Author: Fiona Craig

Oil prices declined on Monday after US President Donald Trump announced exemptions from sanctions and proposed tariffs affecting Russian energy transactions, prompting investors to reassess the outlook for international crude supplies.

Brent futures fell 2.06% to $107.60 per barrel at 02:00 ET (06:00 GMT), while US West Texas Intermediate (WTI) futures declined 1.6% to $99.80 per barrel.

The losses followed an increase of almost 5% in crude prices during the previous week, when disruptions to oil shipments from the Middle East had supported the market.

Although economic data from China indicated stronger-than-expected growth and increased refinery activity, the figures provided limited support to oil prices during Monday’s trading.

US Suspends Russian Sanctions Ahead of Implementation

Trump issued an executive order on Friday evening suspending numerous sanctions against Russia shortly before they were due to take effect.

The administration also waived proposed tariffs on countries purchasing Russian oil.

The president said the decision was in the national interest of the United States.

The announcement followed an agreement signed the previous week for US imports of Russian diesel.

Trump had also attributed rising global fuel prices partly to Ukrainian attacks on Russian energy facilities.

In a subsequent social media post, the president said he was pursuing negotiations aimed at ending the conflict between Russia and Ukraine and did not want measures that would “drive… Russia away from the bargaining table.”

Trump also renewed his criticism of Ukrainian President Volodymyr Zelensky.

Ukraine indicated late last week that it intended to continue attacks on Russian infrastructure and expressed dissatisfaction with additional agreements between Washington and Moscow.

Political Response Reflects Disagreement Over Energy Policy

The sanctions waiver prompted criticism from European officials and members of both the Republican and Democratic parties in the United States.

The decision comes as the Trump administration faces elevated domestic fuel prices ahead of the US midterm elections.

Higher petrol and diesel costs have increased household and business expenditure, making energy prices an economic and political consideration.

Critics of the administration have argued that US military operations against Iran contributed significantly to the disruption of global oil supplies.

The conflict has affected shipping through the Middle East, particularly routes associated with the Strait of Hormuz.

The suspension of restrictions on Russian energy transactions has therefore raised questions about how additional crude availability could affect international prices while regional supply disruptions continue.

ANZ Identifies Refined Fuel Distribution as a Market Constraint

Analysts at ANZ said the ability to transport and distribute refined petroleum products had become an increasingly important consideration for global oil demand.

“The key question is no longer whether the global economy can generate fuel demand, but whether the global supply chain can efficiently deliver refined products to end-users,” the analysts wrote.

The bank noted that global oil consumption had remained relatively resilient despite substantial price increases in recent months.

According to ANZ, constraints affecting the transportation and delivery of refined products may be limiting consumption independently of underlying economic growth.

“The largest upside risk to oil demand in 2027 is therefore not necessarily stronger GDP growth but the easing of constraints that are currently suppressing consumption,” the analysts added.

The assessment suggests that improvements in distribution capacity could influence future demand even without a corresponding increase in the rate of global economic expansion.

Tehran Reiterates Proposal to Reopen Strait of Hormuz

Iranian Foreign Minister Abbas Araqchi said on Sunday that Tehran’s proposal to reopen the Strait of Hormuz within seven days remained available to Washington.

“The way to reopening the Strait of Hormuz is obvious,” Araqchi told Iranian media, criticising the United States for not accepting the offer.

The closure of the waterway has disrupted approximately 20% of global oil supplies.

Asian importing countries have been particularly affected because of their reliance on shipments passing through the strait.

Shipping volumes briefly improved in September before renewed attacks on vessels disrupted traffic again.

The Strait of Hormuz remains a major transportation route for crude oil and petroleum products exported from the Middle East.

Its reopening would be relevant to the availability and delivery of energy supplies, although the timing and conditions of any agreement remain uncertain.

Middle East Security Risks Continue to Affect Oil Transportation

Additional tensions in the region have contributed to uncertainty surrounding oil exports.

Saudi Arabia and Yemen’s Iran-backed Houthi movement have continued to clash, adding to concerns about energy infrastructure and maritime security.

Shipping data indicated that oil flows from the Persian Gulf improved during the second week of October.

However, the recovery remained vulnerable to further disruption.

Market participants are monitoring vessel movements and security developments to assess whether improvements in regional exports can continue.

Chinese Growth and Refinery Activity Provide Demand Indicators

China’s latest economic figures offered some support to expectations for global oil consumption.

