by Patrick Fearon-Hernandez, CFA, and Thomas Wash

[Posted: 9:30 AM ET] | PDF

Our Comment today opens with a new release of crude oil reserves by the top industrialized countries. Of course, the move is geared toward trying to bring down energy prices as reports suggest the recent rebound in oil shipping through the Strait of Hormuz may be going in reverse. We next review several other international and US developments that could affect the financial markets today, including an unexpectedly strong performance by the main right-wing candidate in Brazil’s first-round presidential election yesterday and another big spending vow in the US.

Global Petroleum Markets: The Group of 7 (G7) leading industrialized countries on Friday agreed to release 100 million barrels of crude oil and diesel fuel from their strategic reserves to combat the surge in energy prices due to the US-Israeli war against Iran. The release is set to take place over four months, starting immediately, including a substantial diesel release frontloaded within the first 20 days. It’s not clear how much the new release might help bring down prices, but the US allies’ acquiescence to the plan could cut the risk of a US ban on diesel exports.

• Separately, reports over the weekend say Iran has again found a way to attack oil tankers trying to pass through the Strait of Hormuz, striking at least seven vessels over the last week.
• While the US Navy and allied governments in the region had been able to largely shut down Iran’s attacks and boost oil shipments last month, the new attacks could well disrupt global energy supplies again and push oil prices higher. As of this morning, however, oil prices are little changed on the day, with near Brent crude futures trading at $102.68 per barrel.

US Politics: President Trump said in a social media post late Friday night that his administration will begin sending out $90 checks to nearly 20 million Medicare participants to help them pay for their Part B premiums. The checks, or direct deposits, could arrive as early as this week. The promise follows an earlier move to pay $500 to about 1 million Obamacare users for “overcharges” and a vow to pay $5,000 to every adult citizen if the Republicans retain control of both the House and the Senate in the midterm elections.

• With the federal budget deficit already widening dangerously due to ramped up spending and tax cuts, the cash payments could significantly worsen the situation if they are all implemented.
• The cash payments are likely aimed at winning votes for Republicans in the midterm elections, although the bulk of the opinion polling today still points to the Democrats taking control of at least the House.

US Artificial Intelligence Industry: After OpenAI late last week notified more than 100 organizations that its AI agents had accessed their systems during pre-deployment testing, analysts over the weekend began to focus more heavily on the legal risks the firm faces because of the intrusions. As we have noted before, popular perceptions that AI is dangerous and uncontrollable could be one factor that takes the wind out of the current AI investment frenzy. Associated legal risks could also undermine investor faith in the leading AI companies.

• We have also identified other elements of the evolving AI landscape that could put the AI frenzy into reverse.
• These other issues include the strong competitive threat from Chinese open-source models and domestic US pushback against the data-center construction needed to run AI.

US Insurance Industry: According to the Wall Street Journal today, Sens. Elizabeth Warren (D-MA) and Josh Hawley (R-MO) have asked six of the biggest property insurers for data and explanations related to customers’ increasing risk of receiving no payment at all. The request follows an investigation by the newspaper earlier this year that showed insurers are refusing to pay anything on a rising share of claims. The senators’ move could potentially lead to tighter regulation, increasing costs, and lower profits for the industry.

Russia-Ukraine War: Planning documents show the Kremlin will boost its 2027 military budget to the equivalent of $205 billion, up approximately 40% from 2026 and almost 400% higher than in 2021, the year before it launched its war against Ukraine. The plans foresee only a slight reduction in spending in 2028. Taken together, the figures suggest President Putin intends to double down on his attack and sustain it for the long term if necessary. In turn, that will keep  alive the risks to European security and global fuel supplies.

Russia: The White House has announced it is monitoring reports of an accident at an anti-plague research facility in Siberia in which a researcher reportedly contracted the disease and died. Russian officials subsequently imposed quarantines on several research facilities in the region. Given the enormous social and economic costs of the coronavirus pandemic, any sign that the plague has gotten out of control and is spreading would likely rattle financial markets, at least in Russia and potentially globally.

