Key facts
- Brent crude climbed 2% after President Donald Trump rejected Iran's proposal to reopen the Strait of Hormuz.
- Global bond yields reached multi-decade highs as oil prices rallied.
- Stock markets fell, though separate talks with mediators eased selling pressure.
- Nvidia announced a record $150 billion share buyback increase.
- Gold fell 3.5% to a seven-week low as the dollar rose and Treasury yields soared.
Oil prices climbed and global markets braced for potential central bank action as geopolitical tensions in the Middle East and strong economic data complicated the inflation outlook. Brent crude rose around 2% after President Donald Trump rejected Iran's latest proposal to reopen the Strait of Hormuz, a move that analysts believe signals a prolonged conflict. Ship tracker Kpler estimates crude exports from key Middle East producers rebounded in September to 12.8 million barrels per day, the highest since the war started.
The lack of a truce has kept Brent crude above $100 for three consecutive weeks, marking a 17% gain for September. Record high diesel prices, with a crack spread around $75 compared to a historical average of $15, further contribute to inflationary pressures.
These energy price shocks make it difficult for central banks to "look through" inflation. Australia's central bank is expected to hike rates to a 15-year high on Tuesday. Meanwhile, the AI boom and strong Purchasing Managers' Index (PMI) data have led to upward revisions in economic growth forecasts for Asia, Europe, and the United States, with the Atlanta Fed's GDPNow prediction for the third quarter at 5.0%.
In response to the economic outlook and inflation concerns, fund futures are pricing in a 66% chance of a Federal Reserve rate hike in October and a total of 90 basis points of tightening. Markets have also seen bond yields reach multi-decade highs, with French, German, UK, and US benchmark 10-year yields all highest since the mid-late 2000s. Stock markets fell, with the Dow down 0.7%, the S&P 500 down 0.8%, and the Nasdaq down 0.9%. However, news that Iran and mediators will hold separate talks eased selling pressure across asset classes.
Nvidia announced a record $150 billion increase to its share buyback authorization, bringing its remaining capacity to $235 billion through fiscal 2028. The company's shares rose nearly 2% on Monday. Gold, meanwhile, fell 3.5% to its lowest in nearly two months, with the dollar rising and Treasury yields soaring diminishing its safe-haven appeal.