Morning Brief: Tariff refunds widen U.S. budget gap as oil-supply and yen headlines stack up

Treasury Secretary Scott Bessent said on September 2 that the budget gap rose this year because of $70 billion in tariff refunds. The disclosure frames the wider deficit as partly a cash-return mechanism: importers and consumers receive money back, which can support discretionary demand even as the fiscal gap widens. The second-order effect is a wider fiscal deficit that may steepen the curve while providing a near-term lift to consumption.

Ukraine's prime minister said on September 3 that Russian strikes overnight damaged energy infrastructure. The report raised supply-disruption and retaliation risk, keeping an oil and refined-product risk premium in focus; it also pointed to potential refined-product and European gas price pressure. No confirmed WTI or XLE reaction accompanied the headline, with any energy-sector outperformance conditional on confirmation.

Separately, a report on BP's U.S. refinery lockout said the action signals a shift in corporate labor battles. The downstream labor dispute points to industry wage-cost and supply constraints, although the report did not confirm a production or margin impact. The lockout is the latest oil-supply-side headline in a session already focused on geopolitical risk.

A currency strategy note described a sharp yen jump in the previous session, potentially due to another intervention, that knocked the dollar across the board and left only currencies with positive domestic stories holding gains. It added that today's ISM services report is in focus and expected to flatten at 54.1, with a high bar to shift the Fed away from a September hike, especially for second-tier data.

The note retained a preference for dollar upside, citing front-end rates and higher energy prices, while flagging the risk that higher back-end yields can prompt more Treasury interventionism and a revamp of the debasement trade. It characterized any EWJ strength as a currency-translation move rather than local earnings strength.

Also on the data and policy calendar, euro area bank interest rate statistics for July 2026 were published, and Federal Reserve Board Chairman Warsh delivered keynote remarks at the 2026 Jackson Hole Economic Policy Symposium.