China-Vietnam: New satellite imagery shows China is making substantial progress on a military runway it’s building on the disputed Antelope Reef in the Paracel Islands. The reef is also claimed by Vietnam, which has lodged diplomatic complaints over the airfield construction. China’s continued territorial aggression in the South China Sea is added evidence that Beijing is taking advantage of the “constructive strategic stability” that President Trump and General Secretary Xi agreed to in May to keep advancing its geopolitical strength.

France: High school students across the country have staged mass demonstrations and riots in recent days to protest overcrowded facilities, crumbling infrastructure, and under-investment in education. The protests have led to some 3,000 arrests and resulted in dozens of schools being set ablaze. Importantly, top officials and far-right leaders have said there is evidence that the protests were instigated by hard-left firebrand Jean-Luc Mélenchon. If that is the case, it could weaken Mélenchon’s party in next year’s national election and ensure a centrist-far right contest.

Spain: Socialist Prime Minister Sánchez, who has led a left-wing minority government since 2023, today called snap parliamentary elections on November 29 to capitalize on popular anger over high housing prices and the right-wing opposition’s success last week in blocking legislation to address the problem. However, the decision is a major gamble, as right-wing parties are currently leading opinion polls in large part because of a popular perception that the prime minister’s immigration policies are too lax.

Brazil: In the first round of Brazil’s presidential election yesterday, preliminary reports show right-wing Sen. Flávio Bolsonaro came in first with 47.3% of the vote, short of the 50.0% needed for an outright victory but ahead of incumbent left-wing President Luiz Inácio Lula da Silva. That sets up a runoff between the two on October 25. If Bolsonaro wins that election as well, he would likely bring Brazil’s foreign and domestic policies much more in line with those of the US administration, which could boost Brazilian stock prices.

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by Patrick Fearon-Hernandez, CFA, and Thomas Wash

[Posted: 9:30 AM ET] | PDF

Our Comment opens with our outlook on the upcoming Brazilian elections this weekend. Next, we provide an update on Iran, examining the president’s plan to deploy additional troops to the region. We then briefly cover the ongoing war in Ukraine and the EU’s proposal to release strategic diesel reserves into the market. As always, we conclude with a review of recent domestic and international economic data.

Brazil Elections: South America’s largest economy is set to hold elections this weekend, setting the tone for the country’s future relationship with the United States. In a crowded field, incumbent left-wing President Luiz Inácio Lula da Silva is expected to advance past the first round against Flávio Bolsonaro, the right-wing candidate and son of former president Jair Bolsonaro. The race highlights the intensifying rivalry between the US and China, both of which are actively competing for resources across the continent.

• While both frontrunners are expected to comfortably clear the first round, the general election remains a tight contest with no clear favorite. Recent polling shows a competitive race, with Luiz Inácio Lula da Silva holding a narrow three-point edge over Senator Flávio Bolsonaro in a potential runoff. However, prediction markets lean toward Bolsonaro, giving him approximately a 60% chance of winning the presidency.
• Washington is keeping a close eye on Brazil’s high-stakes election. US President Donald Trump has publicly expressed interest in the vote, maintaining close ties with the Bolsonaro family after supporting former president Jair Bolsonaro and later criticizing his judicial prosecution. Tensions have mounted following reports of a proposed $1 million US grant intended for civil society groups opposed to the Brazilian judiciary, prompting local allegations of external interference.
• The White House’s support for Bolsonaro comes as incumbent Lula maintains a cooler stance toward closer diplomatic and economic ties with Washington, particularly regarding Brazil’s vast natural resources. While Lula has stated that Brazil is open to US investment in its world-class rare earth mines, he has rejected granting exclusive access or playing favorites. In contrast, Bolsonaro has shown a far greater willingness to align closely with Washington’s strategic and commercial interests.
• Although a decisive first-round winner is unlikely this weekend, the vote should provide key momentum indicators for a prospective late-month runoff. A victory for Bolsonaro could spark a rally in Brazilian equities as market participants anticipate greater fiscal discipline from the conservative candidate, along with expanded US investment and trade incentives.

Iran Tensions: The US is preparing to escalate tensions with Iran after negotiations stalled. According to a new report, Washington plans to deploy an aircraft carrier carrying more than 10,000 troops, a move that would give the president more options should he decide to ramp up attacks on Iran. This follows the US decision to expel Iranian delegates over a lack of progress in talks. A broadening conflict would further add to market uncertainty.

