This was the week oil ripped through $100 and everything else fell apart. Brent hit $107. WTI cleared $103. The Strait of Hormuz is running at a fraction of its normal traffic. Diesel prices are 90% above pre-war levels. And if you're wondering why stocks dropped four sessions straight, that's your answer. Higher energy costs feed into everything: freight, manufacturing, food, retail margins. There's no hiding from it.

It started on Monday with US markets closed for Labor Day. But oil didn't take the day off. Three more Iranian tankers got hit over the weekend. Just two vessels transited the Strait of Hormuz on Saturday. Six on Sunday. Before the war started, roughly 125 large commodity vessels passed through every day. Do the maths. Brent ticked up to $97.50, copper smashed through to an all-time high of $14,728 per tonne, and the Australian dollar hit a four-month high. Iran declared a restricted zone near the strait. OPEC+ said it would keep production steady in October, pausing six months of output increases.

Tuesday was ugly. GPT-6 Astra dropped and the software sector got obliterated. Salesforce, Intuit, ServiceNow, each down around 5%. The AI disruption trade is back, except now it's disrupting the disruptors. Intel jumped 9% on price hikes, which tells you something about how broken the chip market is when raising prices is bullish. Qualcomm gained 3.2% on an Amazon AI deal. But health care was the real wreck. Novartis failed two drug trials in a week, and the sector fell 2.6%.

Wednesday, Brent topped $100 for the first time since May. That's the headline everyone will remember. The Treasury buyback landed at $6 billion against expectations of $10 billion, which spooked bond traders. Apple unveiled the iPhone Duo at $1,999, a foldable. The stock barely moved. Meta jumped 6.5% on an AI agent announcement. Memory chip stocks in South Korea caught a GPT-6 enthusiasm bid.

Thursday was the crescendo. The ECB hiked 25 basis points to 2.5%, exactly as expected. Deutsche Bank immediately called for another hike in December to 2.75%. PPI came in hot at 0.4% month-on-month, 5.4% year-on-year. The 10-year yield pushed to 4.96%. September Fed hike odds climbed to 73%. The S&P fell 0.6%. Oracle reported after the bell and beat on every line: $1.92 EPS, $19.35 billion revenue, raised full-year guidance. The stock jumped 6.6% after hours. Adobe beat too, but soft Q4 guidance sent it lower. Then Bessent grabbed the microphone and told Japan "I am the house now" on yen intervention. And Trump floated a $5,000 dividend for every American, which would cost $1.2 trillion. Just another Thursday.

Four straight sessions of selling for the S&P. That hasn't happened since the March scare earlier this year. And the selling was broad-based, which is worse. It wasn't one sector dragging the index down. Tech got hit by GPT-6 disruption fears. Health care got hit by Novartis trial failures. Industrials got hit by $103 oil. Bonds got hit by hot PPI. The only thing that worked was being long oil or short the market.

The Nikkei was the lone major index in the green, and only because South Korean memory heavyweights (SK Hynix, Samsung) caught a massive GPT-6 enthusiasm bid that spilled over. The yen hit a seven-month high against the dollar at 154.32, which would normally crush Japanese exporters. But the AI chip trade was stronger. Europe was a mess. The ECB hiked into what looks increasingly like a stagflationary setup, with oil above $100 and the AfD winning a German state election at 44% of the vote. The euro is the weakest major currency of 2026, down 1.1% year-to-date. Marine Le Pen is leading French polls. The political ground is shifting under Europe's feet.

Oil is the story. It was the story last week. It was the story the week before. And it will be the story next week. Brent went from $95.81 last Friday to $107.40 by Thursday. WTI broke $103 and hit its highest level on record (in nominal terms). The catalyst is simple: the Strait of Hormuz isn't functioning. Traffic has collapsed from 125 large commodity vessels per day to single digits. Middle East exports are 39% below January/February levels. Five Iranian tankers have been destroyed. Iran has declared a restricted zone near the strait. Diesel is 90% above pre-war levels and at record highs.

