Morning Bid: Forever war?

By Mike Dolan

Sept 10 (Reuters) – Energy and bond markets are on edge once again after U.S. President Donald Trump said the Iran war would not end until after November’s midterm elections. That came amid the most intense attacks on Gulf shipping in the conflict so far.

Meanwhile, markets await a likely European Central Bank interest rate rise and the first of the week’s U.S. inflation updates on Thursday, as Treasury Secretary Scott Bessent’s bond buyback salvo appeared to flop after details of the operation disappointed.

Crude oil closed at its highest level since late May above $100 per barrel on Wednesday, and 10-year Treasury yields hit their highest in three years, fast homing in on the 5% milestone.

That came after a wave of tit-for-tat attacks on oil tankers in the Gulf, the biggest since the Iran war started six months ago. Meantime, a planned $6 billion buyback of longer-dated bonds on Thursday disappointed some investors who had wanted more.

President Trump indicated in a primetime speech on Wednesday that an end to the war and fuel price relief would only come after the midterm elections, remarks that saw six-month Brent crude futures creep further toward $90/bbl.

The Wall Street Journal reported later that top White House advisers, including Vice President JD Vance and Secretary of State Marco Rubio, have privately warned Trump that the conflict could extend through the remainder of his presidency.

In his speech, Trump also promised every American $5,000 checks if the Republicans win the midterms. That would cost the Treasury more than $1 trillion, which it would likely have to borrow.

U.S. producer price inflation data for August is up next on Thursday after the ECB policy decision, which is likely to be a quarter-point hike to 2.5%, just as European natural gas futures hit their highest in three years.

Meantime, fresh jitters in the AI world about damage to software firms from new models, as well as more reports of rogue AI agents, were compounded by headline-grabbing warnings from Anthropic employees about an end to humanity.

Markets won’t be able to price that, but they may have to consider the regulation of AI development that those sorts of apocalyptic forecasts call for.

Chart of the day

The ECB is widely expected to lift its main policy interest rate by a quarter percentage point to 2.5% on Thursday as inflation rates have been aggravated by Iran-related energy price spikes.

It’s the second hike of the year and financial markets don’t expect it to stop there, with two more rate rises priced into European money markets over the next 12 months.

Today’s events to watch

• U.S. August PPI (8:30 a.m. EDT), weekly jobless claims (8:30 a.m. EDT), August existing home sales (10 a.m. EDT)

• European Central Bank interest rate announcement (8:15 a.m. EDT)

• U.S. 30-year bond auction (1 p.m. EDT)

Before you go, check out my latest column on the signs the Trump administration is inching toward a weaker dollar – and the hurdles such a plan could face.

And listen to the latest episode of the Morning Bid daily podcast. Subscribe to hear Reuters journalists discuss the biggest news in markets and finance.

Want to receive the Morning Bid in your inbox every weekday morning? Sign up for the newsletter here. You can find ROI on the Reuters website, and you can follow us on LinkedIn and X.

Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.

(By Mike Dolan)