Reports of a phased US-Iran deal to reopen Hormuz pull stocks back to flat, even as Houthi missiles send Brent toward $108 and the 10-year holds above 5.1%
Thursday was a tug of war between two opposite Middle East headlines. In the morning, oil surged after Iran-allied Houthi forces in Yemen fired a barrage of ballistic missiles at Saudi Arabia. Saudi air defences intercepted six missiles aimed at Taif and Yanbu, the Red Sea port that handles crude exported through the kingdom's East-West pipeline. A senior Iranian military official added to the pressure by warning that Tehran could widen the war to the Indian Ocean if attacked, and security chief Mohsen Rezaei said Iran "had not changed its conditions" for reopening the Strait of Hormuz. Brent jumped as much as 5% to a session high of about $108/bbl, and WTI rose above $96.
Then, around midday in New York, Reuters reported that US and Iranian negotiators at the UN were exploring a phased path out of the nearly seven-month conflict: Iran would reopen the strait step by step while Washington lifted its naval blockade and eased sanctions. Iran's proposal also calls for a regionwide ceasefire. The catch, according to Reuters' sources, is that neither side wants to give up its leverage first. Iran is reportedly willing to defer its demand for tolls on Hormuz traffic but not to give up administrative control of the waterway, which Washington is unlikely to accept. Oil pared its gains but still finished sharply higher, with Brent around $105-106 and WTI around $94, depending on the source and time of settlement. Brent is now up roughly 7% on the week, wiping out the decline that followed Tuesday's talks. Some supply relief is in the background: Saudi Arabia's East-West pipeline has reopened after earlier drone damage, and the kingdom has sold about 100 million barrels to Asian buyers for October-November delivery.
02Stock market & economy
The Hormuz report rescued a day that had started badly. The S&P 500 slipped just 0.02% to 7,704.13 after being down much more earlier, the Nasdaq Composite eked out a 0.01% gain to 26,939.37, and the Dow fell 161.61 points, or 0.31%, to 51,349.98, its third straight decline. Bonds gave no relief. The 10-year Treasury yield held around 5.10-5.11%, still its highest since 2007, and the 30-year rose to about 5.43%, its highest since 2004. The data kept the pressure on: initial jobless claims fell to 197,000, below the 201,000 expected, another sign the labour market is not cooling. Philadelphia Fed President Anna Paulson added to the hawkish chorus, saying "some modest further tightening may be warranted" if the economy evolves as she expects. Gold fell about 0.9% to around $4,250-4,290/oz as higher real yields, a firmer dollar and rising oil (which strengthens the case for more Fed hikes) weighed on it.
Among individual stocks, Meta rose about 4% after Mark Zuckerberg explained at Connect how Muse will make money: the agent stays free for users, and Meta will take a small fee from merchants on transactions it completes. Muse now connects to PayPal, Walmart, Best Buy, Sephora, Wayfair and others, with Expedia and Instacart coming for travel and groceries. Eli Lilly also gained. Oracle fell around 3-5% after sending a "force majeure" notice on its New Mexico data centre (see below), pulling other AI-infrastructure names down with it. MGM dropped about 10% after Barry Diller withdrew his takeover bid. Europe closed before the Hormuz report and took the full weight of rising yields: the Euro Stoxx 50 fell 0.4% to about 6,275 and the STOXX 600 fell 0.5%. The AEX held up better, slipping 0.1% to 1,106.84. Chip-equipment makers Besi, ASMI and ASML were the main drags, losing up to 2.1% as investors waited for the Trump-Xi summit outcome.
That outcome was modest, as expected. Xi left the White House after a bilateral meeting of just over an hour, and the headline result remains the two-month extension of the Busan tariff truce to 10 January that Bessent announced on Wednesday. The evening state dinner, attended by Musk, Cook, Bezos, Altman, Huang and Pichai, produced better photos than policy.
For the unhedged USD sleeve (MSCI World ETF, S&P 500 ETF, High Dividend Yield ETF), a flat close hides a lot of movement underneath. The Muse monetisation plan helped Meta, one of the biggest weightings in MSCI World ETF and S&P 500 ETF, while the Oracle news showed that the AI build-out has physical limits that can hit infrastructure stocks. The bigger issue is still the 10-year above 5.1%, which keeps pressure on long-duration tech valuations. High Dividend Yield ETF benefited from its energy holdings as crude rose. For AEX index ETF and EURO STOXX 50 ETF, higher oil is a problem twice over: it lifts eurozone inflation, which is already at 3.3% after the ECB raised its deposit rate to 2.5% on 10 September, and it keeps euro-area sovereign yields near multi-decade highs. The AEX's smaller loss reflects Shell gaining with crude, offset by semiconductor weakness.
03Also in the news
The Kremlin quickly dismissed the Russia-Ukraine "energy ceasefire" that Secretary of State Marco Rubio floated after meeting Sergey Lavrov on Wednesday. Asked whether Western talk of an energy truce was purely rhetorical, Kremlin spokesperson Dmitry Peskov replied "absolutely," and Moscow said conditions are not ready for resuming peace talks and there is no prospect of high-level meetings for now. Zelensky said Thursday that the US is still pushing for an energy and grain ceasefire and a trilateral meeting. For now, though, the hope of an energy truce before winter, which would have eased European gas prices, has faded.
Wednesday's hawkish Fed commentary also kept echoing. Governor Christopher Waller reportedly said there will be no rate cut in 2026, a view two colleagues quickly repeated. With Paulson's comments on Thursday, the message from the Fed this week has been consistently hawkish, and markets continue to price a strong chance of another hike at the late-October meeting.
04Off the beaten path
what Oracle's "force majeure" notice says about the AI build-out's real bottleneck
Force majeure is a standard contract clause that lets a party delay or escape its obligations when events outside its control, such as a natural disaster, war or government action, make them impossible to meet. Invoking one on a data centre is unusual. Oracle sent the notice to the developer of Project Jupiter, a huge AI campus in New Mexico that is part of the Stargate build-out, and a unit of Blue Owl Capital. The notice lets Oracle delay payments if the campus is not online as planned in 2028. The underlying problem is power. The project depends on a natural-gas pipeline that has been delayed and has faced legal challenges over water and air-quality permits. Bloom Energy, which is supplying on-site power equipment, fell 4.4%, and Blue Owl also declined. Both companies tried to calm investors: Oracle said Jupiter "remains on our planned schedule," and Blue Owl said the notice "does not change the financial commitments."
The broader point is that the AI boom increasingly runs up against physical limits, not financial ones. The money for data centres is there; what is scarce is grid connections, gas turbines, transformers, water rights and permits. When a tenant as large as Oracle formally reserves the right to pay late because of power risk, investors question whether announced capacity will arrive on time. That matters for the chip and hyperscaler earnings that dominate MSCI World ETF and S&P 500 ETF, since delayed data centres mean delayed chip orders and delayed revenue. It also explains why power equipment and utility stocks have become an AI trade in their own right. The caveat is that a force majeure notice is often a precaution against liability rather than a sign a project is failing, and Oracle says the schedule has not changed. The thing to watch is whether other large AI tenants start adding similar protections to their contracts, which would point to a sector-wide problem rather than a single troubled site.
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