Oil prices higher as US-Iran continue skirmishes in Gulf

EU mid-market update: Oil prices higher as US-Iran continue skirmishes in Gulf; G20 Finance Ministers meet in NC; Musk plans to take the turbine bottleneck in-house.

Notes/observations

- Hormuz is live again first time in a month. Overnight U.S. strikes hit Iranian rocket launchers on Larak Island after CENTCOM observed IRGC forces preparing to seed the strait with sea mines; Tehran answered with claims of missile and drone strikes on U.S. bases in Jordan and the UAE, plus reports of a supertanker struck by mines. Commercial transits remain a fraction of the pre-war ~130 vessels per day. Brent is up more than 2% near $90.50, WTI near $85.50. Six months into the conflict the refined-product squeeze remains the tighter constraint: global refining capacity is still roughly 10% impaired from combined Gulf damage and Ukrainian strikes on Russian plants. Reminder: on Friday, Axios reported that by mid-Sept, US hopes to widen the main channel of the Hormuz strait so that at least 50 ships can transit in and out of the Gulf every night to reach 60-70% of pre-war oil exports.

- Warsh clarified the reaction function and simultaneously raised the political and AI stakes. At Jackson Hole he stated that financial conditions show few signs of restraint and that the summer’s better inflation prints had not convinced him the underlying trend was improving. The presumption has flipped: the default is now to raise rates unless the data clearly argue against it. September hike odds sit near 60% v under 50% before Warsh’s speech. The decisive input will be the US jobs report this Friday and August CPI on September 11th. He also devoted a full section to AI as a potential new factor of production, noting that annualized token sales at the two leading labs alone already exceed $100B - up more than 500 % year-on-year - and raising open questions on productivity, capital intensity, token pricing (frontier premium versus commodity), and how the surplus will be distributed. Holding without strong data justification would revive the July credibility questions the speech was meant to quiet; a hike would land weeks before the midterms. The committee remains split with plenty of hawkish speak recently.

- G20 finance ministers and central-bank governors convene today and tomorrow in Asheville under the U.S. presidency. Bessent is hosting with a “back to basics” agenda: growth, global imbalances, sovereign-debt transparency, resilient supply chains for critical resources (including energy), and private-sector innovation. He is also expected to press counterparts to sever remaining commercial ties with Iran. Warsh is attending alongside the Treasury Secretary. Ueda/Katayama also arrive with USD/JPY near 160; Pan Gongsheng with Washington openly targeting China’s external surplus; Lagarde/Cipollone with Europe importing another oil shock.

- Bessent’s G20 pitch is growth through forced rebalancing: he said he wants partners to make China’s $1.2T trade surplus harder to sustain, while continuing bilateral tariff reductions on non-strategic U.S.-China trade. On Japan he effectively blessed normalization without asking for it - yen moves are “contained,” Abenomics has run its course, and he expects Ueda to act appropriately as fiscal policy becomes less interventionist. The Iran rhetoric was mostly a restatement of last week’s Economic Outcast campaign; the useful new commitment is weekly bank actions, while the unresolved question remains whether Treasury will ever impose secondary sanctions on a major Chinese institution rather than Iran’s smaller financial conduits.

- Musk is taking the turbine bottleneck in-house. SpaceX and Tesla are each targeting 100 GW/year of solar capacity “as fast as possible,” yet natural gas will still be required to supplement and bootstrap for several years. The binding constraint on turbine output is casting of blades and vanes - the hottest, most specialised components. By doing that casting in-house at SpaceX he claims an acceleration of up to 18 months - “a profound game-changer.” The remark lands against an already visible build-out: SpaceX/xAI data-centre power is tracking toward 10–15 GW by end-2027, a draw that could rival a large LNG terminal if met entirely with gas while grid interconnection queues stretch to multi-year waits.

- China’s August manufacturing PMI rose 0.6 points to 49.8. Production and new-orders indices both crossed 50, large-enterprise PMI reached 50.6 and high-tech/equipment manufacturing stayed expansionary. Non-manufacturing held at 49.0, dragged by construction. Extreme weather was cited as a residual drag. The print is the cleanest stabilisation signal in months but leaves the sector still contracting and does not yet confirm demand broad enough to shift growth forecasts.

