MPC Markets Morning Call — 10 September 2026: Oil Tops $100 as Middle East Escalation Rattles Markets
Brent crude surged above $100 a barrel for the first time since May after U.S. strikes on five Iranian oil tankers triggered retaliatory missile attacks across the Persian Gulf. The energy shock sent Treasury yields to their highest since 2023, with the 10-year hitting 4.85%, while a disappointing Treasury buyback announcement added to the bond sell-off. The S&P 500 fell 0.5% and ASX 200 futures point to a weak open, down 89 points to 8,815.
Escalating U.S.–Iran military strikes pushed Brent crude above $101 a barrel — its first triple-digit close since May — reigniting inflation fears and sending the U.S. 10-year Treasury yield to 4.85%, its highest level since November 2023. The Treasury Department’s announcement of a $6 billion buyback in 10–20 year maturities disappointed a market expecting at least $10 billion, deepening the bond rout. The S&P 500 slipped 0.5% to 7,636.46, the Dow shed 0.8% to 52,381, and the Nasdaq declined 0.6% to 26,253. Energy was the sole gaining sector as all others fell, with decliners outnumbering advancers 4.1-to-1. Gold steadied at $4,443 while copper climbed 1.1% to $6.86. ASX 200 futures fell 89 points to 8,815, pointing to a softer open as investors brace for Thursday’s U.S. PPI and Friday’s CPI data that could seal a September Fed rate hike.
The S&P 500 fell 0.5% to 7,636.46, the Dow dropped 0.8% to 52,381.02, and the Nasdaq declined 0.6% to 26,253.34, with energy the only sector in the green.
U.S. strikes on five Iranian oil tankers and retaliatory Iranian missile attacks on a Jordanian base and commercial vessels escalated the seven-month-old conflict with no ceasefire in sight.
Brent crude surged 3.3% to $101.12 and WTI jumped 3.5% to $96.27 as Strait of Hormuz oil flows fell to near-record lows.
The U.S. 10-year yield climbed 4.2 basis points to 4.85% after the Treasury’s $6 billion buyback underwhelmed, with money markets pricing a 60% chance of a September Fed hike.
Apple unveiled the $1,999 foldable iPhone Duo under new CEO John Ternus, while Meta surged 6% on its autonomous AI agent launch and Alphabet dropped 2.3% on a $15.1 billion Finland AI spend.
ASX 200 futures fell 89 points (–1%) to 8,815 with the Australian dollar at $0.7217; all eyes on U.S. PPI (Thursday) and CPI (Friday) for rate direction.
Equities — Broad Sell-Off, Energy Stands Alone
U.S. stocks closed lower for a third straight session as triple-digit oil prices and surging Treasury yields weighed on sentiment. The S&P 500 slipped 0.48% to 7,636.46 — now about 2% below its August 13 record high close — while the Dow Jones Industrial Average shed 0.77% to 52,381.02 and the Nasdaq Composite declined 0.64% to 26,253.34. The Russell 2000 underperformed, dropping 1.3% to 2,921.60. Declining stocks outnumbered advancers by a ratio of 4.1-to-1 on the S&P 500.
The S&P 500 energy index rose 1.1%, the sole sector in positive territory as crude oil’s surge lifted producers. Industrials led the declines. Meta Platforms jumped over 6%, limiting the S&P 500’s fall, after rolling out an autonomous AI assistant capable of sending emails, selling cars, and making travel bookings on users’ behalf. Alphabet dropped 2.3% after announcing a €13 billion ($15.1 billion) AI infrastructure investment in Finland. The Philadelphia Semiconductor Index rose 0.37%, with AMD gaining 3%.
“That’s leaving markets a little concerned, particularly as we don’t have a lot to go on in terms of earnings expectations until we start to get into third-quarter reporting season,” said Rob Haworth, senior investment strategist at U.S. Bank Wealth Management. Peter Tuz, president at Chase Investment Counsel, noted: “So far, September is living up to its reputation as the most disappointing month of the year for equity markets.”
