Morning Bid: Forever war?

• Crude oil hit its highest level since late May above $100/barrel, with six-month Brent futures approaching $90/bbl following escalating Gulf tanker attacks
• Trump's proposed tax relief plan would cost the Treasury over $1 trillion in additional borrowing if Republicans win the midterms
• The ECB is expected to hike rates by a quarter-point to 2.5%, with markets pricing in two more rate increases over the next 12 months as European natural gas futures reach three-year highs

Market Summary: Energy Markets Surge on Iran War Extension, ECB Rate Hike Expected

Key Developments:

President Trump announced the Iran war will not end until after November midterm elections, triggering sharp moves in energy and bond markets. The conflict, now six months old, saw its largest wave of attacks on Gulf oil tankers to date on Wednesday.

Market Impact:

• Crude oil prices surged above $100/barrel, the highest since late May
• Six-month Brent crude futures approaching $90/barrel
• 10-year Treasury yields hit multi-year highs, nearing the critical 5% level
• European natural gas futures reached three-year highs

Key Figures:

• Treasury Secretary Bessent's bond buyback program disappointed markets with only $6 billion in longer-dated bonds scheduled for Thursday
• Trump promised $500 checks to all Americans if Republicans win midterms, estimated to cost over $1 trillion in additional Treasury borrowing
• White House advisers, including VP JD Vance and Secretary of State Marco Rubio, privately warned the conflict could extend through Trump's presidency (per WSJ)

Central Bank Action:

The European Central Bank is expected to raise its main policy rate by 0.25 percentage points to 2.5% on Thursday, with markets pricing in two additional hikes over the next 12 months due to Iran-related energy price inflation.

Upcoming Data:

Thursday brings U.S. August Producer Price Index (PPI) data, weekly jobless claims, and existing home sales figures.

Other Concerns:

AI sector faces fresh jitters over software company valuations from new models, compounded by apocalyptic warnings from Anthropic employees about AI risks.