• The decision to send more troops follows a threat by President Trump that he is prepared to resume strikes after the midterms in November. The ships have already left their ports and are expected to carry sailors as well as marines in what will be the largest deployment the US has launched since the conflict began in February. The ships appear to be preparing for a possible amphibious operation, which suggests there is a possibility of troops on the ground if the president gives the order.
• In the days leading up to the midterms, there are growing concerns that Iran may be broadening its attacks. On Wednesday, the UK prime minister stated that a security incident at a military base in September may have been linked to Iran. At the same time, Trump has also asserted that a recent attack by a copilot on a flight from Dubai to Israel may also have Iranian ties. While none of these links have been proven, if true, they could add another layer to the conflict.
• The US deployment to the Strait of Hormuz could loosen Iran’s grip on the waterway. Although trade flows through the strait have remained subdued since the conflict began, the US has managed to escort a limited number of ships safely through. A larger US troop presence in the region should therefore enhance stability, helping to secure the strait, allow more ships to transit, and ultimately ease pressure on energy markets.

Ukraine War: Russia appears to be escalating its war effort in a bid to shift momentum on the battlefield. Ukrainian President Volodymyr Zelenskyy accused President Vladimir Putin of instructing Russian military leaders to abandon the rules of war. The warning comes amid a grinding stalemate, with both nations carrying out reciprocal strikes on critical infrastructure. Zelenskyy’s comments suggest that hostilities could intensify significantly in the coming weeks.

Diesel Prices: The EU is weighing a release of its strategic reserves of diesel to help bring down global prices under pressure from Washington, which has threatened to ban exports to Europe if it does not act. The push comes as tightening supply has driven diesel prices sharply higher. A release would likely ease inflation pressures and reduce, though not eliminate, the risk of shortages should the conflict drag on.

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by Patrick Fearon-Hernandez, CFA, and Thomas Wash

[Posted: 9:30 AM ET] | PDF

Our Comment opens with our thoughts on whether the unwinding of the yen carry trade may be contributing to rising bond yields. We then turn to monetary policy where we examine White House efforts to push former Fed Chair Jerome Powell out of the central bank. Next, we briefly cover a potential partnership between the EU and Canada, South Korea’s planned investment in Alaska, and a failed Senate effort to make data centers pay for their own grid costs. As always, we conclude with a review of recent domestic and international economic data.

The Yen Carry Threat? The yen may be playing a bigger role in the global bond market than investors realize. While the market has attributed the recent rise in global bond yields to the war in the Middle East and the AI boom, noted economist Ed Yardeni points instead to an unwinding of the yen carry trade driven by rising Japanese policy rates. If he is right, his theory may help explain why the US Treasury has intervened in both the currency and bond markets and offer clues as to where yields may head next.

• Earlier this week, Yardeni suggested that a potential catalyst for the rise in bond yields was the Bank of Japan’s decision to raise its policy rate above 1% for the first time since 1995. In his view, the hike set off a structural unwinding of the yen carry trade, in which investors borrow cheaply in yen and invest the proceeds in higher-yielding assets abroad. The trade has been a cornerstone of global markets and a key source of liquidity for years, but that role may now be at risk as Japan tightens policy to curb inflation.
• Recent actions by the US Treasury Department also suggest a possible connection. This year, the department has coordinated with Japan on yen support operations, including open-market purchases of the currency, and it has also conducted buybacks of US government debt. Treasury Secretary Scott Bessent’s suggestion that he possesses nonpublic information about the outlook for the yen and bond markets may further signal his intent to prevent a disorderly unwinding of the carry trade.

• The potential unwinding of the yen carry trade may be more of a global story than a US one. The US 10-year Treasury yield has risen roughly 80 basis points, while 10-year gilt, Bund, and OAT yields have also increased materially. The breadth of these moves suggests the yen carry trade may have helped keep global bond yields low, and its unwinding may now be contributing to a global bond sell-off.
• If the rise in global bond yields partly reflects an unwinding of yen-funded carry trades, then bond markets could become increasingly sensitive to further Bank of Japan tightening. Conversely, a slower pace of BoJ normalization could provide some near-term relief by easing pressure to unwind those positions. However, other factors, including Middle East tensions, rising debt burdens, and the risk of overheating from the AI buildout, will also likely play an important role.