- The Economist’s Kremlin sources say Putin increasingly treats the whole Donbas as a minimum result and believes outright defeat could endanger him personally. Moscow is therefore trying to buy another campaigning season without declaring a second mobilisation: another 300–400K men, raised by forcing recruitment quotas down onto the regions, alongside preparations for a renewed strike campaign against Ukraine’s power system. Ratcliffe’s sudden Moscow trip and Finland’s request for Swedish support on its Russian frontier fit the same concern: not that Russia is close to breaking Ukraine, but that Putin may need a discontinuity before five years of war harden into evidence that the war failed.

- Cross-asset: Asia finished mixed rather than softer: Nikkei -0.2%, KOSPI +0.5%, CSI 300 +0.4%—Korea had been down as much as 3.6% intraday before Samsung/SK Hynix dragged it back above Friday’s close; the earlier MSCI Asia ex-Japan -0.6% print predates that late reversal. Europe: STOXX 600 -0.1%, DAX -0.6%, with energy outperforming on oil. U.S. futures have also repaired most of the overnight weakness: S&P ~-0.1%, Nasdaq ~+0.1%. Rates/FX: UST 2Y ~4.33%, USD/JPY ~159.6, EUR/USD ~1.159. Commodities: Brent +~2.7% at $90.5–90.7, WTI +~2.6% at $85.6; gold -~0.6% around $4,425. Crypto: BTC ~flat around $78.1K, ETH ~-0.8% around $2.45K.

Asia

- China Aug (Govt Official) Manufacturing PMI: 49.8 v 49.6e (2nd month of contraction).

- Japan July Retail Sales M/M 2.4% v 1.6%e; Y/Y 4.0% v 3.3%e.

- Japan July Preliminary Industrial Production M/M: +0.1% v -0.7%e; Y/Y: 4.1% v 3.3%e.

- South Korea July Industrial Production M/M: +0.2% v -0.5%e; Y/Y: 3.6% v 4.7%e.

- New Zealand Aug ANZ Business Confidence: 53.7 v 56.1 prior; Activity Outlook: 48.2 v 49.3 prior.

- Australia July Private Sector Credit M/M: 0.6% v 0.7%e; Y/Y: 8.4% v 8.6% prior.

Mid-East

- Turkey/Saudi/Pakistan to meet in Istanbul on Monday (Aug 31st) for 1st committee meeting under joint defense pact signed last month.

Global conflict/tensions

- Weekend skirmishes between the US and Iranian forces in the Middle East. Brent crude trades above $90/bbl (+$0.70) and WTI at $85/bb.

- US military stuck Iranian rocket launchers in the Strait of Hormuz.

- Central Command noted that international shipping lanes were open; confirmed successfully cleared sea mines laid in Strait of Hormuz.

- IRGC confirmed had launched attack on two US bases in Jordan with ballistic missiles in response to US attack on Larak Island.

- IRGC stated that a super tanker caught fire, stopped after hitting two naval mines in Strait of Hormuz; tanker tried to cross southern part of Strait illegally.

- Pres. Trump: posted on Truth Social that Iran’s Kharg Island was being blown to smithereens!!!

- US Treasury Sec Bessent stated that would impose additional Iran secondary sanctions every week, starting with banks.

Europe

- Fitch affirmed France's sovereign rating at A+; Outlook stable.

- Iceland voted against restarting EU membership talks.

Trade

- Treasury Sec Bessent ahead of G20 stated that the world could not accept a China with a sustained $1.2T global trade surplus. Would encourage G20 countries at finance meeting to re-examine terms of trade with China to reduce global imbalances.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [FTSE +0.29% at 10,824.26, DAX -0.62% at 26,419.50, CAC-40 +0.13% at 8,412.14, IBEX-35 +0.16% at 20,094.28, FTSE MIB +0.40% at 52,825.00, SMI -0.11% at 14,383.30, S&P 500 Futures -0.14%].

Market focal points/key themes: European equities opened softer as the weekend’s U.S.–Iran military exchanges over Larak Island pushed Brent through $90 and forced desks to reprice both geopolitical risk and the higher probability of Fed and ECB hikes. Energy majors (OMV, TotalEnergies, Repsol) captured the oil beta with gains of 1–1.5%, yet the STOXX 600 still eased 0.1% while the DAX underperformed and London stayed closed; Warsh’s Jackson Hole insistence that financial conditions remain insufficiently restrictive lifted September Fed odds near 60 % and reinforced expectations of another 25 bp ECB move next week. Single-name action was sharply polarised: OHB jumped more than 7 % on a nearly €1 bn SES contract for 18 IRIS² satellite platforms, and Soitec rose 3.5 % after its CEO confirmed multi-year photonics capacity reservations that turn the >$200 m Photonics-SOI target into a floor, while Bakkafrost dropped 7.5 % on a clear Scottish-driven Q2 miss and Siemens Energy fell 3.5 % once Musk’s in-house turbine-blade foundry plans were read as a potential erosion of the scarcity premium. Airlines and other oil-sensitive travel names drifted lower on the dual jet-fuel and route-risk hit, leaving the market focused on this week’s dense data sequence and the ECB’s September 10th decision.

