WSJ What’s News - Trump Pivots Back to Iran Diplomacy

Episode Date: August 3, 2026

A.M. Edition for Aug 3. President Trump’s latest walkback came just hours after saying he was prepared to launch the biggest attack since World War II, and as Gulf countries grow frustrated over a lack of a clear U.S. strategy to end the war. Plus, the Japanese Yen rises after Washington and Tokyo launch their first joint intervention in a generation after the currency fell to a 40-year low against the dollar. WSJ Tokyo bureau chief Jason Douglas breaks down the worries that drove Washington to get involved. And California’s Democratic Party endorses the state’s proposed billionaire tax. Luke Vargas hosts. Sign up for the WSJ’s free What’s News newsletter. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

As President Trump pivots back to diplomacy after toning down fresh threats to strike Iran, we'll look at one Gulf ally starting to question the logic of basing American troops on its territory. They like to have the U.S. there as a kind of visible deterrent, although it has to be said that it hasn't quite served that purpose in this conflict. Since the U.S. began the attack, it has turned it more into a target than a deterrent. Plus, the U.S. steps in to help Japan boost the weakening yen, and California's proposed billionaire tax gets a backing from the state's Democratic Party. It's Monday, August 3rd. I'm Luke Vargas for the Wall Street Journal, and here is the AM edition of What's News, the top headlines and business stories moving your world today. For the first time since the late 90s, Japan and the U.S. are intervening to boost the yen.

that is, after the currency hit a 40-year low against the dollar last month, a depreciation that had gathered steam as investors flocked to the dollar amid tensions in the Middle East. Given that the last time Washington and Tokyo worked in concert to buy up the yen was at the height of the Asian financial crisis in 1998, I asked Journal Tokyo Bureau Chief Jason Douglas if that means we're in a similar crisis point. The weakness of the yen, there's a bunch of factors behind it. Some of them are investor anxieties around things like fiscal policy, around debt levels in Japan around inflation, but there are also other factors. You mentioned the strong dollar. So,

you know, one thing we've seen a lot of is money fleeing Asia to go into AI stocks in the US, right? There's this colossal AI boom and that is a factor that's weighing on all Asian currencies and not just the Japanese yen. So the weakness has much more to do with these, you know, idiosyncratic factors that we're seeing at the moment. And there's no sort of sign of any broad crisis in the same way that there was in the late 1990s. While the yen is rising in response to the latest intervention. Jason told me that boosting the currency over the long haul won't be easy. The Japanese have intervened by themselves solo a couple of times over the last year or so, most recently in April and May, defending the yen. And what we saw was the end just drifted right

back to where it was before that. It's important to understand what modern currency interventions are for. I don't think it's right to think of them as definitively changing the direction of a currency. That's not really what this is about. Japan is a huge importer of oil and energy from the Middle East. it is a big problem for them if the yen sinks so far that it pushes up their import bill for energy. So by putting a floor on the yen, they're kind of putting a cap the price that they have to pay for energy at this moment, which is really important. To see a durable change in the direction of the currency, we probably have to see some changes in the Japanese economy. But as we see interest rates increase, if we see growth pick up, if we see some of the fruits of the investment plans that the current administration has in train begin to appear, then perhaps the end weakness won't be as profound.

President Trump has once again backed off ordering a major strike on Iran, just hours after saying he was prepared to launch the biggest attack since World War II. Instead, Trump was talked down by U.S. allies, including Saudi crown prince Muhammad bin Salman, who urged a de-escalation of the crisis. Iranian representatives reacted positively to a plan presented by Qatari mediators on Saturday to open the Strait of Hormuz, and oil prices are, lower today ahead of fresh U.S. Iran talks that Trump said could start this afternoon. At the same time, though, we report that behind the scenes, Gulf countries are growing frustrated

about what they see as a lack of a clear U.S. strategy to end the war that subjected them to frequent Iranian attacks and strain their air defenses. And the latest country to face such attacks is Kuwait, which was forced to shoot down an Iranian drone volley on Saturday. Since the Gulf War, Kuwait had viewed the basing of U.S. troops. in its territory as an important security deterrent. But as journal correspondent, David Cloud, joins me to discuss the country is waking up to some of the risks that come along with that American presence. David, I'll admit, I had forgotten just how large the U.S. footprint in Kuwait really is. And that's a key thing to keep in mind when you consider the degree to which Kuwait has

come under intense attacks since the start of the war. American troops just haven't been able to stop that. Yeah, they have come under a lot of attack. And the U.S. footprint is quite large. And really in the last month, Iran has stepped up its attacks against Kuwait, both against civilian targets in Kuwait and against the U.S. bases there. In fact, it's justified its attacks by saying that Kuwait is hosting U.S. forces and allowing the U.S. to use Kuwait as a launching pad for its attacks. The U.S. has air defense missile interceptor batteries there to protect the bases that they have. And so they have used those to shoot down, they say, a lot of the Iranian missiles and drones. And they've used fighters to do that as well.

But they've also moved, as far as we know, a good number of forces out of Kuwait already to protect them from these attacks. And the attacks have caused U.S. casualties. In one incident, Iranian missiles hit a U.S. facility at the port in Kuwait and killed six Americans, one of the largest single casualty events of the war so far. But it's also created a tension between Kuwait and the U.S., Kuwait's power facilities, desalination plants, ports, airports, buildings have been struck by Iranian missiles and drones, and it's created a lot of uncertainty about their security future. And we should also mention very early in the war, a Kuwaiti jet fighter had mistakenly downed several U.S. F-15s. Obviously, this is an accident, but sort of an

example of the fact that, you know, militaries can be in very close cooperation. And that doesn't rule out, though, that things can go very amiss when the environment gets very kinetic all of a sudden. That's true. It also highlights Kuwait's. alarm at suddenly being on the front lines of this conflict. I mean, for many years, Kuwait's major concern has been Iraq and has been another ground invasion from Iraq of the sort that they endured 1990 and 91 when they were invaded and occupied by Saddam Hussein. And for understandable reasons, that has been their concern. Not, it has to be said, a missile and drone attack from Iran, although Kuwait is also concerned about the threat from Iran.