Fed Pressure: In its ongoing effort to shape central bank policy, the White House directed Attorney General Todd Blanche to review a report clearing former Federal Reserve Chair Jerome Powell. On Wednesday, the Fed’s internal watchdog finalized its review of the headquarters renovation, finding no evidence of criminal intent or misconduct. The move underscores the administration’s persistent push to counter what it sees as political bias at the Fed.

• The decision to scrutinize the watchdog’s findings follows the report’s highlight of significant management deficiencies. According to the evaluation, key missteps, including proceeding well into construction without a total cost estimate or a guaranteed maximum price, drove the renovation’s total cost from $1.3 billion to $2.4 billion. Despite these operational failures, the report concluded there was no evidence of administrative misconduct or federal criminal violations.
• While the report likely falls short of providing the president legal grounds to fire Powell or force him off the Federal Reserve Board, the administration appears undeterred. Following the report’s release, the president argued that former Fed Chair Powell remains responsible for the cost overruns. Consequently, he has directed Attorney General Blanche to explore whether the government can hold Powell accountable through the courts, potentially via a civil lawsuit.
• White House pressure to remove Powell likely underscores its broader intention to replace Fed officials it does not trust. Over the past two years, it has targeted former Chair Jerome Powell, Governor Lisa Cook, and former Vice Chair for Supervision Michael Barr. Removing them would create additional opportunities to appoint officials more aligned with the administration’s agenda, including a potentially greater willingness to delay or soften monetary tightening.
• Although previous White House pressure on the Fed has weighed on the dollar, market sentiment appears to have shifted since the Fed raised rates in September. The dollar’s muted response suggests that investors have greater confidence in the central bank’s willingness to set policy independently of political influence. As a result, future White House attacks on the Fed could have a smaller effect on markets.

EU-Canada: The European Union and Canada are expected to unveil a broad new partnership at their summit next month. The agreement is expected to cover digital trade barriers and critical raw materials as well as joint support for Ukraine. A deal would deepen ties between the two sides as they seek to reduce their dependence on the US and strengthen their leverage in trade negotiations with Washington. The move could provoke a backlash from the White House against the EU as the president has viewed other similar actions as meddling.

Alaska Investment: President Trump announced plans for South Korea to invest in a liquefied natural gas project in Alaska. The move comes as South Korea seeks to meet its investment commitments under last year’s trade agreement with the US. While no timeline has been set for the project and the funds have not been formally approved, the announcement suggests the US economy could see additional investment from reshoring efforts following the trade talks.

Data Centers: The US Senate failed to advance legislation that would encourage data centers to bear the cost of the grid upgrades needed to serve them. Lawmakers who voted against the measure said it did not go far enough, since it would not require data centers to cover those costs. However, the failure has also been attributed to Democrats’ reluctance to hand a vulnerable Republican senator a win ahead of the midterms. The broad support suggests that data centers could face rising costs in 2027.

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by Patrick Fearon-Hernandez, CFA, and Thomas Wash

[Posted: 9:30 AM ET] | PDF

Today’s Comment opens with our thoughts on the recent level of spending by AI companies. We then examine whether the United Kingdom may be considering rejoining the EU. Next, we briefly cover White House talks on AI oversight, concerns about a short squeeze in Treasurys, and a plane incident that could potentially escalate tensions in the Middle East. As always, we conclude with a review of recent domestic and international economic data.

AI Fundraising: AI providers continue to seek massive financing to build out their computing capacity. On Tuesday, Reuters reported on a leaked IPO prospectus for Anthropic, revealing that the company’s aggressive expansion will significantly increase overall costs and potentially delay its path to profitability. Meanwhile, OpenAI is also considering another round of equity issuance to boost its valuation and raise funds for its own expansion. The push by these two companies for additional capital highlights the growing scale of the global AI buildout.

