Middle East Tensions Escalate, Impacting Global Markets and Oil Prices

North American Morning Briefing : Stock Futures Fall Ahead of Data-Heavy Sessions

Stock futures fell early Thursday as investors jostled for position ahead of a slew of economic updates that will likely affect the Federal Reserve's thinking on the pace of interest-rate cuts. With inflation having fallen back close to the Fed's 2% target, the central bank is turning more of its focus to the pace of activity in the economy, particular the health of the labor market. The weekly initial jobless claims report due at 8:30 a.m Eastern follows the stronger-than-forecast ADP survey of private sector jobs released on Wednesday which contributed to reassuring investors in yesterday's session. "[T]hat was an important sign of strength in the U.S. labor market, particularly ahead of tomorrow's all-important jobs report, and it also ended a run of 5 consecutive months where the ADP reading had kept slowing down," Deutsche Bank said. Treasury yields rose slightly, also underpinned by lingering concerns that a spike in oil prices because of the Middle East conflict, and the port strike, could spur inflation. Premarket Movers U.S.-listed shares of Alibaba, PDD Holdings, JD.com, and NIO fell as a rally unleashed by Beijing's stimulus blitz appeared to run out of steam. Levi Strauss cut its revenue outlook and signaled it could make a fresh attempt to sell its Dockers brand. Shares slid more than 10%. Tesla shares fell 1.5%, following declines in the last session after it reported deliveries for the third quarter. Postmarket Movers Caesars Entertainment announced the offering of a $1.1 billion aggregate principal amount of senior notes that pay a 6% interest rate and are due in 2032. Shares edged 0.3% lower. Watch For: Weekly Jobless Claims; ISM Report on Business Services PMI for September; Factory Orders for August Today's Headlines/Must Reads: - Wall Street Races to Bring Private Credit to the Masses - What Is the Market Impact of the SEC's Cyber Disclosure Rules? Not Much. - Oil shock? How OPEC+ Could Soften the Blow if the Middle East Conflict Hits Supply. - If Stocks Struggle in Early 2025, You Can Blame the New U.S. President The dollar rose to a one-month high, boosted by safe-haven flows and Wednesday's private payrolls data, and is likely to remain well supported, ING said. "We sense that the bar for a dollar-negative reaction to U.S. data today and tomorrow is probably higher after Federal Reserve Chair Jerome Powell's recent pushback against 50 basis-point [interest-rate] reductions." Unless market nerves over the Middle East ease and oil prices correct lower, the currency might retain decent momentum into Friday's nonfarm payrolls report, it added. The USD Index's downtrend seems to be ending and the probability of a recovery is increasing, based on the charts, UOB said. Given steadily rising momentum a break of key resistance around 102.00 wouldn't be surprising and the next level to watch would be the 21-week exponential moving average, at 102.70, it added. The euro could extend its losses as expectations for an October 17 interest-rate cut by the ECB build, ING said. ECB member Isabel Schnabel, a hawk who usually favors higher rates, on Wednesday said the central bank couldn't ignore economic headwinds particularly given slowing inflation. That suggests hawks are throwing in the towel on the October rate-cut debate after lower-than-expected eurozone inflation data earlier this week, it said, adding that the euro could fall to slightly below $1.10. Sterling remained lower after the BOE's latest decision maker panel survey showed inflation expectations fell marginally and September's U.K. services purchasing manager's index was revised downward. It had earlier fallen after the BOE's Bailey signalled the prospect of more aggressive interest-rate cuts if inflation continues to ease. Bailey's remarks undermined sterling's yield differential with the U.S. and Europe, XTB said. "The market has used Bailey's comments as a green light to price in more monetary loosening." The yen weakened against the dollar during the Asian session, weighed by recent remarks from Japanese policymakers. Energy: Oil prices rose with fears of a widening conflict in the Middle East as markets await Israel's response to Iran's missiles. "A more limited response would be hitting launch sites used for the recent missile attack, while a significant escalation would be if Israel decided to target Iranian nuclear facilities," ING said. Prices could move significantly higher also if Iranian oil facilities are targeted, as Iran exports roughly 1.7 million barrels a day, it added. However gains are capped by a stronger supply outlook, with the latest EIA data showing U.S. crude inventories unexpectedly rose 3.9 million barrels last week and ANZ said the U.S. inventories added evidence that the market is well supplied