By Anna Szymanski
Sept 25 (Reuters) – Geopolitics initially took center stage this week, as the United Nations General Assembly kicked off and Chinese President Xi Jinping headed to Washington, but these meetings have ended up offering little more than talk. It was in the bond market where we really saw some action.
While the annual meeting of global leaders in New York rarely produces market-moving news, there were hopes that this year’s event could restart negotiations to end the stalled conflict between Washington and Tehran. Sentiment about the prospects for a breakthrough seesawed throughout the week, taking crude oil prices for a wild ride in the process.
During US President Donald Trump’s speech at the UN on Tuesday, he employed his now familiar rhetorical mix of carrots and sticks. The president warned Tehran that he could annihilate the Islamic Republic if there were no deal to end the war, while also suggesting that an agreement could come soon – or potentially “right after the midterm elections.”
There did appear to be a genuine diplomatic push, however. US envoy Steve Witkoff said that the US and Iran engaged in lengthy talks on Tuesday on the sidelines of the UN meeting through mediators.
Hopes for a breakthrough, coupled with news of the earlier-than-expected restart of Saudi Arabia’s East-West Pipeline, saw oil prices dip below $100 a barrel early in the week. However, the reprieve was short-lived. The apparent lack of immediate diplomatic progress – and further Houthi strikes against Saudi Arabia – helped lift Brent crude to as high as $107/bbl on Thursday.
But prices edged slightly lower later in the day as reports suggested US and Iranian negotiators were exploring a phased path out of the war that would involve Tehran reopening Hormuz and Washington lifting its economic blockade.
Whatever the outcome on that front, in the Gulf itself, a meaningful amount of crude does appear to be finding its way out, as evidenced by the uptick in Asian crude imports this month. (For more on the complex system that Gulf producers are increasingly using to ship oil out of the region, read Ron Bousso’s breakdown.)
Yet US fuel prices remain elevated and that continues to be a sore spot for President Trump. His approval rating fell to 32% in the new Reuters/Ipsos poll, the lowest of his political career. Importantly, just 17% of respondents said they approved of his handling of the cost of living.
Sky-high US prices for diesel – the fuel that powers much of the economy – aren’t helping. They hit a new record of more than $6.50 per gallon this week. This led the president to float the idea of a diesel export ban on Tuesday.
While that might make political sense ahead of the midterms, the economics suggest it would be counterproductive. Energy Secretary Chris Wright seemed to walk back the president’s comment on Wednesday, saying that the administration was not seeking an outright export ban and was instead working with US refiners to boost domestic supplies in a “simpler, voluntary, cooperative fashion”.
Elevated energy prices are causing other problems, though. High fuel costs, in combination with strong US and European PMI data and a weak US Treasury auction, helped kick off a fierce global bond rout on Wednesday and Thursday. The benchmark 10-year US Treasury yield leapt to a fresh post-financial-crisis high above 5.2%, while the 30-year yield hit a 22-year high of just over 5.46%. Elsewhere, Japan’s 10-year yield jumped to a 30-year high.
Moving to the other major geopolitical event of the week, US President Donald Trump welcomed Chinese President Xi Jinping to Washington on Wednesday for a three-day visit. It’s the Chinese leader’s first trip to the US in nearly three years and his first to Washington in more than a decade. However, bilateral talks on Thursday produced no major breakthroughs on trade, AI or global security.
Earlier rounds of talks between Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng saw the two countries agree to extend their existing trade truce by two months to January 10. They also agreed on Monday to set up a formalized dialogue on AI, according to Bessent.
Meanwhile, President Trump appeared to once again dismiss safety warnings about AI – or, as he now calls it, “Super Intelligence.” But AI security fears were compounded on Thursday after Australia said an OpenAI agent had breached a government health data portal in June.
AI safety concerns were also a major talking point back at the UN General Assembly, where industry leaders reiterated recent calls for caution. Anthropic CEO Dario Amodei told the council that poorly managed AI could pose a risk to humanity, while OpenAI CEO Sam Altman called for international cooperation and “democratic processes.”
But investors, for their part, appeared to put aside pesky worries about the future of our species, amid enthusiasm for Meta’s new AI assistant Muse. The tool, which allows users to delegate tasks such as shopping and travel-booking to an AI agent, overtook ChatGPT as the top free app on Apple’s App Store and Google Play Store in the US and Canada.
Meta’s shares surged more than 11% on Monday and chip stocks rallied too, with the Nasdaq notching two consecutive record closing highs. However, Muse also weighed on financial and online travel stocks, amid concerns the new tool could disrupt their business models, another reminder that AI could create as many winners as losers.
Looking ahead to next week, the data diary offers quite a bit for the Federal Reserve to chew on, with August job openings figures coming on Tuesday, the Fed’s preferred PCE inflation gauge on Wednesday and September payrolls on Friday.
Before you go, take a look at some questions ROI columnists have recently been exploring:
• Is the latest bond rout actually a sign that the 6-year bear market could be nearing its end?
• Could AI help the US and UK cut their government debt?
• Which global pipeline is Africa increasingly dominating?
• Are AI leaders’ real concerns actually less Terminator and more Adam Smith?
• What new phase are global electricity grids entering?
• Is Kevin Warsh’s Fed more “touchy feely” than data-driven?
• Are passive investors even more exposed to tech than they realized?
• Which critical metals are the biggest beneficiaries of the global EV boom?
• Why aren’t markets buying Indonesia’s nickel production curbs?
• Is the US developing a two-tiered fuel market?
• Could AI democratise refined fuel trading?
• Which ASEAN equity laggards could soon become leaders?
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