Equities

- Consumer discretionary: Lufthansa [LHA.DE] –1.0%; TUI [TUI.DE] –1.0% (shared oil/travel read-through: Brent >$90 raises jet-fuel exposure while renewed Gulf attacks add route/geopolitical risk), Bakkafrost [BAKKA.NO] –7.5% (open weakness expanded).

- Industrials: Siemens Energy [ENR.DE] –3.5% (roughly flat indication before the open → now –3.5%; [L━●━━━━H]; Musk says SpaceX is building an in-house foundry for gas-turbine blades/vanes—the bottleneck he says can bring turbines online up to 18 months earlier. The market is treating this as a threat to the scarcity/lead-time premium embedded in Siemens Energy; importantly it is not yet evidence SpaceX can manufacture complete competing utility-scale turbines, and Musk simultaneously validates the extraordinary underlying gas-turbine shortage. Siemens Energy ~€144.5 vs Friday ~€149.7), Rheinmetall [RHM.DE] –1.0% (about –0.9%; no sufficiently strong fresh company-specific catalyst identified after the cross-market check—the move is modest versus the larger DAX weakness).

- Technology: Soitec [SOI.FR] +3.5% (AI-optics catalyst; CEO says >10 photonics customers are moving to multi-year capacity reservations with deposits and fixed prices, ~80% expected signed within 1–2 weeks; FY Photonics-SOI revenue >$200m is now described as a floor, not merely an outlook point; UBS estimates ~95% silicon-photonics substrate share).

Speakers

- Financial Stability Board (FSB) Bailey said to warn of threat to stability posed by new AI models.

- Sweden Central Bank (Riksbank) Dep Gov Jansson stated that inflation risks being elevated but have scope to wait and see.

- China Foreign Ministry Spokesman Guo stated that the country had never sought a trade surplus.

- China Commerce Ministry (MOFCOM) stated to target CNY60T retail sales by 2030 and to expand automobile consumption.

Currencies

- USD was slightly softer in a quiet session. Dealers noted that hawkish Fed guidance from Fed Gov Wardh on Friday and rising Middle Eastern tensions did little to prompt any firm trend for the greenback.
Fed Gov Warsh stressed that must be confident that underlying inflation was moving to objective, clearly and at sufficient speed. Otherwise it had work to do. Fed rate hike probabilities continued to rise on Warsh’s comments from Fri. The probability of a rate increase was now >60%.

- EUR/USD remained contained within recent ranges with the pair at 1.1590 by mid-session. Focus on EU inflation data. Analysts saw a pickup in YoY inflation readings.

- USD/JPY did test above 160 on Friday following Warsh’s Jackson Hole comments but remained within its recent range. Pair at 159.65 by mid-session.
USD/USD at 159.65.

- The 10-year German Bund yield last at 3.28%, France 10-year Oat at 4.13% and 10-year Gilt yield at 5.06% (Fri close); 10-year Treasury yield: 4.71%; 10-year JGB: 2.91%.

Economic data

- (FI) Finland July Retail Sales Volume Y/Y: 2.0 v 2.6% prior.

- (SE) Sweden Jun Non-Manual Workers Wages Y/Y: 3.4 v 2.8% prior.

- (DK) Denmark July Unemployment Rate: 2.7% v 2.7% prior; Gross Unemployment Rate: 3.1% v 3.1% prior.

- (ZA) South Africa July M3 Money Supply Y/Y: 8.6% v 9.3% prior; Private Sector Credit Y/Y: 7.4% v 7.8% prior.

- (HU) Hungary July PPI M/M: 1.4% v 0.1% prior; Y/Y: +1.0% v -0.4% prior.

- (TR) Turkey July Unemployment Rate: 8.1% v 7.6% prior.

- (TR) Turkey Q2 GDP Q/Q: 1.1% v 1.0%e; Y/Y: 2.3% v 2.5%e.

- (TH) Thailand July Current Account Balance: -$1.6B v -$1.7Be; Overall Balance of Payments (BOP): -$3.6B v +$0.6B prior; Trade Account Balance: -$0.1B v -$2.7B prior; Exports Y/Y: 22.3% v 21.1% prior; Imports Y/Y: 35.5% v 48.9% prior.