and can withstand any disruptions. Metals: Gold futures were broadly flat, but tailwinds are likely to keep driving prices going forward, according to MUFG. "We hold conviction in our above-consensus call for [spot] gold and forecast prices to rise to $2,750/oz by year-end and to breach the $3,000/oz threshold in 2025." Bullion's structural strength continues to be buoyed by its role as the geopolitical hedge of first resort in an uncertain operating environment, amid Middle Eastern conflicts, Fed rate cuts, unprecedented central bank demand, the risk of inflationary policies post-U.S election and rising debt apprehensions, MUFG added. Angel One agreed that gold was likely to trade higher on increasing risks of the Israel-Iran conflict turning into a wider regional war. Copper Jefferies said a projected recovery in copper demand, thanks to stimulus in China and a rate cut by the Fed, is unlikely to be met by a corresponding recovery in supply. While copper production growth surprised in 1Q--due to limited mine disruptions--it slowed significantly in 2Q it said, citing an analysis of production reports from companies that account for roughly 70% of global mine supply. Second-quarter output was 0.5% higher year-over-year. "The impact of mine supply growth on the copper market balance is a key point of debate" and "some believe that there will be a supply overhang over the next year," although it reckons "risk to overall supply remains to the downside" and expect sizable deficits over this decade. TODAY'S TOP HEADLINES OpenAI Nearly Doubles Valuation to $157 Billion in Funding Round OpenAI has raised $6.6 billion in new funding, capping a complex fundraising process that involved negotiations with multiple tech giants and large private investors at the same time it has been experiencing disruptive internal turmoil. Investors are valuing the startup behind ChatGPT at $157 billion, a total that puts it on par with the market capitalizations of publicly traded household names such as Goldman Sachs Group, Uber Technologies and AT&T. Microsoft to Invest $4.8 billion on AI, Cloud Infrastructure in Italy Microsoft plans to spend about $4.75 billion over the next two years in cloud and artificial-intelligence infrastructure in Italy, the latest pledge from U.S. tech giants to bolster their presence overseas amid booming demand for AI services. The U.S. tech giant said in a statement Wednesday that it would pour 4.3 billion euros ($4.75 billion) to grow its hyperscale cloud and AI data center infrastructure in the country and provide digital skills training to more than 1 million people by the end of next year. AI to Have Human-Level Abilities in a Few Years, SoftBank CEO Son Says TOKYO-SoftBank Group Chief Executive Masayoshi Son reiterated his bullish forecasts for artificial intelligence in a speech Thursday that stressed advances made by OpenAI. OpenAI raised $6.6 billion in a recent round of new funding that included a $500 million investment by SoftBank, according to a person familiar with the matter. Can Rockefeller Center Rise From the Ashes of New York's Office Market? If Rockefeller Center successfully refinances its debts, it won't automatically unlock lending for other landlords. But it would be an early sign that investors are starting to separate the wheat from the chaff in America's battered office market. The New York office and retail complex's owner, Tishman Speyer, is looking for $3.5 billion of debt, according to media reports. Some of the cash is needed to pay off a roughly $1.7 billion commercial-mortgage-backed-securities loan that matures in May next year. Fed's Barkin Sees More Work to Do on Inflation Progress on slowing price growth-after two years of 20-year high interest rates and easing supply-chain snags-justifies Federal Reserve rate decreases, but the inflation beast isn't slain yet, according to Thomas Barkin. The central bank's September jumbo rate cut was about adjusting to today's economic backdrop-not a signal of panic about a faltering economy, the Federal Reserve Bank of Richmond President said Wednesday. "This dial-back in restraint just takes a little bit of the edge off," Barkin said in prepared remarks at the 2024 University of North Carolina Wilmington Economic Outlook Conference in Wilmington, N.C. on Wednesday. Israel Strikes in Beirut, Battles Hezbollah in Southern Lebanon BEIRUT-The Israeli military launched an airstrike in central Beirut, marking a gradual expansion of what it says are strikes targeting Hezbollah in the Lebanese capital, as its forces fight with the militant group in the country's south. The strike in Beirut's Bachoura neighborhood early Thursday killed at least six people, according to the Lebanese Health Ministry. Witnesses said there were strikes on two different apartments on the same floor of a building shortly after midnight. Iran Exposed to Israeli Counterattack After Blows Against Its Allies