• Anthropic’s recent prospectus reveals the company continues to incur heavy losses, even as it targets a valuation of $2 trillion. According to the document, the AI developer posted a net loss of $42 billion in 2025 and plans to spend $518 billion on cloud computing and infrastructure over the coming years. Despite these staggering costs, strong revenue growth sustains expectations that the company could transform society on par with the Industrial Revolution and the internet.
• OpenAI is also looking to raise funds, although its IPO is expected to follow Anthropic’s. In its latest funding round, the company aims to raise $30 billion in new capital, which would value it at $1.4 trillion. While OpenAI boasts strong revenue, it faces challenges similar to Anthropic; recently, the ChatGPT maker decided to postpone going public this year while it addresses rising safety concerns surrounding AI.
• Spending on artificial intelligence is scaling at an unprecedented rate. According to The Wall Street Journal, this infrastructure build-out is projected to reach 3.6% of GDP from 2025 to 2032, dwarfing past projects. By comparison, the telecom and fiber expansion during the dot-com bubble accounted for less than a third of that. The investment has grown so massive that spending on information-processing equipment has already surpassed residential housing investment this year.
• The constant capital requirements of AI companies remain a major market factor that increasingly threatens to crowd out other sectors of the economy. This astounding level of spending feeds concerns that it could overheat key economic sectors, potentially pushing bond yields higher across the board. While the infrastructure build-out will likely benefit tech and related industries, persistent borrowing costs could create broader economic headwinds.

Brexit Redo? Nearly a decade after leaving the EU, the UK is considering rejoining the bloc. Prime Minister Andy Burnham has stated that he plans to review the country’s European policy, with his push to rejoin coming as he prepares for new elections in the upcoming year. This decision coincides with other radical proposals under consideration, such as potentially higher taxes to fund social spending. While any reversal of Brexit is far from certain, it could signal what the EU might tolerate from countries seeking to return to the fold.

• Burnham’s push comes as he plans to hold talks with his EU counterparts this autumn at a summit focusing on ways to help promote British companies within the EU bloc. This shift marks a major U-turn for the Labour Party, which in 2024 established strict red lines on the EU, including promises not to rejoin the customs union, the single market, or return to free movement.
• The policy shift comes as the party appears to be pursuing a broader strategic rebrand amid rumors that it is considering early elections. Although Burnham has denied plans to call a new vote, his proposed agenda would almost certainly require a fresh electoral mandate. Beyond rejoining the EU, he has floated tax increases to fund social spending and electoral reforms intended to make it harder for divisive political forces to gain power.

• Since taking over the party in July, Burnham has overseen a rise in Labour’s public support, lifting it to the top of UK opinion polls. The party’s gains have coincided with a steady decline in support for Reform UK, suggesting that Labour may be attracting more moderate voters. If that trend continues, particularly if Labour’s gains increasingly come at Reform’s expense, it could strengthen the case for an early election.
• That said, the potential for the UK to rejoin the EU could help restore confidence in the region as well as make it more politically stable. Since Brexit, the country has cycled through seven different prime ministers. Additionally, a new election could shore up public support for the potential tax hikes, which would ease the country’s debt burden and make its bonds more attractive to investors. The major downside, however, is that the country would have to submit to burdensome EU regulations.

AI Oversight? The White House hosted a meeting with AI executives to discuss regulating the safety risks associated with the technology. Following the discussions, officials announced that industry leaders will self-regulate — a move indicating the administration currently plans to minimize federal oversight. This lighter regulatory approach should make it easier for AI companies to innovate with fewer restrictions, providing a boost to the sector.

Crowded Short: The growing push by investors to offload Treasurys could leave them vulnerable to a rug pull if confidence begins to shift. These concerns come as more investors are betting on higher interest rates following signs that the economy is overheating. As a result, this week’s jobs report could squeeze those investors if it comes in weaker than expected. Such bets may also incur the wrath of US Treasury Secretary Scott Bessent, who has made clear he will penalize investors who stray from market fundamentals.

Plane Attack: A plane heading to Israel was forced to make an emergency landing following a scuffle that left the pilot and co-pilot injured. While nothing has been verified about what took place during the incident, a person who claims to have been on the flight said that an attacker stabbed the pilot. At this time, the facts are still being gathered; however, Israeli Prime Minister Benjamin Netanyahu did hold an emergency meeting. The incident is being investigated as a security matter and could raise tensions in the Middle East if deemed a terrorist attack.

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by Patrick Fearon-Hernandez, CFA, and Thomas Wash

[Posted: 9:30 AM ET] | PDF

Our Comment today opens with an update on the war in Iran, where new data shows the US and its Gulf allies are having more success in getting oil shipments through the Strait of Hormuz. We next review several other international and US developments that could affect the financial markets today, including the planned expansion of a major Canadian natural gas export facility and a decision by US artificial intelligence firm OpenAI to delay the release of its latest frontier model over safety concerns.

