text: Good morning. Here’s your Early Warning for Wednesday, 13 July 2022.TODAY’S BRIEFING:READ TIME: 7 mins 13 secondsInside the BeltwayDomestic INTSUMGeostrategic INTSUMLow Intensity Conflict Activity Rollup & OutlookINSIDE THE BELTWAYWHITE HOUSE: President Biden is in Israel this week to discuss regional security issues. The White House has pitched increased ties between Israel and Saudi Arabia, and watchers expect that Biden could announce normalized relations between the two countries. Biden is scheduled to travel to Saudi Arabia at the end of the week. (Analyst Comment: The Biden administration had previously criticized the Saudis, going so far as to call them a “pariah.” This shift in U.S. foreign policy, away from the friendly era under the Trump administration, caused speculation and media reports back in March that the Saudis could begin selling oil priced in Chinese yuan, instead of the dollar. At the time, I said it could just be Mohamad bin Salman expressing his displeasure with the Biden administration, but it also signaled how fragile the “petrodollar” system is. Biden’s trip to Saudi Arabia appears, at least in part, to be an attempt to keep the petrodollar system alive. – M.S.)CONGRESS: House Permanent Select Committee on Intelligence Chairman Rep. Adam Schiff (D-CA) reintroduced an amendment to the National Defense Authorization Act that would eliminate Congressional oversight of military forces deployed inside the United States. (AC: Watchdogs say this amendment would block Congressional oversight of everything from border deployments to Capitol security efforts. – R.P.)DEFENSE: The USS Benfold, a guided-missile destroyer, sailed past the Paracel Islands, located in the South China Sea. China’s Southern Theater Command ordered the Benfold to leave Chinese territorial waters, which the U.S. describes as an international waterway.DOMESTIC INTSUMFOOD & AG: Yesterday’s USDA Crop Progress report showed improving yields for corn and spring wheat. As always, this is likely to change due to continued drought and extreme weather, however, analysts were surprised by increased corn acreage despite planting delays due to weather. – M.S.ENERGY: Speaking at the Sydney Energy Forum, International Energy Agency director Fatih Birol declared the first global energy crisis. Birol warned that increased demands and dwindling supplies will likely result in a crisis this winter as heating demands soar and the effectiveness of solar energy diminishes. The director stressed the importance of diversifying energy supply chains. (AC: In contrast to OPEC forecasts, the IEA declaration paints a far more realistic picture of the state of global energy markets gutted by the effects of Russian sanctions, global drought, and extreme heat, with overzealous applications of green energy initiatives. – R.P.)ECONOMY: In a note to clients this week, Morgan Stanley is warning of a softer earnings season on lower exports as the U.S. Dollar index is up 16% over the past year. “This could not be coming at a worse time as companies are already struggling with margin pressure from cost inflation, higher/unwanted inventories, and slower demand,” Mike Wilson writes. Richmond Federal Reserve Bank President Thomas Barkin echoed the sentiment, saying that he sees signs the economy is “definitely” weakening. Barkin added that U.S. consumers should expect “a lot of volatility” in inflation before the Fed can get it under control. Meanwhile, numbers out this morning show the Consumer Price Index is up 9.1% since last year, exceeding the consensus 8.8%. More importantly, CPI inflation accelerated to 1.3% month over month. We’ll have much more on economic, financial, and monetary conditions in tomorrow’s Economic Early Warning report.