European Midday Briefing : Stocks Steady as World Watches Middle East

European stocks edged mostly higher on Wednesday as investors monitored developments in the Middle East. European airlines , in particular, lost ground on news of the escalating conflict. Traders will be watching OPEC+'s meeting later, an online gathering that comes after the Saudi oil minister made comments which have been seen as threat of a price war if group members didn't stick to agreed production limits . Stocks to Watch: Rio Tinto 's exposure to China will drive shares after the country's government showed it will step to support its economy, Berenberg said, adding that the stimulus measures also keep iron ore prices stable, one of Rio's key commodities. "With a lower medium-term capital bill than BHP, and significantly less execution risk than Anglo American, we move Rio up to [a] buy [rating], and think that the shares will be the medium-term diversified winner versus peers," Vestas 's third-quarter order intake and revenues seem to be tracking slightly below consensus and there could be headwinds to margin expansion and a lower contribution from offshore, Deutsche Bank said as it lowered its target price on the stock to 165 Danish kroner from 175 kroner, but kept its hold rating. Assa Abloy stock looks to be pricing in upgrades to 2025 growth which are unlikely, according to Citi. Assa Abloy is a relative underweight compared to other high-quality names in the sector, such as Legrand, it added. U.S. Markets Stock futures were lower early as investors wait and see Israel's response to Iran's attack. The ADP employment report is due at 1215 GMT ahead of Friday's nonfarm payrolls. An update from Tesla on quarterly vehicle deliveries is expected, as well as earnings from Conagra Brands before the open. Stocks to watch Nike slid premarket after the sportswear company posted a drop in quarterly revenue and sales. Forex: The euro might benefit if the French-German government bond spread remains contained next week when full details of the French budget are unveiled, MUFG Bank said. French Prime Minister Michel Barnier on Tuesday provided initial details of plans to reduce the budget deficit, including spending cuts, which might be opposed by left parties but be more palatable for the right and the National Rally, the largest party in parliament. The prospect of getting a plan approved have improved, as reflected by the modest narrowing of the French-German bond spread, it added. "If the spread does remain contained through the budget process next week it will remove one near-term downside risk for the euro." The USD rebound is underway, boosted by tensions in the Middle East, OCBC said. "Gold, bonds, and oil have reacted more while the equity, FX responses appear milder." "It is probably prudent to monitor further if there is excessive complacency in markets," it said, cautioning that a widespread conflict involving more parties could fuel risk-aversion flows that would benefit the likes of the dollar, the Swiss franc, the yen and gold. ING said geopolitical events should remain the main driver for the currency and U.S. domestic developments, including the vice-presidential candidate debate data, have been overshadowed. Bonds: Credit spreads are expected to widen slightly according to UniCredit, "The escalation of geopolitical tensions in the Middle East will weigh on market sentiment today as investors finally started to react to rising tensions, while waiting for Israel's response." Most economic data this week are unlikely to have much impact it added, saying it didn't expect strong market conviction towards wider spreads as long as the U.S.-soft-landing narrative remained intact. The 10-year German Bund yield could test the 2% level, Commerzbank Research said. The 10-year OAT-Bund yield spread is still elevated and in line with expectations of rating downgrades by at least one notch, ING said. The spread "reflects market concerns about the stability of the government and by extension the longer-term commitments to fiscal consolidation." Energy: Oil gained further on growing fears of a full-scale regional war in the Middle East. "Significant escalation would likely involve targeting Iranian nuclear facilities and energy infrastructure, which would likely boost the risk premium priced into the oil market." Meanwhile, traders will be closely watching OPEC+'s meeting later on Wednesday for more cues on the group's next policy move. European natural-gas prices rose early, boosted by Middle East tensions that could hit key supply routes. Meanwhile in Ukraine, fears of supply disruptions are still high after President Volodymyr Zelensky said that an intelligence report indicates Russia is planning strikes on nuclear facilities. Metals: Gold edged lower early, with some profit-taking, after rising in the previous session as fears of an all-out war in the Middle