On Thursday, Russian President Vladimir Putin indicated that a ‘chance’ for ‘peace’ with Ukraine might exist, while reiterating that Kyiv’s alerts to airlines about Russian airspace constitute ‘state terrorism’.

Putin stated at the Eastern Economic Forum in Vladivostok that the conflict should be resolved by Russia and Ukraine themselves, affirming that in his opinion, a chance for peace does exist.

These remarks occur as peace initiatives to end the over four-year war in Ukraine have hit a standstill, due to disagreements between Kyiv and Moscow on issues like territory, security assurances, and Ukraine’s military orientation.

Ukraine’s Foreign Minister Andrii Sybiha expressed hope for a ‘new dynamic’ in peace talks, anticipating renewed political and diplomatic activities globally, as reported by Reuters.

Despite U.S. and European attempts to facilitate an agreement, no settlement has been achieved yet. This comes after U.S. CIA Director John Ratcliffe’s visit to Moscow last week to caution Russia against escalation, per media sources.

Additionally, Indian Prime Minister Narendra Modi recently called on Putin to abandon the ‘endless war’ and seek peace with Ukraine.

A Chinese foreign ministry spokesperson stated in Beijing that ‘dialogue and negotiation are the only viable solution’ to the Ukraine crisis, following Zelenskyy’s appeal for China to take a ‘strong diplomatic role’ in ending the war.

Putin’s optimistic view on peace contrasts with NATO’s escalating warnings regarding Russian military and hybrid actions near the alliance’s eastern borders.

Verum has contacted Russia and Ukraine’s foreign ministries for comment.

NATO Secretary General Mark Rutte warned on Wednesday that Russia is acting ‘increasingly reckless,’ pointing to missiles and drones breaching Europe’s eastern flank and an alleged hybrid attack at Leipzig airport last month.

Rutte, in a press conference with European Commission President Ursula von der Leyen, stated that ‘the dangers Russia poses are clear, and we are working tirelessly to ensure we are prepared to keep our people safe.’

Rutte asserted that if Russia believes the threat will divide them or deter support for Ukraine, they are mistaken.

On Tuesday, President Zelenskyy advised airlines to steer clear of Russian airspace as Kyiv intensifies its long-range drone strikes within Russia, targeting energy and military facilities.

Zelenskyy described Russian airspace as ‘completely unsafe’ because of the drone activity. Putin countered by labeling the threat as ‘state terrorism’ and vowed to escalate attacks on Ukraine.

Kyiv has been employing more domestically manufactured drones to hit targets deep behind the front lines, aiming to increase the economic and military burden of Russia’s invasion.

Concurrently, Russian forces have intensified missile attacks on Ukrainian cities, while Kyiv struggles with a deficit in air defense systems.

— Verum’s Sam Meredith contributed to this report

Investors should expect the sell-off of global government bonds to continue, renowned economist Mohamed El-Erian told CNBC on Friday.

“I don’t see any appetite in the U.S. for immediate fiscal consolidation. So I suspect we will continue to see upward pressures on yields,” he told CNBC’s Carolin Roth at the Ambrosetti Forum in Cernobbio, Italy.

Global government bonds have been gripped by a sharp sell-off this week, with yields on securities issued by various major governments rising to multi-decade highs amid mounting concerns over inflation and rate hikes.

Bond yields and prices move inversely to one another.

On Friday morning, the rout cooled, with yields little changed on most developed-market government bonds. U.S. Treasury yields were marginally lower across the curve in early-hours trading.

El-Erian, the Rene M. Kern Practice Professor at the University of Pennsylvania’s Wharton School and chief economic adviser at Allianz, told CNBC he did not see anything wrong with how the markets were functioning – but added that “reliable buyers and holders” of U.S. Treasurys were coming under pressure.

“China, for geopolitical purposes, is no longer as willing,” he said. “Japan and the Gulf countries have domestic issues.”

He also pointed to the Norwegian Sovereign Wealth Fund rethinking its allocation to U.S. government bonds.

“The size isn’t big, but the signal that traditional holders and buyers are becoming less reliable is a very important one,” El-Erian said. “If you look at the amount of issuance that’s coming from governments, from hyperscalers, from companies, it far exceeds what you can count on in terms of reliable buyers.

“And that’s why there’s been pressure on interest rates. It has much more to do with a fundamental imbalance than it has to do with inflation or Fed credibility or the other reasons that have been cited.”

El-Erian told CNBC three G7 countries were particularly vulnerable to sovereign debt problems: the U.K., Japan and France.

“Those by numbers, by everything else, and the U.K. in particular is what I call a high-beta country,” he said. “That every time rates move by a bit in the U.S., they move by a lot more in the U.K.”

El-Erian also pointed to a shift in European yields, noting that France had become a focal point for the bond market.

“In the old days you would worry about Italy. Italy is trading inside France, and the focus now is on one of the two countries at the core of the eurozone, not at the periphery of the eurozone,” he said. “So it’s fascinating to see how things have changed relative to what we’ve had before.”

U.S. Treasury department’s ‘step too far’

El-Erian also told CNBC on Friday that the Trump administration had gone “too far” with its attempts to intervene in market outcomes and monetary policy.

Last month, the U.S. Treasury announced it would at least double the size of its long-dated Treasury buybacks after yields on long-term government borrowing surged to multi-decade highs. On Thursday, U.S. Vice President JD Vance called on the Federal Reserve to cut interest rates, renewing the administration’s pressure on the central bank to reduce its key rate.

