6 Three-Tier Models】On July 9, OpenAI opened the new generation GPT-5.6 model family to the global public. Unlike previous “single flagship” style releases, this generation rolls out three tiered models at once: Sol, positioned as the strongest and for the hardest tasks; Terra, for everyday scaled business; and Luna, focused on high throughput and low cost. OpenAI also activated a new naming rule at the same time—numbers (5.6) represent the “generation,” while Sol / Terra / Luna represent “capability tiers” that can each be iterated independently at their own pace. The official said this is to give developers clearer trade-offs among “intelligence, speed, and cost.” On a per-million-token basis, Sol is priced at $5 for input and $30 for output; Terra at $2.5 / $15; and Luna at $1 / $6. As a direct comparison, Anthropic’s currently public flagship Claude Fable 5 is priced at $10 input and $50 output.

5、【Micron Increases Its US Investment Commitment to $250 Billion】On Thursday, Micron Technology announced that it has raised its commitment to domestic manufacturing and technology investments in the United States to more than $250 billion, an increase of $50 billion one-time compared with the earlier commitment of $200 billion. On the same day, the company also pledged to invest up to $3 billion to build a domestic semiconductor supply chain, provide $500 million in strategic financing to silicon wafer supplier GlobalWafers, and sign a 10-year long-term agreement.