East drove safe-haven demand. "Haven assets were in demand amid the rising tensions in the Middle East, " ANZ Research said. "Even so, the outlook for real interest rates is what will drive gold prices over the longer term." Steel inventories held by Chinese distributors are at a six-year low entering China's Golden Week holiday, a potentially bullish driver for prices, Citi said. Distributor inventories were drawn down by 27% in 3Q versus a typical 3Q reduction of around 5% following cuts to China's daily steel output in recent months. EMEA HEADLINES JD Sports Fashion Revenue, Profit Rise; Strengthens U.S. Presence JD Sports Fashion reported an increase in revenue and profit for its fiscal first half and said it was continuing to bolster its presence in the U.S. The U.K. sneaker and fashion retailer said Wednesday that it booked revenue of 5.03 billion pounds ($6.68 billion) for the period ended Aug. 3, up 6.8% on year at constant currency. TotalEnergies to Invest $10.5 Billion in Suriname Oil Project French energy major TotalEnergies said it would invest $10.5 billion in a large offshore oil-and-gas field in Suriname, in line with its push to expand its project portfolio outside of the restrictive legal environments of North America and Europe. Europe's second-largest integrated oil company by market value said Tuesday that it signed a final investment decision for the Gran Morgu field, which has estimated recoverable resources of more than 750 million barrels. GLOBAL NEWS Iran Attacks Israel. The Israeli Response Will Drive the Market. Iran fired a barrage of missiles at Israel on Tuesday, prompting the price of oil to rise and stocks to fall. The attack did minimal damage, but employed roughly twice the number of ballistic missiles as a similar Iranian strike on Israel in April, according to the Pentagon. Israeli Response to Iran's Attack to Set Course of Widening War As Israel weighs how to respond to Tehran's latest missile barrage, it could take a page from its previous playbook when, after days of deliberation, its military targeted a single Iranian military site. Few expect Israel's response to be as narrow this time, posing a fresh test as the Biden administration seeks to avoid a new spiral of escalation. AI Could Help Solve Inflation, Federal Reserve Gov. Cook Says Could advances in artificial intelligence be the key to help reduce U.S. inflation rates and keep them low? Federal Reserve Gov. Lisa Cook said Tuesday that she is onboard with the possibility that the latest technological advances could have long-term disinflationary benefits. Speaking at the Technology-Enabled Disruption Conference organized by the Federal Reserve Banks of Atlanta, Boston, and Richmond, Cook said that she is closely monitoring recent developments in AI because the technology could begin to play a much larger role in improving labor productivity. Vance Seeks to Temper Trump's Policies, Walz Casts Former President as Dangerous JD Vance sought to temper Donald Trump's more controversial rhetoric on issues like abortion, immigration and guns during a vice presidential debate Tuesday night, as an occasionally tense Tim Walz offered a defense of Kamala Harris's record and argued that Trump poses a danger to democracy. On the campaign trail, the Republican senator from Ohio has developed a reputation as a partisan attack dog. But throughout the debate, he gave a more polished performance, playing down Trump's plans for mass deportations and saying the GOP needs to earn back the trust of Americans on abortion, tacitly acknowledging a massive gender gap Trump suffers. And he reminded viewers of his modest roots and that he was raised by "two lifelong blue-collar Democrats." Spy Mania Sows Fear Among Russia's Scientists Think of Russia's most dangerous jobs and the role of research scientist doesn't immediately spring to mind. Coal miner, maybe. Or a deep sea diver on the Barents Sea oil rigs. The same kinds of jobs that are dangerous anywhere. But over the past six years, at least a dozen scientists, many of whom conducted research in the field of high-speed aerodynamics or hypersonics, have been arrested. Some of the arrests were on suspicion of handing over scientific data to Moscow's rivals. The latest was sentenced to 15 years in prison. North Carolina in Crisis Mode as Helene Rescues Continue As the death toll from Helene continued to rise, the city of Asheville in western North Carolina's Blue Ridge Mountains was picking up the pieces from the devastating storm. Water systems were down Tuesday and would likely take weeks to repair, many roads in the city were washed away, and there was no word from some rural communities cut off by the floods. We offer an enhanced version of this briefing that is optimized for viewing on mobile devices and sent directly to your email inbox. If you would like to sign up, please go to https://newsplus.wsj.com/subscriptions.

