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Summary:
Oil opened higher on Globex in Sunday evening US trade, with the Houthi attack on Riyadh cited, then eased as attention shifted to US Central Command’s comments on improving oil flows.Reports pointed to explosions in Sanaa, with commentary suggesting a possible Saudi response to the earlier attack on Riyadh. The blasts have not been attributed.The US Virtual Embassy in Iran urged Americans to leave immediately, warning of flight cancellations and airspace closures.The New York Times reports Trump told the Pentagon to prepare airstrikes on the Houthis, then reversed by Sunday midday, with officials saying no strikes for now.Axios reports Trump repeatedly asked Zelensky to stop attacking Russian oil refineries over diesel prices, and the two leaders meet Tuesday in New York.US and Chinese officials called their New York talks successful, with the Trump-Xi summit due Thursday.CBA moved its RBA call to a September 29 hike and ANZ now expects hikes in September and November, joining Westpac and NAB.Fed’s Kashkari said inflation is too high beyond energy, ECB’s Stournaras said an October hike cannot be ruled out, and the PBOC held its LPRs for a 16th month.Japanese markets are shut through Wednesday and reopen Thursday.
Oil opened higher on Globex in US Sunday evening trade, with the Houthi attack on Riyadh cited as a factor. Prices eased during the session, and attention appeared to shift to US Central Command’s comments that oil flows were improving. Central Command has said oil and LNG shipments through the Strait of Hormuz over the past two weeks reached their highest level in six months. JPMorgan analysts said in a September 18 note that Middle East flows remain surprisingly strong despite the disruption to Saudi Arabia’s East-West pipeline, although they are still roughly 6 million barrels per day below the 2025 average.
Multiple reports pointed to explosions inside Sanaa, the Yemeni capital. Commentary described any strikes there as a significant red line for the Houthis, who are also known as Ansarallah, and suggested the blasts could be a Saudi response to the attack on Riyadh two days earlier, which reports linked to smoke and disruption at King Khalid International Airport. The source of the explosions has not been confirmed.
The US Virtual Embassy in Iran urged American citizens to leave the country immediately, warning of potential flight cancellations, airspace closures and other travel disruption amid rising tensions across the Middle East. The alert, reported by ANI and Fox News, tells Americans not to travel to Iran for any reason. Washington has no diplomatic or consular presence in Iran, and Swiss diplomats act as its protecting power.
The New York Times reported that President Donald Trump told the Pentagon to prepare airstrikes on the Houthis after speaking with Saudi Arabia’s crown prince, then reversed himself by Sunday midday, with administration officials saying there would be no US strikes for now.
Axios reported, citing a source, that Trump repeatedly asked Ukrainian President Volodymyr Zelensky to stop attacking Russian oil refineries because the strikes are driving up global diesel prices. The request follows Ukraine’s largest drone attack on the Moscow region, which hit the city’s main oil refinery, according to Moscow’s mayor. The two leaders are due to meet Tuesday in New York, and Ukraine’s chief negotiator, Rustem Umerov, said stumbling blocks in the talks had been reduced to one or two key issues.
US and Chinese officials focused on trade and AI in what Treasury Secretary Scott Bessent called successful talks in New York on Sunday. Speaking after his meeting with Chinese Vice Premier He Lifeng, Bessent said the two sides agreed to meet again. US Trade Representative Jamieson Greer said the meeting would lay the groundwork for a successful summit between Trump and Chinese President Xi Jinping on Thursday. China’s chief trade negotiator, Li, said the talks were not bad and that working-group discussions would continue on Monday.
In currencies, CBA brought forward its RBA rate hike call to September 29 from November, and ANZ now expects the RBA to raise rates by 25 basis points in September and November. Westpac and National Australia Bank had already forecast a September 29 increase, which would lift the cash rate to 4.60% from 4.35%. The Australian dollar remained underpinned but little changed, while the New Zealand dollar languished near a two-month low before some late support.
From central banks, Minneapolis Fed President Neel Kashkari said inflation is too high across the US economy and not only in energy, following last week’s quarter-point hike to 3.75%-4.00%. He said the Fed cannot reopen the Strait of Hormuz or lower oil prices through interest rates, but has tools for broader price pressures. ECB Governing Council member Yannis Stournaras said policymakers should stay vigilant on inflation but avoid acting hastily, and that an October hike cannot be ruled out if energy costs or September inflation surge. Markets price a quarter-point rise in the deposit rate to 2.75% next month, from 2.50% after the increase on September 16. The People’s Bank of China left its one-year loan prime rate at 3.00% and its five-year at 3.50% for a 16th straight month, as expected. The PBOC’s 7-day reverse repo rate, currently 1.4%, is now its main policy rate, and analysts said a more hawkish Fed, weak credit demand and thin bank margins narrow the room for easing.
Overall, Asia-Pac trade started mixed ahead of this week’s key meetings in the US, including the Trump-Xi summit. Conditions are thinner because Japanese markets are closed from today through Wednesday, and reopen on Thursday.
This article was written by Eamonn Sheridan at investinglive.com.