AFS Markets Blog: Morning 09/09/2026

*Meanwhile in markets, if you look at the score cards on what has been hit in US-Iran tit for tat strikes overnight, you expect crude and natural gas futures prices to soar and drag bond yields much higher. Punters are rather unfazed though;
*According to wire reports, the US military said it had destroyed five Iranian crude tankers in response to an Iranian missile attack on a US warship. The Iran Revolutionary Guard Corps claimed that in retaliation it attacked another two US ships, eight oil tankers, and another ten “violating ships” that tried to pass the Strait of Hormuz without Tehran’s approval. Furthermore, Iran also launched missiles targeting US bases in Jordan;
*The fog of war doesn’t allow us macro market tourists to deduce what really transpired since late Tuesday. But disclaimers aside, the whole episode has a substantial amount of Baghdad Bob vibes about it (for the younger generations: Baghdad Bob was Iraq dictator Sadam Hussein’s spokesman, known for blatantly lying when the cameras turned on). I am talking in particular about Iran’s claims about its strikes on ships. Notice the lack of the word ‘destroyed’;
*Brent crude futures earlier in the session rose to $99.68 a barrel, a smidgen above yesterday’s high, before sagging to $98.8 a barrel. Remember that oil futures prices jumped 2.5% yesterday on Yemeni Houthis striking Saudi energy infrastructure, forcing the Saudis to halt said facilities;
*The level to watch for Brent is $102 per barrel, which is where we ended up after the breakdown of the US-Iran Memorandum of Understanding. Prices subsequently dropped below $80 a barrel on a weeks’ long pause in tit-for-tat strikes;
*Dutch natural gas future prices, which are much more important for us energy-import reliant Europeans and our ECB overlords, are going places. Earlier in the session we reached a new post-2022 high of 78.3 euros per MWh.  I believe that the ECB will hike again in December on energy prices staying higher for longer. While another quarter point hike in December is fully priced in, sell-side consensus – for what it’s worth – sits motionless on a hold for the meeting that month;
*US Treasury yields have barely budged since yesterday and thus remain close to their highest level in years. Ahead of the Treasury’s expected long bond buyback, the 30y yield sits at 5.24, which is basically where it was before US officials started to jawbone it lower;
*Asian equity markets are quiet this morning with little movement. In the greater scheme of things, broad markets remain close but below their highs. Though notably European equities have started to underperform. Perhaps because of recent EUR strength and the notion that the ECB will be more forthcoming with rate hikes than the Fed – if the Fed will every follow through on Chairman Warsh’s tirades against elevated inflation;
*AI stocks are the surprising outperformers this month. Since early last week, the twenty AI stocks on our screener (ranging from hyperscalers to hardware companies) are up by an average seven percent. While AI queen Nvidia and TSMC are close but below their ATHs, the other eighteen stocks are 10-50% below their ATHs;
*In FX the dollar is weakening notably this morning, with USDJPY matching the intervention low of 153. EURUSD has risen to 1.164, just a two-week high;
*Elsewhere, pricing for the September FOMC is static at broadly a coin toss, with 15bps of hikes priced. As we emphasized before, Friday’s US CPI will likely end up determining the outcome of the meeting. For the record: I expect a quarter point hike because I think Chairman Warsh must follow through on his Jackson Hole performance or risk losing his rather thin credibility. Paradoxically, he might have a hard time convincing many FOMC members of the merits of a hike. Governor Waller’s recent remarks that underlying inflation is actually headed lower come to mind here. And Waller is speaking for a broader contingent here. On the other hand, at least three regional Fed Presidents take every chance they get to push for a hike;
*Looking ahead, besides the Treasury buyback the calendar for today is empty. We have the ECB tomorrow, but that should be a non-event. A well-telegraphed hike, no forward guidance despite hawkish undertones. And journos likely quizzing President Lagarde incessantly on her job hopping (and that of her colleague Board Member Schnabel).