Oil went into the weekend at its highest level since April and came out of it a little lighter, because the one man who could have sent it higher chose not to. President Trump said on Sunday there would be no US strike on Iran that day, Qatari negotiators are shuttling demands between Washington and Tehran, and Brent crude has slipped about 2 per cent this morning to roughly $114 a barrel. That breathing space is welcome, but it is not peace, and it arrives at the start of one of the most crowded weeks of the year. The Federal Reserve, Microsoft, Alphabet and the UK Budget all land on Wednesday.
The 60-Second Market View
Friday was a split day on Wall Street. The Dow Jones fell 1.23 per cent to 52,215.16 as oil jumped, while the Nasdaq Composite slipped only 0.21 per cent to 25,955.34 and the S&P 500 lost 0.52 per cent to 7,623.68. After Thursday’s technology rout, that looks like the selling moved from chip stocks to the rest of the market rather than stopping. The FTSE 100 closed 0.32 per cent lower at 10,690.36.
This morning the tone is calmer. S&P 500 futures are up about 0.2 per cent, Dow futures a little more. In Asia, Tokyo’s Nikkei is down about half a per cent and South Korea’s KOSPI is off 0.6 per cent, while Hong Kong’s Hang Seng is up 0.4 per cent and Australia is a touch higher. Brent is near $114.45 and US crude near $101. Gold futures have edged up to about $4,028 an ounce, sterling is steady near $1.338 and the US 10-year Treasury yield sits just under 5 per cent at 4.97 per cent. Bitcoin briefly fell below $80,000 overnight before steadying around that line.
What Happened Over the Weekend?
Friday’s oil jump had three ingredients. Reports of strikes by Iranian-backed Houthi forces on Saudi energy infrastructure, an oil spill from a damaged tanker reaching beaches in the northern UAE, and President Trump’s talk of “another little Epic Fury” if Iran would not negotiate. Brent settled up more than 3 per cent at $116.72, and energy shares rallied while almost everything else fell.
The weekend took some heat out of that. Trump ruled out military action on Sunday as Qatar carried US demands to Iranian officials. Saudi media reported that Iran had offered, through Pakistan, to reopen the Strait of Hormuz in exchange for an end to the US blockade of its ports. Iranian state media called that report false, so treat it as noise until someone confirms it. There were also unverified reports of a strike on an Iranian missile launcher near the strait and Iranian claims of a downed US drone, which is a reminder that this conflict can flare without warning.
On the supply side, US Treasury Secretary Scott Bessent says Gulf oil exports are back above pre-war levels at 17 to 18 million barrels a day using alternative routes, and the US military says the main shipping lanes are now clear of mines. That matters, because it suggests some of the oil price is fear rather than missing barrels.
The Big Story: A Pause in the Oil Scare, Not an End to It
The move this morning is small, but it tells you how the oil market is being priced. Brent is not sitting above $110 because the world is running out of crude. It is sitting there because traders are paying for insurance against something going badly wrong in the Gulf. When the threat of a strike fades, that insurance gets cheaper, and that is what you are seeing today.
Why does it matter beyond the oil market? Because expensive energy is the thread that ties this week together. The Fed meets on Tuesday and Wednesday with oil well above $100 and inflation still sticky; markets expect it to hold rates at 3.75 to 4 per cent, but Chair Kevin Warsh’s tone on energy will shape how bond markets react. In Britain, the Chancellor, John Healey, delivers his first Budget on Wednesday against a 10-year gilt yield near 5.37 per cent, the highest borrowing costs in the G7, and consumer confidence that fell last week by the most since the pandemic. Higher fuel bills make every one of those problems harder.
The reaction so far is measured. Futures are up modestly, gold has firmed a little rather than fallen, and the dollar is slightly softer. Nobody is betting on a breakthrough yet. The sensible reading is that markets have stepped back from the worst case without believing the best case.
What to watch is the gap between the headlines and the ships. If tanker traffic keeps rising and the diplomacy holds, the oil premium can keep draining, which would help bonds and give equities room ahead of the Fed. If Israel’s election on Tuesday or a fresh incident at sea changes the mood, Friday’s high is only a couple of dollars away.
