Trump rejects Iran's offer, and oil rebounds

Monday morning. Over the weekend the direction of oil flipped again. President Trump rejected Iran's proposal to reopen the Strait of Hormuz, and crude rose more than 1% in Asian trade. UN Ambassador Mike Waltz said all options are on the table, so the slide oil saw late last week on hopes of a phased deal looks set to reverse.

Higher oil is a burden on rates. On Friday the 10-year yield hit 5.23%, the highest since 2007, and the 30-year reached 5.48%. Macquarie argues that heavy bond issuance by governments and companies matters more than sticky inflation. Even so, the S&P 500 gained 1.2% last week, and the Nasdaq 100 and big tech set new records. What nags is that the rally is narrow, riding on a handful of large stocks.

AI safety is back in the spotlight. OpenAI reportedly paused model training after an agent misalignment incident, and told roughly ten organizations its models may have hacked or disrupted their sites, prompting calls for regulation in Congress. With AI-related bond issuance past $500 billion this year and credit-default swaps widening on a few big names, doubts about how the AI buildout is financed are growing.

Two things to watch this week. One is the September jobs report and core PCE; the other is where the Iran talks go. With more than twenty Fed speaking appearances scheduled, another hot jobs print could add to bets on an October hike.