The weekend was far from quiet, with fresh protests across Europe, but tensions in the Middle East didn’t escalate as feared, sending oil prices lower at the start of the week.
But the pullback didn’t last long — Brent was back at $116 a barrel on Tuesday, as the risk of another US operation against Iran after the midterm elections remains. On top of that, the US Strategic Petroleum Reserve has fallen to 282.6 million barrels, meaning that even if the conflict ends tomorrow, demand could still outstrip supply for some time.
As for Iranian official Mohsen Rezaei’s claim that talks between Iran, Saudi Arabia, Turkey and Pakistan in Tehran went well, we’ve heard similar positive signals before, but they haven’t brought peace. Why should this time be any different?
Now, although uncertainty remains, markets still expect the Fed and the ECB to hold rates steady this week. But Warsh and Lagarde may warn that higher energy prices could fuel inflation while slowing growth, keeping rate hikes on the table further down the line.
The same goes for the Bank of Japan, which is also expected to hold rates on Thursday but could still offer clues about a possible December hike.
Another big focus this week will be corporate earnings, as doubts about the AI rally continue to grow amid soaring spending on data centers and infrastructure, while productivity gains remain hard to spot across much of corporate America. It’s also worrying that Big Tech keeps growing while the rest of the S&P 500 struggles to keep up. On top of that, there are concerns that some of the $3.5 trillion being poured into AI infrastructure could lose value before 2030.
Hopefully, results from Meta, Tesla, Netflix and IBM this week will show whether all that spending is finally paying off. And if not, another sell-off could boost safe-haven assets like Treasuries.
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