Thursday, September 10

The Iran conflict and reported Houthi control of strategic Yemeni positions drove the session’s defining move: Brent rose as high as $108 a barrel, while WTI traded around $103–104. Disruption risks around the Strait of Hormuz and Bab al-Mandeb transformed crude from a market variable into an immediate inflation shock.

The repricing spread quickly across assets. The U.S. 10-year yield approached 4.9–4.95%, the highest since November 2023, while the 30-year moved above 5.3%. The Treasury’s $6 billion ceiling for its first expanded long-end buyback failed to stabilize duration, instead highlighting how little relief official demand could provide against the inflation impulse. A hotter August PPI reading, resilient jobless claims, and much stronger recent payrolls lifted the implied probability of a 25-basis-point Fed hike to roughly 58–70%.

Equities fell broadly, with the Russell 2000 down 1.04% and the VIX up roughly 13–14%. Energy and financials outperformed, while housing, growth stocks, miners, and gold absorbed the higher-rate shock.

The European Central Bank delivered its expected 25-basis-point hike, taking the deposit facility rate to about 2.50% and the main refinancing rate to roughly 2.65%. More consequentially, it raised its 2027–2028 inflation forecasts, signaling that the energy shock could extend the tightening cycle rather than represent a one-off policy challenge.

The euro weakened toward the 1.1635–1.1650 area as markets treated the decision as part of a synchronized global hawkish turn, not a euro-specific positive. European equities reversed early gains and closed lower, while sovereign yields rose alongside Treasuries. In Japan, Bank of Japan board member Kazuyuki Masu said rates remained below the estimated neutral range, and a Reuters poll showed economists expecting a move toward 1.25% at the September meeting. Markets were already fully pricing a 25-basis-point increase.

The common thread was policy asymmetry: higher energy prices are reviving inflation just as central banks face weaker rate-sensitive demand, leaving equities and smaller companies exposed to further repricing.