Morning in New York: Oil Caught Between De-escalation and the Risk of New Attacks

A daily review and forecast of events in the U.S. stock market by Mikhail Denislamov, Deputy Director of Capital Markets Research at Freedom Broker.

The week begins with a roundup of the top energy news stories from the past weekend. On Sunday, Donald Trump announced an “energy truce” (an agreement not to strike energy infrastructure) between Russia and Ukraine; however, the parties did not confirm the truce, and Kyiv reported that Russian attacks were continuing. Earlier, the U.S. agreed to allow imports of Russian diesel fuel with a temporary easing of sanctions restrictions. On Monday morning, oil prices are down from Friday’s closing levels: Brent is trading around $104 per barrel, and WTI around $91.

The highlight of the week will be the release of the Consumer Price Index for September on Wednesday. Market consensus estimates are 0.6% MoM for the headline index and 0.2% MoM for the core index; Freedom Broker’s forecast is 0.65% and 0.2%, respectively. Risks for the core index are skewed to the upside: nearly a quarter of the analysts surveyed expect 0.3% MoM. At the same time, Freedom Broker analysts predict that starting in October, the headline CPI will slow to 0.2% MoM or less, provided that oil and petroleum products do not continue to rise in price. If oil prices stabilize below current levels, it will ease concerns about a rate hike at the October 27–28 FOMC meeting and support cyclical sectors.

Columbus Day is observed in the U.S. on Monday: stock exchanges are operating as usual, but the bond market is closed, and no macroeconomic data is being released. No speeches by Fed officials are scheduled, and Susan Collins, who spoke on Friday after the markets closed, did not address monetary policy issues. The most recent substantive signal comes from Christopher Waller’s remarks on October 8: he is “not overly concerned” that monetary policy tightening will trigger a sharp economic slowdown.

Risks in the Middle East persist. The Houthis claimed responsibility for Saturday’s attack on the Riyadh airport. On Sunday, the airport was attacked again, and Trump stated that the U.S. is considering joining Saudi Arabia’s retaliatory strikes. According to available reports, Iran has reached out to Riyadh. Meanwhile, attacks on tankers off the coast of Oman and in the Strait of Hormuz continue, keeping Brent above $100. At the same time, the foreign ministers of Iran and Saudi Arabia held talks, offering limited grounds for hope of a diplomatic de-escalation.

No major corporate earnings reports are expected on Monday. On Tuesday, JPMorgan Chase (JPM), Goldman Sachs (GS), Citigroup (C), and Wells Fargo (WFC) will kick off the earnings season for the largest banks.

S&P 500 and Nasdaq-100 futures are showing mixed trends. We assess the risk balance as neutral and expect moderate volatility. The market is supporting lower oil prices, but this is being held back by the escalation in the Middle East and anticipation of inflation data that could strengthen the case for tighter monetary policy.

— Amazon (AMZN) and Nvidia (NVDA) shares are showing positive momentum on reports of potential deals in the AI sector. Amazon is in talks to acquire the startup Decart for approximately $7 billion, although it was valued at nearly $4 billion in May. Decart’s models edit video in real time and create simulations for training robots and self-driving cars. NVIDIA is in discussions with Reflection AI—in which it has already invested $800 million—regarding an increased investment or an acquisition of the company. The talks are in the early stages, and the deal could take the form of hiring the team and licensing the technology. For megacaps, acquiring startups remains a way to accelerate the development of AI initiatives.

— AstraZeneca’s (AZN) efzimfotase alfa failed to achieve statistical significance for the primary endpoint in the Phase III HICKORY trial in adolescents and adults with hypophosphatasia. The increase in distance on the six-minute walk test compared to placebo was 17.05 m (p=0.1675). The company attributes this to better-than-expected results in the placebo group among patients with the adult form of the disease. The FDA had previously granted the drug priority review for patients aged two years and older, so the study results may primarily complicate its use in adults.

