Midday Mashup
Published
The Hormuz crisis has metastasized into a broader Middle East energy shock, and the supply destruction is now compounding faster than diplomacy can respond. Saudi Arabia's Yanbu port on the Red Sea, the outlet for the East-West Pipeline that was already offline after drone strikes, has suspended oil loadings entirely, pushing US crude up roughly $5 a barrel from the morning session and Brent's physical spot price above $135. The Middle East-to-Asia VLCC benchmark topped $1 million a day for the first time ever, against under $100,000 a year ago. Libya's National Oil Corporation added to the pressure by halting output at its Hamada and Al-Tahara fields after pipeline closures and protests. US diesel futures rose to their highest level since 2022 near $5.23 a gallon. Treasury Secretary Bessent attributed rising 10-year yields to the oil price surge and said the administration is now "ending the Iran threat rather than managing it," though he offered little concrete mechanism beyond noting UAE commitments to cut off Iranian finances and planned Trump-Xi discussions on Iran at a summit later this month. Oman's foreign minister and Secretary of State Rubio held a de-escalation call, and US military chiefs from the US, Israel, and Arab nations held a secret meeting on Iran, per Axios. Iran's top security official continues to reject engagement until US conditions are fully met.
Markets are reflecting the energy shock clearly. Energy is the standout sector, with Transocean up 8.2% after its pre-market contract news, and the broader E&P complex rallying on the supply disruption. On the losing side, Axon Enterprise is down 10.2%, steeper than the 3.3% pre-market drop flagged after its convertible note offering. Coinbase is off 6.5%, Chipotle Mexican Grill drops 6.6%, and Skyworks Solutions leads gainers at +12.7%. Revvity adds 7.7% and Mercury Systems gains 6.8%. Seagate falls 5.1%.
The AI governance debate produced more noise than resolution. Goldman Sachs flagged an unprecedented split opening within the AI momentum trade to top clients, raising questions about durability. House Speaker Johnson met with President Trump on AI risks and said a moratorium would hand China a competitive edge. National Economic Council Director Hassett commended private sector AI measures, and Trump said the US already has the tools needed. Senator Sanders called for mandatory safety regulations and a US-China treaty to halt advanced AI development. China's Kimi AI reportedly suffered a security breach that shared weapons plans with Anthropic. Google introduced Gemini 3.8 Live. Altera filed confidentially for an IPO.
On the economic data front, the September Empire Manufacturing index came in at 7.6 against an expected 15.0 and a prior reading of 20.6, a notable miss that went largely unaddressed given the energy story. Wells Fargo's CFO said net interest margin could beat Q3 guidance and loan growth will likely exceed full-year targets. US private jobs rose an average of 16,250 per week in the four weeks to August 29, up from 12,000 in the prior period.
Corporate activity continues across sectors. Corteva's board approved the separation of its seed business into Vylor, with a one-for-one stock distribution to Corteva holders expected October 1 under the NYSE symbol VYLR. RB Global doubled its buyback authorization to $1 billion. Otis Worldwide announced CEO Judith Marks will retire by July 2027, with a search underway. Jazz Pharmaceuticals completed its $820 million acquisition of Actio Biosciences. Scholar Rock received FDA approval for ISEMBYLD in spinal muscular atrophy, though the company corrected an investor call error, disclosing that the FDA did require a pregnancy safety study as a post-marketing commitment. German Chancellor Merz cancelled his New York trip as he addressed record fuel prices at home, with Super E10 gasoline near 2.286 euros per liter and diesel near 2.412, and his government in talks with states on relief measures.
With Yanbu suspended, the East-West Pipeline offline, Libya cutting output, and Iran showing no sign of movement, the supply side of the oil market is tightening on multiple fronts simultaneously. Wednesday's Fed decision, with traders pricing near-certain odds of a 25 basis point hike, arrives into this environment.