United States-Israel-Iran: New analyses from energy data firms such as Kpler show the flow of crude oil through the Strait of Hormuz and bypass routes has rebounded to 13 million barrels per day compared with roughly 20 million bpd before the US and Israel launched their war against Iran. The improved shipping conditions come as the US Navy and regional allies get better at protecting ships in the waterway from Iranian drones, missiles, and mines.

• The news has helped push global oil prices lower so far today. As of this writing, near Brent crude futures are trading hands at about $96.84 per barrel, down 1.0%.
• All the same, as the improved oil flow undermines Iranian leverage in the conflict, it’s becoming more likely that Tehran will lean more heavily on its regional proxies in Iraq, Yemen, and elsewhere to try to shut down the Red Sea’s Bab al-Mandeb or attack the energy facilities of US allies in the region. In our view, the conflict continues to present a risk to global energy supplies, the global economy, and financial markets.

Canada: Shell and the four other firms in the country’s flagship LNG Canada consortium have said they will double the capacity of their liquefied natural gas export facility in western Canada to 28 million tons per year, equal to India’s annual LNG imports. The move aims to capitalize on the way that countries around the world want to diversify their energy supplies due to the war in Iran and greater geopolitical tensions elsewhere. It also aims to reduce Canada’s dependence on exports to the US and make the country one of the world’s top five LNG exporters.

Germany: Many of Germany’s key industrial firms have reportedly begun to stockpile critical minerals that China might embargo in a prospective European Union-China trade war. Concerns about such a trade war have been rising since EU trade chief Maroš Šefčovič warned that Brussels would restrict Chinese imports into the EU if no trade deal is reached when he visits Beijing in early October. Some firms have built up enough inventory to keep production going for many months, but others are far behind, prompting one official to say the situation is “very tense.”

• We have long believed that countries and companies around the world will resort to this kind of stockpiling or hoarding as geopolitical tensions rise, global fracturing worsens, and international supply chains come under threat.
• Over time, the rush to secure large inventories of key commodities is likely to drive up global prices and push bond yields higher.

Australia: The Reserve Bank of Australia today hiked its benchmark short-term interest rate by 25 basis points to 4.60%, the highest rate since October 2011. Echoing the concerns of many other major central banks that have recently hiked interest rates, RBA policymakers cited persistently high consumer price inflation. However, RBA Governor Michele Bullock refused to say if more rate hikes would be coming in the future. In response, the Australian dollar has weakened about 0.5% against the US dollar so far today.

Turkey: President Erdogan this week is struggling to contain an $18 billion stock market scandal involving an alleged Ponzi scheme in which at least one high-ranking government minister is implicated. The scandal not only threatens to destabilize Turkey politically, but it also calls into question the quality of Turkish market regulation and the true value of Turkish equities.

US Artificial Intelligence Industry: AI model giant OpenAI last night said it has pulled the release of its next frontier model, GPT-6.1 Astra, saying it underperformed safety standards. According to OpenAI’s safety systems chief, the firm faces a “trade-off” between making models persistent enough to complete tasks and ensuring they follow their instructions. The new model “didn’t quite meet the bar” for staying within the bounds of its instructions, which could foster further safety concerns that might ultimately send the AI investment boom into reverse.

United States-Romania-Greece: US Ambassador to Greece Kimberly Guilfoyle reportedly caused a diplomatic furor at an official embassy event in Athens last March, when she hinted to Greek Energy Minister Stavros Papastavrou about an upcoming collapse of the Romanian government. According to the report, she also warned Papastavrou that, “We can do that to any country we want. We can do that here.”

• Shortly after the March meeting, Guilfoyle traveled to Romania and met with members of its Social Democratic Party (PSD), which subsequently pulled out of the governing coalition and voted with the country’s far-right to topple the prime minister.
• The report suggests the Trump administration may have actively undermined the government of Romania, a NATO ally, and is prepared to do the same in Greece. Therefore, the incident will probably further erode allied trust in the US and increase political and economic tensions between the US and Europe.