FX
The dollar index is a touch weaker at 101.66. EUR/USD is near 1.122 and GBP/USD is steady around 1.338, with sterling waiting for Wednesday rather than trading on anything today. USD/JPY sits near 157, which keeps the yen close to the area where Japanese officials have tended to get uncomfortable, and the Bank of Japan meets on Friday. EUR/GBP is near 0.838.
Equities
The pattern of the last two sessions is worth noticing. On Thursday technology took the beating; on Friday it was the turn of the Dow, banks, consumer names and anything that suffers when fuel costs rise, while energy shares climbed to records. That rotation is typical when oil spikes: the market sells the companies that pay for energy and buys the ones that produce it.
The big test is earnings. Microsoft and Alphabet report after the US close on Wednesday, with Amazon and Intel on Thursday. Alphabet has already fallen more than 20 per cent from its May peak, so expectations are lower than they were. After Meta was punished last week for spending heavily on AI, investors want proof that the money is turning into revenue.
Bonds
The US 10-year yield is 4.97 per cent and the 2-year is 4.66 per cent, both a little lower this morning. The 5 per cent level on the 10-year has been the line all month: below it, shares get some breathing room; above it, valuations come under pressure. In the UK, the 10-year gilt yields about 5.37 per cent and the 30-year about 5.77 per cent. Gilts will be the market’s verdict on the Budget, and after the 2022 mini-budget nobody needs reminding how fast that verdict can arrive.
Commodities
Brent is down about 2 per cent at $114.45 and US crude is near $101 after Friday’s surge. US natural gas has dropped almost 5 per cent. Gold futures are up about half a per cent near $4,028, holding the $4,000 area after last week’s sharp drop, and silver is slightly firmer near $54. Copper is a little softer.
Crypto
Bitcoin dipped to about $79,200 overnight on reports of US military readiness before recovering to around $80,000, and ether is near $2,320. Crypto continues to trade like a high-risk technology stock rather than a safe haven, so it is worth watching as a mood gauge this week rather than a hiding place.
Today’s Economic Calendar
09:00 — German Ifo business climate (October) — a read on whether German firms are coping with high energy costs; forecasts sit around 90, close to September’s 89.9.
All day — Middle East headlines and tanker traffic in the Gulf — the biggest single driver of oil, and through oil, inflation expectations.
This week — Tuesday brings US durable goods and consumer confidence plus Israel’s election; Wednesday the Fed decision at 18:00 UK time, Microsoft and Alphabet results and the UK Budget; Thursday US GDP, PCE inflation, the European Central Bank and Amazon; Friday the Bank of Japan and eurozone growth figures.
Levels Traders Are Watching
These are reference points, not predictions. For Brent, Friday’s settlement at $116.72 is the nearby high and $110 is the floor that has held through October. On the S&P 500, Friday’s close near 7,624 is the first marker, with 7,600 the round number below. The Nasdaq Composite’s 26,000 remains the line traders are arguing over. Gold’s $4,000 is the obvious psychological level. In bonds, 5 per cent on the US 10-year is the level that decides whether equities can breathe. For sterling, $1.34 is the pivot, and on the FTSE 100, 10,700 is the nearby reference. Bitcoin’s $80,000 is being tested right now.
Where This Leaves Traders
The honest read this morning is cautiously defensive. The weekend removed the most immediate risk, a US strike, and oil has eased accordingly, but nothing has actually been agreed, the Strait of Hormuz is still far from normal, and Friday showed how quickly oil can move on a headline. The evidence for calm is the modest rebound in futures and the drift lower in bond yields. The evidence for caution is everything that lands in the next five days.
What would change the view is fairly clear. A confirmed diplomatic step that lets more tankers through would take pressure off oil, bonds and the parts of the stock market that pay for energy. A fresh attack, a hawkish Fed or a Budget that spooks the gilt market would do the opposite. The markets worth keeping on screen are Brent, the US 10-year yield, Nasdaq 100 futures ahead of Microsoft and Alphabet, GBP/USD and the 10-year gilt into Wednesday.
Weeks like this create opportunity because volatility rises around fixed events, but they also punish anyone who trades every headline. For beginners, the lesson from this morning is that markets price fear as well as facts, and a fall in oil on a quiet Sunday says more about the fear than the barrels. If you want to understand how you make decisions when the news is this busy, the free Samuel & Co Trading Trader Assessment is a sensible place to start before Wednesday arrives.
