The Opener
Published
The bond selloff that drove Tuesday's session stays the dominant force heading into Wednesday, with Treasury yields still sitting near their highest levels since 2002 and the Iran standoff functioning as a second, compounding stress rather than the main driver. Premarket pricing reflects both: the VIX is up 3.9%, while BNO and USO are each up 3.2% as crude stays bid.
Overnight commentary did little to resolve either thread. Fed Governor Christopher Waller said more rate increases are likely needed but do not have to come in consecutive moves, and that the Fed can use "signaling" rather than firm forward guidance to steer expectations, a flexible-but-hawkish message that keeps the yield backdrop unsettled. The Swiss National Bank's vice chair attributed recent Swiss inflation to oil products, and Bank of England Governor Andrew Bailey said policy must stay focused on inflation, underscoring how the energy shock is now feeding directly into central bank messaging well beyond the Gulf.
On the energy side, the market is already adjusting around the Hormuz disruption rather than waiting for resolution. Saudi Arabia is reportedly in talks to set up shuttle services through the Strait to capture market share, Iraq priced its Basrah Heavy and Medium grades for November at discounts of $5.80 and $2.80 a barrel to Asia, and Abu Dhabi National Oil Company set November pricing for Upper Zakum, Umm Lulu and Das crude at premiums to Dubai. Together they point to Gulf producers actively repricing and rerouting supply around the chokepoint rather than a standoff that's easing.
China's central bank spent the early hours reassuring markets on currency policy, stating it has no plan to devalue the yuan for trade purposes and that market forces remain the primary driver of the exchange rate, while also calling on countries to address global imbalances. That comes alongside Trump's plan to sign a US-Thailand trade deal next month, a reminder that trade diplomacy continues on a separate track from the energy and rates stress.
Equity moves in the premarket lean toward names tied to defense and government services, with Huntington Ingalls up 2.6% and Booz Allen Hamilton up 2.5%, while semiconductor and tech-adjacent names are under pressure: VeriSign down 4.3%, Coherent down 2.8%, NXP Semiconductors down 2.7%, Ciena down 2.5%, and the South Korea ETF down 2.3%. The split suggests investors are rotating away from rate-sensitive growth names and toward sectors seen as insulated from both the bond selloff and the energy conflict.