North American Morning Briefing : Stock Futures Slip as Middle East Tensions Rise

Stock futures were lower on Wednesday as the prospect of a widening Middle East conflict weighed, while oil prices extended gains, boosting Occidental Petroleum and ConocoPhillips premarket. Investors are bracing for Israel's reaction to Iran's missile attacks. A hawkish retaliation risks trigger a new spiral of escalation, but the U.S. is hoping for a more measured response, similar to when Iran attacked in April. Traders will no doubt be keeping an eye on OPEC+'s Joint Ministerial Monitoring Committee meeting later for clues on the group's next policy move, especially after Saudi's Oil Minister called out members for overproducing, seen as a veiled threat of a price war . In European trading, energy companies, including BP, also climbed, defense stocks rose, and airlines dipped. Asian markets were mostly lower. Mainland Chinese markets were closed for a holiday. More Premarket Movers Lamb Weston posted fiscal first-quarter profit down 46% from a year earlier, and announced a restructuring plan. Shares declined 4.5%. LPL Financial fired Chief Executive and President Dan Arnold for making statements to employees that violated the company's code of conduct. Stock fell 2.9%. Nike was down 5.7% after it said it was withdrawing guidance for fiscal 2025 and postponing its first investor day in seven years to give recently appointed CEO Elliott Hill time to evaluate the company's strategies. Tesla fell 1% ahead of the release its third-quarter deliveries. Watch For: ADP National Employment Report for September; EIA Weekly Petroleum Status Report; Earnings from Conagra Brands Today's Headlines/Must Reads: - Israeli Response to Iran's Attack to Set Course of Widening War - Pay Rises for Cyber Chiefs as Hacks, Regulatory Pressure Increase - JD Vance's Version of Trump Is Better Than the Real Thing The USD rebound is underway, boosted by tensions in the Middle East, OCBC said. "Gold, bonds, and oil have reacted more while the equity, FX responses appear milder." "It is probably prudent to monitor further if there is excessive complacency in markets," it said, cautioning that a widespread conflict involving more parties could fuel risk-aversion flows that would benefit the likes of the dollar, the Swiss franc, the yen and gold. ING said geopolitical events should remain the main driver for the currency and domestic developments, including the vice-presidential candidate debate and data, have been overshadowed. The euro might benefit if the French-German government bond spread remains contained next week when full details of the French budget are unveiled, MUFG Bank said. French Prime Minister Michel Barnier on Tuesday provided initial details of plans to reduce the budget deficit, including spending cuts, which might be opposed by left parties but be more palatable for the right and the National Rally, the largest party in parliament. The prospect of getting a plan approved have improved, as reflected by the modest narrowing of the French-German bond spread, it added. "If the spread does remain contained through the budget process next week it will remove one near-term downside risk for the euro." Bonds: Credit spreads are expected to widen slightly according to UniCredit, "The escalation of geopolitical tensions in the Middle East will weigh on market sentiment today as investors finally started to react to rising tensions, while waiting for Israel's response." Most economic data this week are unlikely to have much impact it added, saying it didn't expect strong market conviction towards wider spreads as long as the soft-landing narrative remained intact. Energy: Oil gained further on growing fears of a full-scale regional war in the Middle East. "Significant escalation would likely involve targeting Iranian nuclear facilities and energy infrastructure, which would likely boost the risk premium priced into the oil market." Meanwhile, traders will be closely watching OPEC+'s meeting later on Wednesday for more cues on the group's next policy move. Metals: Gold edged lower early, with some profit-taking, after rising in the previous session as fears of an all-out war in the Middle East drove safe-haven demand. "Haven assets were in demand amid