"The oil market remains well-supported with little sign of peace between the US and Iran," ING said, which might be the understatement of the year. OPEC+ paused six months of output increases and is keeping production steady through October while it sorts out 2027 quotas. There's no supply cavalry coming. If this situation escalates further, and there's no reason to think it won't, Brent at $110-120 is not an extreme scenario. Jonathan Tacadena on Ausbiz this week called it: Woodside and Santos are the obvious plays, oil could spike to $120.

Copper smashed through to an all-time high of $14,728 per tonne before pulling back 4.82%. The long-term supply deficit story remains intact. EVs, AI data centres, and grid electrification are all copper-intensive. JT on Ausbiz talked through the copper bull case: Capstone Copper at the same market cap as Sandfire but with double the production, and Kaoko Metals in Namibia with visual copper in virgin territory, assays due in about a month. Gold fell 0.6% to $4,404 on Thursday. Rising real yields are a headwind, but the gold miners are generating the best free cash flow of any sector, per Mark on Ausbiz.

The risk register is as long as we've seen it all year. Start with Hormuz. The 10-day moving average for vessel transits has dropped to 10. Prior to the war, it was 125 per day. That is a 92% decline in the world's most important oil chokepoint. Five Iranian tankers destroyed. Tehran declaring restricted zones. Both sides escalating. This feeds directly into inflation, bond yields, and every central bank decision from here.

Then there's margin debt. US margin lending is sitting at $1.4 trillion. Berkshire Hathaway has 32% of its portfolio in cash, the highest allocation on record. When Buffett is this defensive, it's worth paying attention. The September seasonal effect is real: in midterm years (which 2026 is, for these purposes), drawdowns are historically worse. Mark's buy-back date isn't until October 11-13. Between now and then, there's plenty of room for the market to punish complacency.

The yen is at a seven-month high against the dollar. Bessent's "I am the house now" comment was aimed squarely at Japan, warning them not to intervene. But intervention isn't what's driving the yen higher. BOJ hike expectations are. When the BOJ raises rates on September 18, Japanese institutional money starts coming home. That means selling US Treasuries. Which means higher yields. Which means more pressure on the stocks that have been priced for a low-rate world that no longer exists.

The ASX drifted to new 20-day lows this week. Healthcare was the standout loser after Novartis's double trial failure spooked the entire sector. Rate-sensitive names are still under pressure. New mortgage applications are down 15-20%, per Kai on Ausbiz, and the RBA looks increasingly likely to hike in September. Goldman has it at 60% probability with a possible November follow-up.

But here's the split. Energy and materials are doing well. Obviously. Oil above $100 is a direct tailwind for Woodside, Santos, and Beach Energy. Copper at record highs lifts BHP, South32, and the junior copper explorers. The Canaccord Genuity downgrade cycle call suggests we're heading into a rotation: out of banks and real estate, into resources and healthcare. It's a stock picker's market right now, with dispersion high even as index volatility stays low.

The pattern from last week is still playing out. A handful of commodity and AI infrastructure names are propping up the index. Take those out and the ASX is having a rough time. Banks are weakening as rate hike fears mount and mortgage applications dry up. Real estate is under the same pressure. Metcash issued an earnings warning. The consumer discretionary space is stuck between higher fuel costs and rising rates. It's not a market to be broadly long. You want to own specific names with specific catalysts, and you want to be ready to sell anything that disappoints. Mark on Ausbiz covered 10 stocks this week. Greatland Gold was a double-buy (gold $5,000+ possible, best free cash flow of any sector, unhedged). Paladin Energy was a buy (uranium supply constrained). Santos was a buy (energy undervalued). CBA was nowhere near the buy list.

CPI on Friday, then the Fed on Tuesday. That's a five-day stretch that could reshape the second half of 2026. If CPI comes in hot on top of that PPI print, a September hike is done and the 10-year breaks 5%. If it's soft, Warsh gets cover to hold, bond yields pull back, and the equity bears have to rethink their thesis. We think a hot print is more likely given oil at $103 and diesel at record highs. But even a hold doesn't fix the underlying problem: energy costs are rising, central banks everywhere are tightening, and the consumer is running out of room. The BOJ decision on Thursday adds another layer. A hike there sends the yen higher, drags Japanese money out of US bonds, and pushes yields up regardless of what the Fed does. This is a week to be cautious, stay liquid, and keep position sizes small.