Tuesday, October 13

Oil extended its rally for a fifth session, with WTI near $94.45 and Brent around $106 in late U.S. trading. Intensified Houthi and Iranian attacks, Saudi-related security concerns, and uncertainty over Persian Gulf shipments added a geopolitical risk premium; President Donald Trump’s temporary easing of restrictions on Russian energy did not erase it.

That matters beyond the energy complex: sustained higher crude prices would complicate the disinflation backdrop and weigh particularly on energy-importing economies. The day’s oil move therefore linked Middle East security directly to the inflation data markets were awaiting.

South Korean shares suffered their worst session in 21 months, with the Kospi falling 5.5% after an intraday drop of as much as 7%. Samsung Electronics and SK Hynix were among the hardest hit as investors unwound crowded AI and memory-chip trades amid concerns over Chinese competition and the durability of AI investment.

The pressure was not confined to Korea: Chinese equities remained well below their June peak as investors questioned the scale of prospective Beijing support, while broader technology shares faced headwinds despite Microsoft closing at a record. The selloff puts the sustainability of AI-linked spending, rather than enthusiasm for the technology alone, at the center of the sector’s valuation risk.

New York Fed President John Williams said one additional rate increase remained appropriate in 2026, while further tightening should not be necessary in 2027. That tempered the outlook for future hikes: Treasury yields edged lower and the dollar fell, though the 10-year yield remained just above 5.22%. Kevin Hassett also said the Fed could hold rates if inflation continued to slow.

The next test is September CPI, for which consensus expected a 0.6% monthly increase and a 3.6% annual rate, both above August readings. Germany’s final September inflation rate also rose to 3.3% from 2.9%. The combination leaves central banks with little room to declare victory, even as Williams’s comments reduced expectations of aggressive tightening in 2027.

The IMF lifted its 2026 global growth forecast to 3.1% from 3.0%, saying strong AI-infrastructure investment was helping offset higher energy prices and conflict. But the forecast came with a significant downside: a sharp reversal in AI investment could reduce global GDP by 1.1% by 2028 and U.S. output by 1.8%.

The fund also pointed to elevated government-bond yields, high debt, and a prolonged Middle East conflict as financial-stability risks. The message is that the same forces supporting growth—especially AI spending—could amplify the damage if investment falters, while energy disruption would add pressure to already exposed importers.