— Merck (MRK) shares are showing positive momentum: in a Phase IIb/III trial, the experimental drug remigromig for the treatment of diabetic macular edema was as effective as ranibizumab, although complications occurred more frequently with remigromig. At the same ophthalmology conference, Roche (RO-CH) presented positive annual data on vamikibart for the treatment of uveitic macular edema; an FDA decision on this drug is expected by July 2027. For remigromig, the safety profile will be a key factor in discussions with regulators.

— A fund managed by Jefferies (JEF) said it had evidence of alleged fraudulent transactions involving trade receivables totaling nearly $900 million by Singapore-based trader Radiant World and its affiliate Sapphire Minmetals, Bloomberg reported on October 10. For the Point Bonita division, this is already the second such case following the bankruptcy of First Brands.

Trading on October 9 ended on a positive note: the S&P 500 rose 0.59%, the Nasdaq-100 rose 0.51%, the Dow Jones rose 0.83%, and the Russell 2000 rose 0.46%. After two days of declines, the indices were buoyed by Amazon (AMZN) and Microsoft (MSFT), while Apple (AAPL) lagged behind. There were 1.3 times as many advancing stocks as declining ones on the NYSE, and 1.4 times as many on the Nasdaq. Real estate (XLRE: +1.86%) led the gains: SpaceX’s (SPCX) purchase of spectrum for Starlink Mobile boosted shares of tower operators Crown Castle (CCI: +15.6%) and American Tower (AMT: +9.3%). The same deal weighed on the communications sector (XLC: −1.51%): T-Mobile US (TMUS: −13.3%), AT&T (T: −10.8%), and Verizon (VZ: −10.1%) fell on concerns about the emergence of a fourth mobile carrier.

Treasury yields rose slightly, with the sharpest increase at the short end of the curve. The yield on 2-year Treasuries rose by 4 basis points to 4.79%, on 10-year Treasuries by 1 basis point to 5.24%, and on 30-year Treasuries remained unchanged at 5.6%. As a result, the spread between 10-year and 2-year yields narrowed to 45 basis points. There was no clear driver: the market continues to price in about 25 basis points of monetary policy tightening by the end of the year.

Oil ended a volatile trading session higher: WTI rose 0.49% to $91.92 per barrel. Donald Trump’s statement that he would refrain from striking Iran until after the midterm elections put pressure on prices, but the increasing frequency of attacks on ships in the Strait of Hormuz continues to pose risks to physical supplies.

The University of Michigan’s preliminary consumer sentiment index fell to 46.3 points in October, compared with the market consensus of 47.7 points (48.1 in September). The current conditions index fell to 44.7 points, its lowest level since records began, while one-year-ahead inflation expectations rose to 4.7%. Despite these figures, the market reaction was muted.

Corporate news has shown that rising costs are beginning to create a divide among companies within sectors. Lumentum (LITE: +5.2%) rose after its CEO stated that optical components for AI servers are sold out through early 2029, but chipmakers fell again. According to Nikkei, Apple (AAPL: −1.1%) asked suppliers to cut October orders for iPhone 18 Pro and Pro Max components by at least 15%: expensive memory is driving up prices and hurting demand. Delta Air Lines (DAL: +0.04%) ended the session unchanged despite a weak earnings report. Adjusted EPS for the third quarter ($1.72) came in below market consensus estimates, and the full-year forecast was lowered to $5.10–5.60 from $6.50–7.50 due to a 60% year-over-year increase in jet fuel costs. Management’s comments about steady demand provided support for the stock price. The healthcare sector (XLV: +1.58%) was buoyed by Humana (HUM: +11.6%): ratings for its Medicare Advantage plans for 2027 improved significantly and exceeded the company’s target, and the full-year adjusted EPS forecast of at least $9 was reaffirmed. The week ended on a positive note, with the S&P 500 gaining 2.09% since the start of October. AI trading remains selective: pressure on chipmakers persists due to widening CDS spreads for AI-related issuers and investor positioning.

This article was AI-translated and verified by a human editor