But this war is unlike one that they had anticipated, really. I'm curious. Does this raise questions about the value of having the U.S. military in any given country going forward or for the U.S. for that matter of maintaining such a massive military footprint around the world? Basically, if any soldier asleep in a barracks is at risk of a drone attack, is this kind of diffuse force presence necessarily the approach we're going to see going forward? I mean, this war has raised that issue very starkly for the U.S. The U.S. has a string of bases along the Persian Gulf, and many of those bases, the personnel have been withdrawn because of the risk from Iran. For the Kuwaitis, that's a concern because they like to have the U.S. there as a kind of visible deterrent, although it has to be said that it hasn't

quite served that purpose in this conflict since the U.S. began the attack. It has turned it more into a target than a deterrent. So it highlights the changing nature of warfare very much. And the U.S. is thinking about how to re-revis its basing in the future, including drawing down its large presence in Kuwait. It's whether the U.S. perceives the risk of remaining in these bases in the Gulf as outweighing the dangers. And it's very possible that they will conclude that they don't want and can't afford as large a presence in these places as they've had for many decades and would find alternative arrangements. I doubt they will completely relinquish these bases because they still provide a presence and a reassurance to allies in the region that many of them want.

It would just be a question of adjusting force levels downward and not basing as many planes, ships and other gear there in the future. I've been speaking to Wall Street Journal correspondent David Cloud. David, thank you so much for the time and for bringing us this story. My pleasure. Coming up, Todd Blanche rescinds the president's anti-weaponization fund in a bid to smooth a vote on his confirmation. And the latest Spider-Man is a story.

certified blockbuster. We've got those stories and much more. After the break. Hundreds of homes around Spokane in eastern Washington State were destroyed by wildfires over the weekend in what the city's mayor called the worst natural disaster the region has faced. Thousands were forced to evacuate after three fires that started Saturday, quickly burned around 7,500 acres. Dave Up the Grove is Washington's commissioner of public land. More than 250,000 acres are on fire in this state. This is an extraordinary wildfire season in the Pacific Northwest. It's not a normal season.

A confluence of weather conditions, a confluence of fires throughout the West are stretching our resources and challenging the individuals in this response. While no deaths or injuries have been reported, given the size of the fires, authorities said that could change. Acting Attorney General Todd Blanche has signed an order to formally terminate a $1.8 billion anti-weaponization fund aimed at compensating President Trump's political allies. That's after Blanche said at a hearing last month that the DOJ wouldn't move forward with the fund, which was the subject of bipartisan outrage over the possibility that rioters who attacked the U.S. Capitol on January 6th, 2021 could be considered for payments.

The move follows weeks of negotiations with the United States. two Republican senators who've been blocking Blanche's nomination to formally take on the role of Attorney General. At the same time, the Justice Department appeared to address another demand of Senators John Cornyn and Tom Tillis by narrowing the scope of tax audit protections for the president. It isn't clear whether the Justice Department's new commitments are legally binding. The White House didn't immediately respond to requests for comment. Staying on Capitol Hill, Senate leaders have unveiled a short-term spending bill that would keep federal agencies funded past the mid-terms and into early December, with a vote expected this week ahead of the Senate's August recess.

Democrats note that the measure excludes a White House request for a billion dollars to build Trump-class battleships. It also differs from a similar measure passed by the House in which Democrats say they were able to include language that prevents the administration from transferring funds to the Border Patrol. California's Democratic Party has endorsed a proposed billionaire tax, delivering a victory to advocates before voters weigh in on the measure in November. That's after the proposal for a one-time 5% levy on the state's roughly 200 billionaires cleared a required 60% threshold at a meeting of party officials over the weekend. The proposal was initiated by a large health care union in a bid to offset the Trump

administration's deep cuts to health care funding. Our health care system is literally on the verge of collapse. That's Dave Reagan, president of SEIU United Healthcare Workers West, who spoke to ABC10. This is a common sense proposal. Nobody is offering another solution. The tax has sharply divided California's democratic establishment with Governor Gavin Newsom and gubernatorial candidate Javier Bacera among those publicly opposed.

So too are the California Medical Association and California Primary Care Association advocates who've backed a campaign against the proposed tax, calling it, quote, bad for our budget, bad for our economy, and bad for our future. In markets news, France's total energies has made a deal with Shell to buy four gigawatts of the British firm's renewables portfolio. Reporter, says that that bet primarily on solar, wind, and battery storage projects in Spain, Italy, and the UK, comes as fellow European energy firms head in a different direction.

And finally... Did you miss me, Spidey? I'm losing my mind. Sony Pictures Spider-Man, brand-new day, has just scored the second biggest film debut ever, raking in more than $900 million globally in its opening weekend. Starring Tom Holland, the Blockbuster, is positioned to surpass the year's other top hits, including Christopher Nolan's The Odyssey, which has grossed about the same as Spider-Man after three weekends in theaters. A series of action hits are propelling Hollywood to its best year since the pandemic,

with North American box office sales up 15% so far this year to $6.2 billion. And that's it for What's News for this Monday morning. Additional sound in this episode was from Reuters. Today's show was produced by Hattie Moyer. Our supervising producer was Daniel Bach, and I'm Luke Vargas for the Wall Street Journal. We will be back tonight with the news show. And until then, thanks for listening.