The world’s largest crude importer reported third-quarter economic growth that exceeded market forecasts.

Separate data showed that Chinese refinery throughput increased for a third consecutive month in September.

The increase was driven mainly by higher exports of refined petroleum products.

The figures indicate continued activity in China’s refining industry, although the positive demand signals were insufficient to offset the effects of changing international supply expectations on Monday.

Crude Markets Remain Focused on Sanctions and Shipping Conditions

Oil futures moved lower as the market considered the possibility of additional Russian crude remaining available to international buyers.

Brent traded at $107.60 per barrel and WTI at $99.80, reversing part of the previous week’s increases.

The US sanctions decision has altered expectations for Russian energy exports, while continuing disruptions around the Strait of Hormuz remain an important supply consideration.

Future developments in diplomatic negotiations, regional security and the movement of oil shipments will continue to influence the outlook for crude and refined petroleum markets.

Gold prices increased on Monday as financial markets reduced the probability of another Federal Reserve interest rate increase this month following remarks from Chair Kevin Warsh.

US gold futures moved above $4,200 per ounce, while spot bullion also advanced. The gains extended across other precious metals, including silver, platinum and palladium.

Investors were reassessing the outlook for monetary policy after stronger-than-expected US inflation data had previously raised expectations of further tightening.

Analysts at ANZ also maintained their longer-term forecast for gold prices to exceed $5,000 per ounce in 2027, citing investment demand, central-bank reserve diversification and concerns about government debt sustainability.

Gold and Other Precious Metals Advance

At 00:51 ET (04:51 GMT), spot gold was trading 0.4% higher at $4,180.29 per ounce.

US gold futures rose 0.5% to $4,200.92 per ounce.

The increases followed a 0.7% decline in bullion during the previous week.

Silver gained 1.3% to $57.7300 per ounce, while platinum increased by the same percentage to $1,655.53.

Spot palladium rose 1.5% to $1,132.74 per ounce.

The US Dollar Index was little changed, slipping 0.04% to 101.80.

The movements came as traders reconsidered the likelihood of further US interest rate increases and their potential implications for precious metals.

Probability of Fed Rate Increase Falls Below 20%

Market expectations shifted after Federal Reserve Chair Kevin Warsh commented on the monetary policy outlook.

Traders subsequently reduced the implied probability of a 25-basis-point rate increase at the Fed’s next meeting to less than 20%.

His remarks were interpreted as supporting the possibility of keeping borrowing costs unchanged.

The change in expectations followed US inflation figures released the previous week that were higher than economists had anticipated.

Those figures had initially strengthened the case for further monetary tightening and contributed to gains in the dollar.

Warsh’s comments subsequently interrupted the currency’s advance.

Gold prices are sensitive to interest rate expectations because the metal does not provide an income stream. Higher yields on interest-bearing assets can therefore increase the opportunity cost of holding bullion.

Gold Remains Above $4,000 Following Earlier Market Decline

Despite recent volatility, gold has traded above $4,000 per ounce since August.

The metal previously experienced a decline that took prices into bear-market territory following the outbreak of the US-Iran conflict in late February.

According to the supplied market figures, bullion remains approximately one-fifth below its level at the beginning of that conflict.

Demand for assets traditionally used to diversify portfolios during periods of financial and geopolitical uncertainty has helped support prices.

However, elevated sovereign bond yields and a relatively firm US dollar continue to influence investment decisions.

The combination of these factors has contributed to fluctuations in gold prices as investors balance monetary policy expectations against demand for portfolio protection.

ANZ Sees Fiscal Concerns Influencing Gold Demand

Analysts at ANZ highlighted concerns about government borrowing and debt sustainability as factors affecting the longer-term outlook for gold.

The bank indicated that rising sovereign bond yields may increasingly reflect fiscal uncertainty rather than expectations of faster economic growth.

This distinction is relevant to investors assessing whether higher bond yields should reduce demand for bullion or encourage diversification into alternative assets.

ANZ suggested that gold could continue to attract investment as a hedge against risks associated with government debt and financial market conditions.

Nevertheless, the bank acknowledged that high yields and a stronger dollar could contribute to additional selling in the near term.

Its longer-term outlook remains dependent on the persistence of investment demand and broader macroeconomic developments.

Chinese Investment and Central-Bank Purchases Remain Relevant

ANZ also pointed to demand from Chinese investors and central banks as supporting factors for the gold market.

