Oil eases on Hormuz hopes while yields hold near multi-year highs

The overnight picture

Oil is sliding for a second session on reports that US and Iranian negotiators are exploring a phased deal to reopen the Strait of Hormuz. The optimism is thin: an Iranian official called the odds of an actual resolution extremely low, and a senior adviser to the Supreme Leader said the strait will never reopen in its old form and that Iran will fully control it. Tehran also warned that a US escalation could open a second front at the Bab el-Mandeb strait.

The pullback in crude is taking some pressure off the bond market. The 10-year Treasury yield eased slightly on Friday after a two-session surge that pushed the 30-year to its highest level since 2004.

Away from rates, President Trump hosted Xi Jinping at a White House state dinner, where the Chinese leader pressed Trump to formally oppose Taiwan independence.

Central banks: hawkish almost everywhere

The Fed chorus is unambiguous. New York Fed President Williams said another hike by year end is reasonable, and Hammack, Barkin and Paulson all struck a similarly hawkish tone.

Europe followed the same script. Norges Bank hiked 25 basis points to 4.50%. The Swiss National Bank held at 0% but flagged its readiness to intervene in FX. The Riksbank held at 1.75% while signalling that hikes will start this year.

The ECB succession is turning into a story in its own right. What began as a Schnabel departure now points to a possible Lagarde and Lane exit next year, which would reopen the entire leadership question in Frankfurt at a moment when the bank is already navigating a tricky inflation backdrop.

Data and corporate headlines

• German Ifo: business climate, current conditions and expectations all beat forecasts in September.
• US data: jobless claims came in below expectations and the current account gap was narrower than forecast.
• Oracle: shares fell 3% after the company declared force majeure at its New Mexico data center, which also weighed on Bloom Energy and Blue Owl.

Trend watch

Market	Bias	Read
USD	Bullish	Fourth straight day of gains on persistent inflation concerns and higher US yields, even as oil eases this morning.
EUR/USD	Neutral	Sideways after failing to reclaim 1.1400; the SNB hold and intervention warning add a regional headwind.
GBP/USD	Bearish	Softer but cushioned near 1.3200; the UK data calendar is light today.
USD/JPY	Bullish	Yen under pressure as the pair tests higher on firmer US yields, though Japan’s finance minister flagged Trump’s own concern about yen weakness.
Crude oil	Neutral	Settled higher Thursday on doubts about a real Iran deal, then sold off this morning on the very same Hormuz reports.
Spot gold	Neutral	Indecisive while the dollar holds its recent gains.

What drives the day

The bond market comes first. Whether Friday’s small pullback in yields is a genuine pause or just noise ahead of the weekend will shape risk appetite into next week, particularly with the RBA’s own hike decision due on Tuesday. For gold, real yields near cycle highs remain the binding constraint, and no amount of Gulf headline risk has been enough to override them this week.

Oil’s behaviour reveals the market’s lack of conviction. Crude rallied on Thursday on doubts about the same Hormuz reports it is selling off on this morning. That inconsistency reflects genuine uncertainty rather than a directional view, and it means the geopolitical premium in gold can leak out just as quickly as it was built.

The dollar is the swing factor. Four straight days of gains have left gold indecisive rather than weak. A pause in the dollar rally, or a confirmed turn lower in long-end yields, is what gold needs to find direction. Until then, the metal stays range-bound and headline-driven.

“The White House has enough trouble with energy into November’s midterm elections, but losing the Treasury market at the same time would be a much bigger problem.” Brendan Fagan, Bloomberg Markets