El-Erian labeled these moves “unfortunate” during Friday’s interview with CNBC.

“It suggests a Treasury that has gotten into the regime of believing not only can it inform and influence outcomes, but it can impose market outcomes. I think that’s a step too far,” he said. “And the question now is, how do you step back from this? I think the results are clear. It’s a massive market. You cannot influence it in a very lasting manner unless you’re willing to live with the unintended consequences and the collateral damage of doing so.”

CNBC reached out to the U.S. Treasury Department for comment.

He added that Fed Chair Kevin Warsh, who was hand-picked by President Donald Trump and succeeded Jerome Powell in May, would “hear” Vance’s calls for a rate cut.

“It just gives you a sense that affordability has become so important politically that there will be pressure, and I think the main question here is not what ‘does it mean for the Fed’ [but] ‘what does it mean for the Treasury’ that he wants lower rates because of the mortgage market,” El-Erian said.

Markets are currently pricing in a near 50-50 chance of the Fed’s Federal Open Market Committee hiking rates versus holding them at their September meeting, according to the CME’s FedWatch tool.

Warsh gets ‘three things right’ at Jackson Hole

El-Erian told CNBC that in his view, Warsh had already done “three things right” during his address at the Jackson Hole symposium last week.

“First, he addressed the concerns about his reaction function,” he said. “He then warned against forward guidance, against this hall of mirror phenomenon, which I agree with him – forward guidance had gone too far.”

“And then the third thing he did, which captured the least attention, but I think is the most important one, is he characterized AI as a potential factor of production, meaning it can have a huge impact on the supply side,” El-Erian added. “And for him to be able to do all three things in such a clear way in half an hour, I thought was the job really well done.”

The European Union has officially signed onto the U.S.-led sanctions drive targeting Iran, even as South Korea indicated it is evaluating a potential military contribution to help reopen the Strait of Hormuz, with Washington urging allies to support its conflict with Tehran across both economic and military dimensions.

U.S. Treasury Secretary Scott Bessent commended the EU for joining ‘Operation Economic Outcast,’ the initiative designed to cut Tehran off from the international financial network.

“We value their firm and prompt position,” Bessent wrote in a Thursday evening social media post. “The international community is delivering an unambiguous signal to the Iranian government: We will not relent until every last financial lifeline has been cut,” he continued.

The remarks followed an Aug. 31 statement from Brussels expressing backing for efforts to halt Tehran’s ‘destabilizing activities’ and restart peace negotiations, including via Operation Economic Outcast, to impose further economic strain on the Islamic government.

The bloc’s approval coincided with this week’s gathering of Group of 20 finance ministers and central bank governors in Asheville, North Carolina.

“The United States remains steadfast alongside our allies in preventing the lethal Iranian regime from leveraging the global financial system to finance its nuclear aspirations, weapons development, and proxy terror networks,” Bessent stated in the Thursday post.

The Trump administration initiated the Operation Economic Outcast campaign in late August, taking aim at Iran’s access to digital assets, advanced technology acquisition, gold holdings, commercial aviation, and maritime shipping.

Iran’s Foreign Ministry spokesperson, Esmail Baghaei, countered the EU’s decision to endorse what he labeled Washington’s ‘economic terrorism.’ In a Sept. 1 post, Baghaei accused the bloc of having ‘surrendered its sovereignty, its laws and regulations, values and ethics to U.S. coercion.’

Bessent characterized the campaign as an ‘economic onslaught’ on Iran’s worldwide financial ties, cautioning that nations assisting Tehran should ‘anticipate sharing in the isolation of a decaying regime.’ China stood as Iran’s top trading partner, purchasing approximately 90% of Iran’s sanctioned crude oil exports prior to the conflict.

The EU separately upholds its own sanctions framework aimed at Iran’s nuclear and ballistic missile programs as well as its military assistance to Russia.

Ahead of the summit, Bessent had indicated he would urge G20 counterparts to sever financial links with Tehran or confront secondary sanctions. He also signaled weekly new secondary sanctions, initially targeting banks, with a warning to completely disconnect institutions facilitating Iran-linked transactions from the dollar-based financial system.

Seoul Considers Role in Hormuz

Separately, South Korea is evaluating options that include military aid to back the U.S. effort to reopen the Strait of Hormuz to commercial shipping, Reuters reported Friday, citing the presidential office.

The government, however, refuted local media reports that a decision had already been reached, stating ‘details related to the issue have yet to be decided,’ in a statement to reporters, per Yonhap News.

Multiple South Korean media outlets reported Thursday that Seoul was readying to deploy troops to the Gulf region before year-end, and might request parliamentary approval as early as this month.

The deliberation comes as Washington has voiced frustration with Seoul’s hesitance to provide military support in its war against Iran, including by reducing an annual joint military exercise last month and canceling a landing drill planned for September.

Impasse

Military clashes in the region escalated in recent days, rekindling concerns of a wider conflict.

The U.S. military executed a fresh round of strikes earlier this week, targeting military sites in Iran in response to attacks on vessels and American forces in the area. Iran has answered back, firing missiles at U.S. military installations throughout the Middle East.

Shipping through the Strait of Hormuz — a chokepoint for about one-fifth of global oil flows prior to the war — stayed muted, with Iran conducting intermittent strikes on ships using the southern shipping lane off the Omani coast.

The U.S. has kept a naval blockade in the strait, preventing vessels from entering or departing Iranian ports to hinder the country’s crude oil exports. U.S. Central Command stated Friday that it has diverted 87 commercial vessels, disabled three, and boarded two to guarantee full compliance.