- (PL) Poland Q2 Final GDP Q/Q: 1.0% v 0.9% prelim; Y/Y: 3.9% v 3.8% prelim.

- (PL) Poland Aug Preliminary CPI M/M: 0.4% v 0.1%e; Y/Y: 3.4% v 3.1%e.

- (ES) Spain Jun Current Account Balance: €2.4B v €1.8B prior.

- (DE) Germany Aug CPI North Rhine Westphalia M/M: 0.2% v 0.9% prior; Y/Y:2.9 % v 2.7% prior.

- (DE) Germany Aug CPI Hesse M/M: 0.3% v 0.7% prior; Y/Y: 3.0% v 2.7% prior.

- (DE) Germany Aug CPI Bavaria M/M: 0.2% v 0.6% prior; Y/Y: 2.9% v 2.8% prior.

- (DE) Germany Aug CPI Brandenburg M/M: 0.3% v 0.7% prior; Y/Y: 3.1% v 2.7% prior.

- (DE) Germany Aug CPI Saxony M/M: 0.1% v 0.7% prior; Y/Y: 2.9% v 2.8% prior.

- (DE) Germany Aug CPI Baden Wuerttemberg M/M: 0.1% v 0.8% prior; Y/Y:2.6 % v 2.5% prior.

- (CH) Swiss Weekly Total Sight Deposits (CHF): 457.3B v 463.7B prior; Domestic Sight Deposits: 431.3B v 437.1B prior.

- (NO) Norway Sept Norges Bank Net FX transactions: +176M v -NK474m prior.

- (CZ) Czech July M2 Money Supply Y/Y: 5.0% v 6.1% prior.

- (HK) Hong Kong July Retail Sales Value Y/Y:4.5 % v 6.3%e; Retail Sales Volume Y/Y: 2.3% v3.9 %e.

- (HK) Hong Kong July M3 Money Supply Y/Y: 5.5% v 2.6% prior; M2 Money Supply Y/Y: 5.6% v 2.6% prior; M1 Money Supply Y/Y: -0.8% v -3.0% prior.

- (BE) Belgium Q2 Final GDP Q/Q: 0.0% v 0.0% prelim; Y/Y: 0.5% v 0.5% prelim.

- (IS) Iceland Q2 GDP Q/Q: -3.0% v +3.7% prior; Y/Y: -1.1%% v +3.8% prior.

- (IS) Iceland July Final Trade Balance (ISK): -39.4B v -40.6B prelim.

- (GR) Greece July Unemployment Rate: % v 8.0% prior.

- (GR) Greece Jun Retail Sales (Volume) Y/Y: 4.2% v 10.1% prior; Retail Sales Value Y/Y: 1.9% v 6.8% prior.

Fixed income issuance

- (DK) Denmark sold total DKK5.9B in 3-month and 6-month bills.

- (NO) Norway sold NOK2.0B vs. NOK2.0B indicated in 6-month Bills.

Looking ahead

- (US) G20 meeting in Ashville NC.

- (CL) Chile Aug IMCE Business Confidence: No est v 43.62 prior.

- 05:25 (EU) Daily ECB Liquidity Stats.

- 05:30 (EU) European Union to sell combined €7.0B in 2031, 2036 and 2040 NGEU bonds.

- 05:30 (ZA) South Africa announces details of upcoming I/L bond sale (held on Fridays).

- 06:00 (PT) Portugal Q2 Final GDP Q/Q: No est v 0.8% prelim; Y/Y: No est v 2.5% prelim.

- 06:00 (PT) Portugal Aug Preliminary CPI M/M: No est v -0.5% prior; Y/Y: No est v 3.0% prior; CPI EU Harmonized M/M: No est v -0.3% prior; Y/Y: No est v 3.1% prior.

- 06:00 (IE) Ireland Aug Preliminary CPI EU Harmonized M/M: No est v 0.1% prior; Y/Y: No est v 3.1% prior.

- 06:00 (RO) Romania to sell RON500M in 5% 2029 Bonds.

- 06:00 (NO) Norway announcement on upcoming bond issuance (held on Wed).

- 06:00 (IL) Israel to sell bonds.

- 06:30 (IN) India Q2 GDP Y/Y: 7.3%e v 7.8% prior; GDP GVA Y/Y: 7.3%e v 7.9% prior.

- 06:30 (IN) India July YTD Fiscal Deficit (INR): No est v 3.078T prior.