In China, weakness in domestic equity and property markets has contributed to continued interest in bullion as an investment asset.

Central banks have also been diversifying their reserve portfolios, seeking to reduce reliance on individual assets.

These developments provide potential sources of demand beyond short-term trading linked to US interest rate expectations.

The scale and continuity of such purchases will remain important considerations for the market’s longer-term outlook.

ANZ Maintains Forecast for Gold Above $5,000 in 2027

ANZ expects gold prices to encounter constraints on further gains in the near term, particularly if bond yields remain elevated or the dollar strengthens.

However, the bank forecasts a move above $5,000 per ounce during 2027.

Its projection reflects expectations for continued investment demand, central-bank purchases and interest in gold amid concerns about fiscal sustainability.

The forecast remains subject to changes in the Federal Reserve’s policy decisions, currency movements and global financial conditions.

For the immediate market outlook, attention is focused on the Fed’s next meeting after Warsh’s remarks prompted a reduction in expectations for another rate increase.

Monday’s trading left US gold futures above $4,200 per ounce, while spot prices stood at approximately $4,180.

European wholesale natural gas prices were broadly unchanged on Monday, remaining near their highest levels since 2022 as investors assessed supply constraints linked to the Middle East and the potential effects of higher borrowing costs on energy demand.

The benchmark Dutch Title Transfer Facility (TTF) front-month futures contract traded at approximately €87.88 per megawatt-hour (MWh), while the equivalent UK National Balancing Point (NBP) contract stood at around 217.20 pence per therm.

Despite limited movement during the session, European and British natural gas prices have recorded substantial increases since the beginning of 2026.

Market participants were also assessing comments from European Central Bank President Christine Lagarde concerning the impact of tighter financial conditions on households and businesses facing higher energy costs.

Dutch TTF and UK NBP Futures Remain Elevated

Dutch TTF natural gas futures traded at approximately €87.88/MWh on Monday, remaining close to levels last recorded in 2022.

The European benchmark has increased by approximately 210% since the beginning of the year, according to the supplied market data.

In the United Kingdom, NBP natural gas futures were broadly stable at 217.20 pence per therm.

The British benchmark has risen by approximately 196% year to date.

The limited price movements during Monday’s session followed several months of increases in European wholesale gas prices.

Traders continued to assess the balance between constrained international supplies and the potential effects of slower economic activity on gas consumption.

Lagarde Highlights Impact of Higher Energy and Borrowing Costs

European Central Bank President Christine Lagarde addressed the economic implications of rising sovereign bond yields in remarks delivered on Saturday.

Lagarde said the recent increase in government borrowing costs was tightening financial conditions across the eurozone, raising financing expenses for households and businesses.

She indicated that these developments could reduce economic growth while making it more difficult for consumers and industrial companies to manage higher energy bills.

The increase in fuel and electricity costs has been linked in part to supply disruptions associated with continuing conflicts in the Middle East.

According to the supplied report, Lagarde suggested that the combined effect of higher borrowing costs and energy prices could place greater pressure on European households and businesses than previously anticipated by the ECB.

ECB Interest Rate Expectations Add to Demand Considerations

Financial markets are anticipating another European Central Bank interest rate increase in December.

According to the supplied update, investors expect a 25-basis-point rise that would bring the benchmark policy rate to 2.75%.

Such a move would place monetary policy in territory considered restrictive to economic activity.

Higher borrowing costs can affect industrial investment and operating expenditure, including activities that rely on natural gas as an energy source or production input.

The potential impact on industrial demand remains one of the factors being assessed by participants in European gas markets.

The anticipated December rate increase remains a market expectation rather than a confirmed ECB decision.

Middle East Shipping Disruptions Affect LNG Supplies

Supply conditions remain a central consideration for European natural gas markets.

Liquefied natural gas (LNG) shipments passing through the Strait of Hormuz have faced restrictions associated with maritime attacks and disruptions to shipping routes.

Some vessels have been diverted around Africa, extending journey times and affecting the availability of LNG cargoes.

These developments have constrained spot LNG deliveries to European import terminals, according to the supplied market update.

The disruptions have increased uncertainty surrounding the timing and availability of imported gas supplies.

European gas prices remain sensitive to changes in shipping conditions and the ability of suppliers to deliver contracted and spot cargoes.

European Gas Storage Levels Remain Below Seasonal Norms

European Union underground gas storage levels are reported to be below historical seasonal averages as the winter withdrawal period approaches.