the rising tensions in the Middle East, " ANZ Research said. "Even so, the outlook for real interest rates is what will drive gold prices over the longer term." Steel inventories held by Chinese distributors are at a six-year low entering China's Golden Week holiday, a potentially bullish driver for prices, Citi said. TODAY'S TOP HEADLINES Oracle to Invest $6.5 Billion in AI and Cloud Infrastructure in Malaysia Oracle Corp. plans to invest more than $6.5 billion to establish a public cloud region in Malaysia, aiming to meet the country's growing demand for artificial intelligence and cloud services. The investment will allow Malaysian businesses to leverage AI infrastructure and services, and migrate mission-critical workloads to Oracle cloud infrastructure, the company said in a statement Wednesday. A CVS Breakup Is No Easy Fix for Its Problems In recent years, CVS Health has sought to transform itself from a retail pharmacy chain to a health conglomerate combining everything from the doctor to the insurer under one roof. It might still have a shot at building a health juggernaut, but perhaps without the well-known pharmacy that brought everything together. CVS is considering a breakup and other strategic alternatives as pressure from investors builds on management in the midst of disappointing earnings results and a depressed stock. Over the past five years, its stock is basically unchanged, compared with a near doubling of the S&P 500. On Monday, the hedge fund Glenview Capital Management met with CVS to discuss ways to improve operations, The Wall Street Journal reported. JPMorgan Plans to Open Around 100 New Branches in Low-Income Areas Jamie Dimon has a plan to help some of the poorest people in America: build more Chase branches in their towns and cities. JPMorgan Chase is working on opening nearly 100 new branches in low-income areas around the country, including America's inner cities and rural towns where banks have been shrinking their footprint for years. Iran Attacks Israel. The Israeli Response Will Drive the Market. Iran fired a barrage of missiles at Israel on Tuesday, prompting the price of oil to rise and stocks to fall. The attack did minimal damage, but employed roughly twice the number of ballistic missiles as a similar Iranian strike on Israel in April, according to the Pentagon. Israeli Response to Iran's Attack to Set Course of Widening War As Israel weighs how to respond to Tehran's latest missile barrage, it could take a page from its previous playbook when, after days of deliberation, its military targeted a single Iranian military site. Few expect Israel's response to be as narrow this time, posing a fresh test as the Biden administration seeks to avoid a new spiral of escalation. BOE Warns of Sharp Correction as Geopolitical Worries Mount Financial markets remain vulnerable to a sharp correction, the Bank of England warned Wednesday as a twice-yearly survey found that geopolitical developments are seen as the greatest threat to stability. The BOE's Financial Policy Committe has repeatedly warned that valuations of many financial assets, particularly equities, are "stretched" and could fall sharply in response to economic or geopolitical shocks. Israel Assesses Damage from Iran's Missile Barrage TEL AVIV-Israel was reviewing the damage Wednesday from roughly 180 missiles fired a day earlier by Iran, some of which hit the country's densely populated center and a few military bases, an aerial attack that has escalated a yearlong conflict in the Middle East. Israel said its air defenses intercepted most of the missiles alongside a coalition of U.S.-led allies, including the U.K, but a number of projectiles successfully penetrated the country's vaunted aerial defense system. Vance Seeks to Temper Trump's Policies, Walz Casts Former President as Dangerous JD Vance sought to temper Donald Trump's more controversial rhetoric on issues like abortion, immigration and guns during a vice presidential debate Tuesday night, as an occasionally tense Tim Walz offered a defense of Kamala Harris's record and argued that Trump poses a danger to democracy. On the campaign trail, the Republican senator from Ohio has developed a reputation as a partisan attack dog. But throughout the debate, he gave a more