Geopolitics — U.S.–Iran War Enters Dangerous New Phase
The seven-month-old U.S.–Iran conflict entered a dangerous new chapter overnight. U.S. Central Command destroyed five Iranian crude oil carriers in response to the targeting of a U.S. Navy warship by the Islamic Revolutionary Guard Corps. Iran’s state media said Tehran struck back by hitting two American vessels, eight oil tankers, 10 U.S.-backed ships, and a U.S. military base in Jordan — though Jordanian officials said 18 of 20 Iranian missiles were intercepted, with the remaining two falling on unpopulated areas.
The escalation came after a period of relative stalemate over control of the Strait of Hormuz. A senior Iranian official told Bloomberg that Tehran has “no intention of backing down” and has rebuilt its military capabilities since April, with enough missiles for a lengthy conflict. Iran’s new security chief Mohsen Rezaee said the country’s military posture toward U.S. ships and bases had been “fundamentally recalibrated.” Parliamentary speaker Mohammad Bagher Ghalibaf warned the era of “proportionate responses” was over.
President Trump downplayed the situation, telling reporters: “I think the war is going to end immediately after the election because they can’t hold out any longer.” Secretary of State Marco Rubio, speaking from Colombia, took a harder line, warning Iran it will “lose tankers” when it tries to “hit U.S. naval ships.” Meanwhile, Yemen’s Houthi militants launched coordinated strikes on several Saudi Arabian cities, drawing a key U.S. partner deeper into the regional conflict.
“The political elites are locked in a debate over whether to escalate or just resist,” wrote Dina Esfandiary of Bloomberg Economics. “Despite the debate, Iran is deciding how to retaliate faster and more efficiently, suggesting it has developed a menu of responses to U.S. escalation. It seeks to impose greater costs on the U.S.”
The economic toll on Iran is severe — inflation has accelerated to almost 90% and the rial is depreciating rapidly. But a senior official said Iran’s leaders believe they have little choice but to keep fighting until they are confident Washington will be too wary to attack again. Oil flows through the Strait of Hormuz have fallen close to record lows, while the five tankers destroyed by the U.S. had collectively exported 45 million barrels of Iranian crude since May 2019, according to TankerTrackers.com.
Energy, Commodities & FX — Triple-Digit Oil Revives Inflation Fears
Brent crude surged 3.3% to $101.12 a barrel, topping $100 for the first time since May 26 and extending its 2026 gain to around 65%. WTI jumped 3.5% to $96.27. “Brent crude pushing above $100 a barrel has had a psychological effect on the market, pushing a hypothetical inflation worry gauge to ‘serious’ status and dragging down financial assets,” said Dan Coatsworth, head of markets at AJ Bell. U.S. domestic diesel prices hit record highs, nearing $6 per gallon. GasBuddy’s Patrick De Haan noted businesses are paying $284 million more per day on diesel, while consumers are paying $377 million more per day on gasoline — a combined $4.63 billion weekly surcharge.
The EIA revised its second-half Brent forecast to $90 a barrel, up from $85, and expects Middle East production to remain below pre-conflict averages until Q2 2027. European natural gas prices traded at their highest since 2023 as the Iran war drives up energy costs heading into the winter heating season. José Torres, senior economist at Interactive Brokers, said the “abrupt return to direct strikes is catching investors off guard” after weeks of what appeared to be a shift toward economic warfare.
Elsewhere, gold steadied at $4,443 as haven demand offset rising yields. Copper advanced 1.1% to $6.86, supported by a giant discovery in the Congo expanding to 12 million tonnes and tight supply narratives. Iron ore edged up 0.5% to $100.02. Silver gained 0.5% and platinum rose 1.9%. Bitcoin slipped 1.3% to $78,248. The dollar index firmed to 98.81, the yen outperformed on haven flows, and the Australian dollar dipped to $0.7217 but remains near four-month highs.
