Good morning and welcome to White House Watch! Let’s jump right into:

• A historic rearmament

• Zohran Mamdani’s NYC victory

• How oil traders bet on US-Iran

Nato secretary-general Mark Rutte can breathe a sigh of relief after the summit designed to win over Donald Trump did just that.

The 32 allies pledged to spend 5 per cent of their GDP on defence in a bid to keep the Nato-sceptic US president on side and willing to protect Europe should it be attacked.

But it was a rollercoaster to get there.

On his way to The Hague, Trump struck a nerve by questioning the “definition” of Article 5, Nato’s mutual defence pact, sparking speculation among summit attendees about how badly things could go when all the leaders met. 

The US president also caused a stir when he posted text messages from Rutte on social media. Everybody was talking about them at dinners and cocktail parties on Tuesday night, debating whether the secretary-general should have sent them, and if he knew Trump would post them.

Meanwhile, Spain broke ranks to get an exemption on the 5 per cent target, threatening to fracture the unity Rutte wanted on display. Trump noticed.

But the mood of the summit improved after Trump spent an evening with the king and queen of the Netherlands and was warmly received by his European counterparts. Some allies didn’t love Rutte’s fawning performance for Trump — whom he even referred to as “Daddy” at one point — but it ultimately kept the US president happy, two officials told the Financial Times.

Yesterday, Trump vowed to “stand with” the rest of the alliance and said the summit’s achievements were “tremendous”. Nato is “not a rip off, and we’re here to help them,” he said.

Still, he took a swipe at Spain, threatening to “make them pay twice as much” in tariffs as part of a US-EU trade deal, but it didn’t sour him as much as some had expected. Trump even had kind words for Ukrainian President Volodymyr Zelenskyy, and harsher ones for Russia: “Vladimir Putin really has to end that war,” he said. 

Though Nato avoided the worst-case Trump scenario, not everybody thought the alliance projected strength. 

Its communiqué didn’t “have the courage to take on political controversy and argument out of fear of being seen as weak”, Jim Townsend, former US deputy assistant secretary of defence for European and Nato Policy, told me.

“It doesn’t demonstrate the strength of its convictions. It comes across as cowardly.”

• The dollar sank to a three-year low this morning after a report suggested Trump was considering nominating the next Federal Reserve chair early.

• Democrats are wondering whether Zohran Mamdani’s stunning victory in the New York mayoral primary could offer the party a nationwide road map as it tries to chart a comeback after Trump’s 2024 win [free to read].

• Meanwhile, panicked Wall Street financiers are searching for a centrist challenger to Mamdani ahead of November’s mayoral vote.

• Trump said the US will hold talks with Iran next week and “may sign an agreement” on Tehran’s nuclear programme.

• The White House has insisted that Trump’s “big, beautiful bill” will cut the US debt as it pushes to win over fiscal hawks in the Senate and get the flagship tax bill over the line.

As soon as the war between Israel and Iran kicked off, oil traders began obsessively tracking the developments because of the potential risk to oil and gas flows in the region.

And once Iran launched its retaliatory missiles against the US’s biggest base in the Middle East after Trump got involved in striking the Islamic republic, oil traders responded super quickly — but by selling, not buying.

The price of Brent crude, the international benchmark, began to slide just seven minutes after Tehran’s first missiles, and within two hours, it experienced its sharpest daily drop in almost three years.

Oil markets usually surge at any sign of geopolitical strife, so the rapid sell-off caught many off guard. Turns out, those traders correctly concluded that the retaliation would cool tensions between the US, Israel and Iran, not inflame them.

They were fixated on the risk that Iran would block the Strait of Hormuz, through which one-third of the world’s seaborne crude passes each day.

“Everyone was focused on the Strait [of Hormuz] being shot at. As soon as it became clear that this was not going to happen, the risk premium came off,” Amrita Sen, founder of market intelligence company Energy Aspects, told the FT’s Malcom Moore, George Steer and Jamie Smyth.

Traders were also keeping an eye on satellite images of the US air base at Al Udeid in Qatar ahead of time: “It is all orchestrated, we know the base is empty. I knew from June 18 that the base was empty,” said Jorge Montepeque, an oil analyst at Onyx Capital Group, just after Iran’s attack began on Monday.

“We have watched this movie before.”

• Pilita Clark explores how the next financial crisis could unfold — and there’s plenty of Trump risk.

• Hanna Notte thinks the Israel-Iran conflict — and the US’s direct involvement — was unwelcome news for Russia, upsetting its strategic calculus in the Middle East and exposing the limitations of its power projection.

• By calling the Israel-Iran conflict “the 12-day war”, Trump is trying to “draw a definitive line under the fighting” and suggesting it will be “a reordering moment” for the region, similar to the six-day war of 1967, writes Gideon Rachman.

• The US’s bombing of Iran’s nuclear sites means Trump is certainly not the isolationist he purports to be, writes Janan Ganesh.

• As Trump claims Iran won’t ever rebuild its nuclear programme, Tehran isn’t likely to formally give up its right to enrichment, even if it does accept some limits, says Gary Samore, a former White House co-ordinator for arms control.