polished performance, playing down Trump's plans for mass deportations and saying the GOP needs to earn back the trust of Americans on abortion, tacitly acknowledging a massive gender gap Trump suffers. And he reminded viewers of his modest roots and that he was raised by "two lifelong blue-collar Democrats." North Carolina in Crisis Mode as Helene Rescues Continue As the death toll from Helene continued to rise, the city of Asheville in western North Carolina's Blue Ridge Mountains was picking up the pieces from the devastating storm. Water systems were down Tuesday and would likely take weeks to repair, many roads in the city were washed away, and there was no word from some rural communities cut off by the floods. Crew Energy Announces Completion of Acquisition by Tourmaline Oil; Crew Energy Holders Received 0.114802 of Common Shr of Tourmaline for Each Crew Shr Held Fission Uranium. Paladin: China General Nuclear Power Unit Opposed Fission Takeover Approval; CGN Mining Holds Disclosed Interest of 11.26% in Fission;

EMEA Morning Briefing : Markets to Focus on Rising Mideast Tensions

Unemployment data for EU; no major corporate trading updates expected Opening Call: European stock futures were higher despite a negative lead from Asian stock benchmarks and U.S. stock futures; the dollar and Treasury yields rose slightly; while oil futures rose and gold declined. Equities: Stock futures in Europe were tracking slightly higher early Wednesday as focus remains on escalating tensions in the Middle East. The prospect of a widening war in the Middle East dragged major U.S. stock indexes back from records on Tuesday, while powering oil prices higher. "Military conflicts can quickly escalate into a scenario that causes markets to sell off dramatically, with safe-haven assets such as gold and Treasurys seeing heavy inflows," said Quincy Krosby, chief global strategist at LPL Financial. Current oil prices and stock-volatility measures suggest that traders aren't yet expecting an all-out war, Krosby added. Meanwhile, data Tuesday showed that eurozone annual inflation fell to 1.8% in September, below the European Central Bank's 2% target for the first time since June 2021 and paving the way for a 25-basis-point interest-rate cut in October. Forex: The dollar was slightly higher against a basket of foreign currencies pushed higher by evolving global interest-rate expectations and by jitters about Iran's strike against Israel. The dollar's gain against the euro is driven both by anxiety about the Middle East flare up and by lower-than-expected Eurozone inflation, fueling speculation about a forthcoming rate cut from the European Central Bank, analysts said. Currency traders had already somewhat priced in the risk of an Iranian attack, Karl Schamotta of Corpay said. "The reaction does seem relatively well contained at this point." Bonds: Treasury yields were slightly higher early Wednesday. Flight-to-safety flows into U.S. government debt left the 10-year yield lower for the second time in the past three sessions on Tuesday, as Iran launched a wave of retaliatory missile strikes on Israel. Government bond yields were already dropping earlier in the day as concerns about a struggling European economy pushed the benchmark 10-year German bund yield down 8.8 basis points to 2.042%. Geopolitical tensions were being treated as the "overriding factor" for market participants and triggered a flight to safety, said Tom di Galoma, head of fixed income at Curvature Securities LLC in New Jersey. Energy: Oil prices gained on rising Middle East tensions. The direct involvement of Iran, an OPEC member, increases the likelihood of oil supply disruptions, ANZ Research analysts said. "Any sustained rally in oil prices will be determined by whether Israel responds to this latest move with its own direct attack on its military, infrastructure or its oil industry," the analysts said. Iran produces about 3.2 million barrels per day of crude oil and perhaps 50% of that gets exported, so "if Israel knocks out some of Iran's capacity, oil markets would have to contend with reduced spare capacity in the marketplace" and a loss of 3.2 million barrels a day in a worst-case scenario, said Stewart Glickman, deputy research director at CFRA