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by Patrick Fearon-Hernandez, CFA, and Thomas Wash

[Posted: 9:30 AM ET] | PDF

On a very slow news day, our Comment today opens with the latest on the war in Iran, where President Trump has rejected a new ceasefire proposal from Iran. We next review several other international and US developments that could affect the financial markets today, including news of a US-China deal to cut tariff rates on a small share of their bilateral trade and an announcement from Nvidia that the firm will further expand its enormous stock buyback program.

United States-Israel-Iran: President Trump on Saturday rejected the latest Iranian ceasefire proposal, which called for reopening the Strait of Hormuz and restarting talks on the country’s nuclear program in exchange for the US lifting its blockade of Iranian ports. The president wouldn’t say whether he will instead restart US military attacks on Iran, but the statement will nevertheless be a disappointment to investors looking for an offramp to the conflict and a reversal of the associated disruptions to global energy supplies.

• In response to the president’s statement, oil prices are up 3.1% to start the week. Near futures prices for Brent crude are up to $100.47 per barrel as of this writing.
• Separately, British authorities are investigating whether Iran or an Islamist group was behind a foiled attack on an air base in England that houses US forces and has been used to launch attacks in the war. If so, it would suggest that US allies providing support for the war could be increasingly at risk of Iran-linked terrorism, potentially affecting their financial markets.

US Bond Market: Yields on longer-term US Treasury obligations continue to march higher today, with the yield on the benchmark 10-year Treasury note hitting 5.219% as of this writing. The rise in oil prices today is likely one culprit as it raises the risk of higher and more prolonged consumer price inflation. Just as important, however, is that we are seeing increasing discussion about stronger-than-expected economic growth also playing a big role in the run-up in yields.

US Artificial Intelligence Industry: New reports say OpenAI and Anthropic have had tens of thousands of incidents in which frontier AI models took steps that outside evaluators would consider problematic. The instances took place in both internal testing and the real world. The volume of problematic behaviors suggests the problem with rogue AI agents could be orders of magnitude worse than the public knew previously. That makes it even more possible that the danger of uncontrollable rogue agents could undermine the ongoing AI investment frenzy.

• Responding to the rising concern about safety and the ability to control the technology, AI chip giant Nvidia today said it is launching a software platform designed to help keep AI agents in a secure environment while they’re being developed and tested. The software would also reportedly let developers continuously monitor and govern AI behavior, ensuring agents follow the rules.
• While the new safety software may help enhance Nvidia’s business, the bigger impact on its stock price today will likely be its announcement that it will increase its stock buyback program by $150 billion, bringing total share repurchases to $235 billion. The expanded buybacks reflect the company’s surging sales and profits amid the AI investment boom.

US Auto Industry: The administration today will reportedly scale back fuel-efficiency rules for new cars and light trucks, reversing one of the Biden administration’s most significant efforts to cut gasoline consumption and speed the US shift to electric vehicles. The move would weaken federal mile-per-gallon standards, which have prodded automakers to increase the fuel efficiency of gasoline-powered cars and to sell more electric models. The change would likely cut costs for US auto manufacturers, while shifting the market toward vehicles with higher fuel costs.

United States-China: The US and China yesterday said they’ve agreed on a special low-tariff regime under which each side will get to import $30 billion of specific non-critical goods from the other side at low duty rates. The covered products include items such as electric shavers, child car seats, fish hooks, rabbit hair, and camels (don’t ask me!). The small deal won’t have much impact on overall US-China trade, but it could modestly help ease current bilateral tensions and potentially set the stage for bigger deals later.

United Kingdom: Prime Minister Burnham on Saturday announced a new program of financial support for first-time home buyers. Under the “Your First Home” plan, first-time buyers who put down a 2.5% deposit on a new-build property will be eligible for a 20% equity loan from the government, with the loan including an initial interest-free period. Stock prices for UK homebuilders have surged today on hopes that the plan will spur big increases in new housing development.

Russia: As the Ukrainian military continues its massive strikes against Russian oil refineries, commercial warehouses, and other targets, President Putin has reportedly signed a decree that allows the government to nationalize any damaged business that didn’t install anti-drone defenses to protect itself. The decree is being seen as an effort by the Kremlin to shift the costs of anti-drone defense onto private firms.

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