Lower storage inventories can reduce the volume of gas available to meet additional demand during periods of colder weather.

This makes storage conditions an important factor in assessing European supply requirements during the winter months.

The supplied report did not specify the current percentage of EU storage capacity that is filled.

Market participants will continue to monitor storage withdrawals, LNG arrivals and weather conditions as winter demand develops.

European Gas Markets Balance Supply and Demand Factors

European gas prices remained broadly stable on Monday, with Dutch TTF futures at €87.88/MWh and UK NBP futures at approximately 217.20 pence per therm.

Both benchmarks have recorded substantial year-to-date increases, reflecting changes in global gas supply conditions.

Supply disruptions linked to the Middle East and below-average European storage inventories remain relevant to price developments.

At the same time, higher borrowing costs and expectations of further ECB monetary tightening are being assessed for their potential impact on industrial and household energy demand.

Eurozone government bond yields remained near elevated levels on Monday, with French short-term borrowing costs rising amid political uncertainty and nationwide protests, while German benchmark yields showed limited movement.

France’s two-year government bond yield increased to 3.603%, while its 10-year yield remained broadly unchanged at 4.812%.

Germany’s benchmark 10-year Bund yield was virtually unchanged at 3.412%, while the two-year yield edged higher to 3.080%.

The movements reflected differences in the performance of French and German sovereign debt as investors assessed fiscal risks, monetary policy expectations and the economic implications of higher borrowing costs.

French Bond Yields Reflect Political and Fiscal Uncertainty

French government bonds faced pressure following nationwide demonstrations over rising living costs, reductions in public services and President Emmanuel Macron’s fiscal policies.

The protests, which included incidents of violence and widespread arrests, added to existing concerns about France’s political and fiscal outlook.

France is managing a government budget deficit equivalent to approximately 5.4% of gross domestic product.

The cost of insuring French sovereign debt against default, measured through credit default swaps (CDS), has also remained near multi-year highs, according to the supplied market update.

These developments have contributed to the additional yield investors require to hold French government bonds, known as Obligations Assimilables du Trésor (OATs), compared with German Bunds.

French-German 10-Year Yield Spread Reaches 140 Basis Points

France’s 10-year government bond yield stood at 4.812%, compared with 3.412% for the equivalent German Bund.

The difference between the two yields was approximately 140 basis points.

This spread is commonly used to assess the additional borrowing cost associated with French sovereign debt relative to Germany’s benchmark government bonds.

At the shorter end of the yield curve, France’s two-year yield reached 3.603%, compared with 3.080% for German two-year debt.

The difference reflects the relative pricing of short-term sovereign risk and expectations for interest rates.

German bond yields were comparatively stable during the session, with the 10-year benchmark virtually unchanged.

Lagarde Highlights Economic Effects of Higher Bond Yields

European Central Bank President Christine Lagarde addressed the impact of rising global government bond yields in remarks delivered on Saturday.

Lagarde said higher market interest rates were tightening financial conditions across the eurozone by increasing borrowing costs for households and businesses.

She indicated that tighter financing conditions could reduce economic activity and moderate inflation over time.

However, higher borrowing costs could also limit the ability of households to manage repeated increases in energy prices associated with the continuing conflicts in the Middle East.

Her comments highlighted the relationship between government bond markets, private-sector financing costs and the ECB’s monetary policy objectives.

Markets Anticipate Further ECB Rate Increase

The European Central Bank has raised interest rates twice over the preceding four months.

According to the supplied market update, money markets were pricing in another 25-basis-point increase in December.

Such a move would bring the benchmark policy rate to 2.75%, a level described by central bankers as restrictive to economic activity.

The expected increase reflects market assessments of the ECB’s response to inflation and financial conditions.

However, the December decision remains subject to the central bank’s assessment of incoming economic data and inflation developments.

Government Debt and AI Investment Add to Financing Pressures

Lagarde also identified several factors contributing to pressure on global sovereign bond markets.

These included substantial government bond issuance, rising national debt levels and competition for investment capital from companies financing artificial intelligence infrastructure.

Large-scale AI projects require significant expenditure on data centres, computing equipment and associated infrastructure.

The financing requirements of these investments can contribute to broader demand for capital alongside government borrowing.

Lagarde’s remarks indicated that these developments form part of the wider environment affecting sovereign yields and financing conditions.