- 07:25 (BR) Brazil Central Bank Weekly Economists Survey.

- 07:30 (BR) Brazil July Nominal (overall) Budget Balance (BRL): -81.1Be v -166.0B prior; Primary Budget Balance (BRL): +6.4Be v -55.3B prior; Net Debt % GDP: 68.8%e v 68.5% prior.

- 08:00 (DE) Germany Aug Preliminary CPI M/M: 0.3%e v 0.8% prior; Y/Y: 3.0%e v 2.8% prior.

- 08:00 (DE) Germany Aug Preliminary CPI EU Harmonized M/M: 0.3%e v 0.9% prior; Y/Y: 3.1%e v 2.8% prior.

- 08:00 (ZA) South Africa July Trade Balance (ZAR): 15.0Be v 17.8B prior.

- 08:00 (UK) Daily Baltic Dry Bulk Index.

- 08:00 (IN) India announces details of upcoming bond sale (held on Fridays).

- 08:00 (ES) Spain Debt Agency (Tesoro) size announcement on upcoming issuance.

- 09:00 (FR) France Debt Agency (AFT) to sell €5.4-7.0B in 3-month, 6-month and 12-month bills.

- To sell €2.9B in 3-month bills.

- To sell €0.5B in 6-month bills (25 weeks).

- To sell €1.7B in 6-month bills (27 weeks).

- To sell €1.9B in 12-month bills.

- 09:00 (CL) Chile July Retail Sales Y/Y: 4.3%e v 5.1% prior; Commercial Activity Y/Y: No est v 4.8% prior.

- 09:00 (CL) Chile July Industrial Production Y/Y: -1.9%e v 1.3% prior; Manufacturing Production Y/Y: -4.6%e v -3.2% prior; Total Copper Production: No est v 447.3K prior.

- 10:30 (US) Aug Dallas Fed Manufacturing Activity: 1.6e v 1.3 prior.

- 11:00 (MX) Mexico July Net Outstanding Loans (MXN): No est v 7.472T prior.

- 11:00 (CO) Colombia July National Unemployment Rate: No est v 8.0% prior; Urban Unemployment Rate: 8.4%e v 8.0% prior.

- 11:30 (US) Treasury to sell 13-Week and 26-Week Bills.

- 16:00 (US) Weekly Crop Progress Report.

- 19:00 (AU) Australia Aug Final Manufacturing PMI: No est v 52.0 prelim.

- 19:01 (UK) Aug BRC Shop Price Index Y/Y: 0.9%e v 0.9% prior.

- 19:30 (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: No est v 77.5 prior.

- 19:50 (JP) Japan Q2 Capital Spending (Capex) Y/Y: -0.3%e v 0.0% prior; Capital Spending (ex-software) Y/Y: +1.6%e v -1.4% prior; Company Sales Y/Y: No est v 1.1% prior; Company Profits Y/Y: 15.2%e v 14.6% prior.

- 20:00 (KR) South Korea Aug Trade Balance: $30.5Be v $30.3B prior; Exports Y/Y: 63.0%e v 62.8% prior; Imports Y/Y: 25.0%e v 26.5% prior.

- 20:01 (IE) Ireland Aug Manufacturing PMI: No est v 55.1 prior.

- 20:30 (JP) Japan Aug Final Manufacturing PMI: No est v 55.1 prelim.

- 20:30 (KR) South Korea Aug Manufacturing PMI: No est v 53.1 prior.

- 20:30 (TW) Taiwan Aug Manufacturing PMI: No est v 55.1 prior.

- 20:30 (ID) Indonesia Aug Manufacturing PMI: No est v 50.2 prior.

- 20:30 (MY) Malaysia Aug Manufacturing PMI: No est v 50.7 prior.

- 20:30 (PH) Philippines Aug Manufacturing PMI: No est v 51.8 prior.

- 20:30 (TH) Thailand Aug Manufacturing PMI: No est v 54.2 prior.

- 21:30 (AU) Australia Q2 Current Account Balance (A$): -30.0Be v -27.1B prior; Net Exports of GDP: +0.1%e v -0.8B prior.

- 21:30 (AU) Australia July Building Approvals M/M: -5.0%e v +7.2% prior; Private Sector Houses M/M: No est v 0.4% prior.

- 21:45 (CN) China Aug Ratingdog Manufacturing PMI: 51.0e v 50.9 prior.

- 22:30 (HK) Hong Kong to sell 3-month and 6-month bills

- 23:35 (JP) Japan to sell 10-year JGB Bonds