Research. Meanwhile, OPEC+ is expected to proceed with a plan to begin unwinding some production cuts in December. A committee meeting of OPEC+ officials on Wednesday isn't expected to produce any major announcements. Metals: Gold edged lower in Asia. The overall outlook for gold remains driven by dovish monetary policies from several central banks and global economic uncertainties, said Li Xing, financial markets strategist consultant at Exness. "With the Federal Reserve focused on labor market conditions, any significant developments in employment figures could drive additional volatility in gold prices throughout the week," the strategist said. -- Copper rose in Asia, exceeding the $10,000 benchmark. Prices are supported by the optimism over demand in China after Beijing announced several stimulus measures, ANZ research analysts said. The prospect of further interest rate cuts has also supported sentiment. In the U.S., Fed Chair Jerome Powell has said that the central bank will continue to loosen monetary policy if the economy progresses as expected, ANZ analysts added. -- Iron-ore prices drifted lower at the start of China's Golden Week holiday, which runs through Oct. 7. Spot iron ore delivered to North China fell by 0.3% Tuesday to $108.00/metric ton, according to S&P Global Market Intelligence. Prices for steelmaking coal are flat, with liquidity thin. TODAY'S TOP HEADLINES AI Could Help Solve Inflation, Federal Reserve Gov. Cook Says Could advances in artificial intelligence be the key to help reduce U.S. inflation rates and keep them low? Federal Reserve Gov. Lisa Cook said Tuesday that she is onboard with the possibility that the latest technological advances could have long-term disinflationary benefits. Speaking at the Technology-Enabled Disruption Conference organized by the Federal Reserve Banks of Atlanta, Boston, and Richmond, Cook said that she is closely monitoring recent developments in AI because the technology could begin to play a much larger role in improving labor productivity. Israeli Response to Iran's Attack to Set Course of Widening War As Israel weighs how to respond to Tehran's latest missile barrage, it could take a page from its previous playbook when, after days of deliberation, its military targeted a single Iranian military site. Few expect Israel's response to be as narrow this time, posing a fresh test as the Biden administration seeks to avoid a new spiral of escalation. Iran Attacks Israel. The Israeli Response Will Drive the Market. Iran fired a barrage of missiles at Israel on Tuesday, prompting the price of oil to rise and stocks to fall. The attack did minimal damage, but employed roughly twice the number of ballistic missiles as a similar Iranian strike on Israel in April, according to the Pentagon. Spy Mania Sows Fear Among Russia's Scientists Think of Russia's most dangerous jobs and the role of research scientist doesn't immediately spring to mind. Coal miner, maybe. Or a deep sea diver on the Barents Sea oil rigs. The same kinds of jobs that are dangerous anywhere. But over the past six years, at least a dozen scientists, many of whom conducted research in the field of high-speed aerodynamics or hypersonics, have been arrested. Some of the arrests were on suspicion of handing over scientific data to Moscow's rivals. The latest was sentenced to 15 years in prison. Oracle to Invest $6.5 Billion in AI and Cloud Infrastructure in Malaysia Oracle Corp. plans to invest more than $6.5 billion to establish a public cloud region in Malaysia, aiming to meet the country's growing demand for artificial intelligence and cloud services. The investment will allow Malaysian businesses to leverage AI infrastructure and services, and migrate mission-critical workloads to Oracle cloud infrastructure, the company said in a statement Wednesday. 08:30/UK: Sep Narrow money (Notes & Coin) and reserve balances All times in GMT. Powered by Onclusive and Dow Jones. Write to us at newsletters@dowjones.com We offer an enhanced version of this briefing that is optimized for viewing on mobile devices and sent directly to your email inbox. If you would like to sign up, please go to https://newsplus.wsj.com/subscriptions. This article is a text version of a Wall Street Journal newsletter published earlier today.