Eurozone Bond Markets Monitor Fiscal and Monetary Developments

Eurozone sovereign bond markets remained focused on political developments in France, government financing requirements and expectations for ECB monetary policy.

French 10-year yields stood at 4.812%, maintaining a 140-basis-point spread over equivalent German debt.

At the same time, rising short-term French yields reflected the additional uncertainty associated with the country’s fiscal and political environment.

Investors will continue to assess developments in France alongside inflation data, ECB policy decisions and changes in global financing conditions.

Bank of America has identified Technoprobe (BIT:TPRO) and Soitec (EU:SOI) as its preferred stocks among European small- and mid-cap semiconductor companies, citing their exposure to artificial intelligence infrastructure investment.

The bank’s assessment focuses on two areas of semiconductor technology: advanced processor testing and data centre connectivity.

Both companies have received upgrades from Neutral to Buy, reflecting Bank of America’s expectations for revenue growth, capacity expansion and improved operating margins.

The analysts expect investment by major cloud service providers in AI computing infrastructure to support demand for the technologies supplied by the two companies.

Technoprobe Upgraded on AI Testing Exposure

Bank of America upgraded Technoprobe from Neutral to Buy in May, identifying the Italian semiconductor testing equipment company as having the highest AI-related revenue exposure among the European small- and mid-cap semiconductor companies it covers.

According to the bank, approximately 50% of Technoprobe’s current revenue is linked to artificial intelligence applications.

BofA expects this proportion to increase to 70% by 2028, supported by demand for more complex semiconductor testing and developments in high-bandwidth memory (HBM).

Technoprobe supplies probe boards used in semiconductor testing, including products based on vertical microelectromechanical systems (MEMS) technology.

The bank highlighted the company’s position in graphics processing unit (GPU) probe boards and expects increasing testing requirements for central processing units (CPUs), application-specific integrated circuits (ASICs), HBM and silicon photonics to support its business.

Technoprobe Forecasts Revised Higher

Bank of America also pointed to Technoprobe’s 2026 financial guidance, which it said exceeded median market consensus estimates by 33% for revenue and 65% for EBITDA.

Following the company’s guidance, the bank raised its revenue growth forecast for the 2026–2028 period from 40% to 48%.

Its EBITDA growth forecast for the same period increased from 70% to 78%.

These revisions reflect the analysts’ expectations for additional demand associated with AI semiconductor testing and the potential contribution from higher-bandwidth memory applications.

The projections remain Bank of America’s estimates and are subject to future industry demand and company performance.

Soitec Upgraded on Silicon Photonics Opportunities

Bank of America upgraded French semiconductor materials manufacturer Soitec from Neutral to Buy on October 9.

The bank’s assessment centres on silicon photonics, a technology used to support high-speed optical data transmission in computing infrastructure.

According to BofA, Soitec holds approximately 95% of the silicon-on-insulator (SOI) wafer market serving photonics applications.

The analysts expect demand for optical connectivity in data centres to increase as AI infrastructure requires higher data transmission capacity.

BofA believes growth in optical port requirements could exceed growth in AI processor volumes, reflecting the increasing bandwidth requirements of large-scale computing systems.

This trend is expected to support demand for SOI wafers used in silicon photonics applications.

Singapore Capacity Expansion Under Consideration

Bank of America expects improved demand visibility to support a potential announcement by Soitec concerning additional manufacturing capacity in Singapore over the coming months.

The bank believes such an expansion could lead the company to revise its financial targets higher.

However, the anticipated capacity announcement remains an analyst expectation rather than a confirmed company decision.

BofA also acknowledged that Soitec’s share price has increased substantially during 2026.

As a result, its Buy recommendation is based primarily on expectations for capacity growth and margin expansion rather than the stock’s current valuation.

AI Infrastructure Investment Underpins Both Recommendations

Bank of America’s selections reflect two different areas of semiconductor infrastructure investment.

Technoprobe provides testing technology for advanced processors and memory devices, while Soitec supplies semiconductor materials used in optical connectivity.

The bank expects demand for both technologies to develop as cloud computing companies expand their AI infrastructure.

For Technoprobe, the principal factors include higher testing complexity, increasing AI-related revenue exposure and projected EBITDA growth.

For Soitec, the assessment focuses on silicon photonics demand, potential manufacturing expansion and the resulting implications for operating margins.

Both recommendations depend on the continuation of investment in AI infrastructure and the companies’ ability to deliver the anticipated financial performance.