“No matter what CPI is on Friday, if crude remains at these levels or even climbs from here, there’s only one direction CPI, and ultimately interest rates, will go from here.”
Bonds — Treasury Buyback Underwhelms, Yields Surge
U.S. Treasury yields sharply extended gains after the Treasury Department announced it would buy back up to $6 billion in 10–20 year maturities, tripling the prior $2 billion cap but falling well short of the $10 billion some had expected. The benchmark 10-year yield jumped 4.2 basis points to 4.846% — its highest since November 2023 — having been up just 1.2 basis points before the announcement. The 2-year yield rose 2.7 basis points to 4.425%. UK 10-year yields surged 9 basis points to 5.26%, while French and Italian equivalents each rose 11 basis points.
SPI Asset Management’s Stephen Innes said: “The Treasury market spent the morning waiting for Scott Bessent to reveal how much firepower he was prepared to put behind the expanded buyback programme. When the number finally arrived, it was larger than the original commitment but still too small to satisfy a market already choking on duration.” He added that “fiscal issuance, inflation and investor demand will continue to determine the equilibrium level of Treasury yields.”
“We think going really big would have been a mistake with an unattractive cost-benefit balance, so we take some reassurance from this decision. It suggests Bessent is accepting a limited role for buybacks — creating a bit of uncertainty for shorts and potentially opposing overshooting — but recognising that the U.S. cannot durably prevent fundamentals from dictating yields.”
Money markets priced a roughly 60% probability of a 25-basis-point rate hike at the Fed’s September 15–16 meeting. All eyes now turn to Thursday’s PPI (forecast: 0.4% m/m headline, 0.3% core) and Friday’s CPI. “A hot CPI print would all but seal a September hike and underpin a firmer dollar,” said Elias Haddad at Brown Brothers Harriman. “A cooler reading would strengthen the case for a hold.”
ASX Outlook & The Day Ahead
The ASX 200 edged down 0.04% to 8,916.80 on Wednesday, paring an intraday slide to a six-week low. Healthcare slumped 1.69% after CSL fell 2.16% to A$171.02 on concerns over plasma collection volume guidance and immunoglobulin margin compression. Major banks were under pressure amid rising bond yields and an RBC Capital Markets reprice toward a November rate hike. On the upside, materials surged as Dalian iron ore futures jumped 5.2% on Chinese stimulus hopes, with BHP CDIs rocketing 17.6% intraday after a Morgan Stanley upgrade to Overweight (A$52 target). Austal jumped 9% to A$4.00 after Wildcat Infrastructure bid up to US$1.35 billion for its U.S. operations, trumping Hanwha’s prior offer.
ASX 200 futures fell 89 points (–1%) to 8,815 near 6:50am AEST, pointing to a weak open as the overnight oil shock and bond sell-off flow through. The Australian dollar held at $0.7217, underpinned by hawkish RBA pricing but capped by the risk-off tone. No domestic data prints are scheduled today.
- ASX Open (~10:00 AEST) — Futures point to a gap lower of around 1%; watch materials for iron ore follow-through and energy names for oil benefit vs broader market drag.
- President Trump Speaks (11:15 PM AEST) — Remarks could move oil and risk sentiment if the Middle East conflict is addressed; Trump said the war will end after midterms.
- U.S. Core PPI m/m (10:30 PM AEST) — Forecast 0.3% vs prior 0.2%. A hotter print would tilt odds decisively toward a September Fed hike and pressure yields further.
- U.S. PPI m/m (10:30 PM AEST) — Forecast 0.4% vs prior 0.0%. The energy surge should be visible in headline; the gap between headline and core will signal pass-through.
- U.S. Weekly Jobless Claims (10:30 PM AEST) — Forecast 205K vs prior 206K. Stable labour market would reinforce the case for a hawkish Fed.
- IPO Watch — With the U.S. post-Labor Day IPO window now open, Anthropic PBC leads a queue that includes Nscale, Aggreko, and Oura Health. Timing remains uncertain.