TMGM Daily Market Breakfast: 09 October 2026

Morning Snapshot

• The United States drew up new options for three days of strikes on Iran, even after President Donald Trump said Washington would not attack before the November 3 midterm elections.
• Oil markets remained volatile as tanker attacks linked to Iran tensions pushed crude sharply higher before prices eased after Trump described talks with Tehran as productive and ruled out a pre-election strike.
• Federal Reserve officials kept a tightening bias in place, with Governor Christopher Waller saying further rate hikes are needed but do not have to come at consecutive meetings and St. Louis Fed President Alberto Musalem saying more firming will be required to return inflation to 2%.
• The September FOMC minutes continued to frame another U.S. rate increase as likely by year-end, while benchmark 10-year Treasury yields eased toward 5.27% after reaching 5.36%, their highest level since 2002, earlier in the week.
• European Central Bank communication left the policy outlook open, with the September account described as neutral and data-dependent as policymakers weighed upside inflation risks against the impact of higher long-term yields on growth.
• Bank of England Governor Andrew Bailey said monetary policy must stay focused on returning inflation to target, while external member Megan Greene warned it was dangerous to assume markets would do the BoE's work for it and said UK pay awards looked set for about 3.5% next year.
• China is set to resume refined fuel exports in October after a brief Golden Week suspension, a move aimed at easing tight global diesel, gasoline and jet fuel markets.
• Banxico's September minutes showed policymakers held the benchmark rate at 6.50% while judging that inflation risks remain tilted to the upside.
• Gold rebounded from a two-month low to trade near $4,140-$4,150 an ounce as markets weighed the Federal Reserve's rate path and the inflation implications of higher energy prices.

Market Developments

Energy

Brent crude climbed to around $105 per barrel before easing to about $103.3, while WTI traded around $90.30 to $89.65 in Asian and early European dealing after gaining nearly 2.5% the previous day; gasoil was up 12% since Tuesday's dip and diesel pump prices were described as near record highs.

Rates

The U.S. 10-year Treasury yield eased toward 5.27% on Thursday after reaching 5.36% on Wednesday, its highest level since 2002.

Foreign Exchange

The Dollar Index traded near 102.30 and remained inside the range it has held since October 1, while GBP/USD traded around 1.3230 after rising 0.14%, EUR/USD was little changed, AUD/USD traded near 0.6950 and USD/CAD hovered around 1.4210.

Precious Metals

Gold traded near $4,140 to $4,150 an ounce after rebounding from a two-month low.

Geopolitics & Energy

U.S. Draws Up New Iran Strike Options as Trump Rules Out Pre-Election Attack

The United States has drawn up new options for three days of strikes on Iran, even as President Donald Trump said earlier that Washington would not restart attacks before the November 3 midterm elections. The planning, reported by the New York Times, underscored that military options remain active despite Trump's public effort to signal restraint.

The Iran standoff continued to dominate energy markets. Oil prices surged after tanker attacks and missile threats disrupted confidence in Gulf shipping routes, with Brent crude climbing to around $105 per barrel at one stage. Prices later pulled back after Trump said talks with Iran were productive and that the U.S. would not attack before the midterms, but crude still remained elevated on the day and week.

Tanker Attacks Keep Oil and Diesel Markets Tight

Energy supply risks remained acute after attacks on tankers and continued threats to shipping linked to the Strait of Hormuz. Gulf crude exports had returned to pre-war levels in September through both a tanker shuttle across Hormuz and a detour route around it, but both channels have since come under attack.

The disruption kept petroleum products under pressure even after crude retreated from intraday highs. Brent was quoted around $103.3 per barrel after the pullback, WTI traded around $90.30 to $89.65, and gasoil had risen 12% since Tuesday's dip. Diesel prices were described as having veered back up sharply, with pump prices near record highs. Rabobank also noted hurricane risks to U.S. output and policy-driven diesel stockpile releases as additional factors in the market backdrop.

China to Resume Refined Fuel Exports in October

China is set to resume refined fuel exports in October after a temporary suspension during the Golden Week holiday, Reuters reported. The return of Chinese shipments is aimed at easing tight global diesel, gasoline and jet fuel markets at a time when Middle East supply risks have lifted prices across the oil complex.

Macroeconomics & Central Banks

Fed Officials Keep Tightening Bias as Yields Stay Elevated

Federal Reserve officials continued to signal that inflation remains too high. Governor Christopher Waller said further rate hikes are needed but stressed that tightening does not have to come at consecutive meetings, while St. Louis Fed President Alberto Musalem said inflation is elevated and that more monetary policy firming will be required to return it to the 2% goal.

The September FOMC minutes reinforced that message. The minutes showed unanimous support for a 25 basis point increase to a 3.75%-4.00% target range, with most policymakers judging that another increase would likely be appropriate by year-end. At the same time, officials did not explicitly commit to a move at the October meeting.

U.S. labour-market data remained firm overall. Continued claims rose to 1.716 million in the week ending September 26 from 1.699 million, while initial jobless claims edged lower despite expectations for a small increase. Treasury yields remained historically elevated even after easing, with the 10-year yield moving back toward 5.27% after touching 5.36% on Wednesday, its highest level since 2002.

ECB Keeps Options Open as Minutes Highlight Inflation Risks and Higher Yield Drag

The European Central Bank's September account left policymakers without a firm forward signal, but showed the Governing Council balancing upside inflation risks against the possibility that higher long-term yields will weigh materially on growth and inflation. Officials noted no signs of second-round effects from the energy shock and only limited indirect effects so far, while also stressing that the outlook remained highly uncertain and heavily dependent on geopolitical developments.

The policy message was interpreted in different ways across the market. Some analysts described the account as dovish relative to pricing because it did not support three additional hikes, while others said the ECB remained primarily focused on upside inflation risks and was keeping the door open to further tightening. A Reuters poll conducted from October 5 to 8 showed economists expecting the ECB to leave rates unchanged in October before delivering another increase in December.

BoE Officials Stress Inflation Fight and Market Resilience

Bank of England Governor Andrew Bailey said monetary policy needs an unwavering commitment to returning inflation to target and argued that financial markets need to be better prepared to absorb future shocks without amplifying them. He said greater absorption of government debt has come with greater fragility, and that while market movements are some way from normal, the BoE is not seeing illiquidity or stressed conditions.

Bailey also said evidence of energy-cost pass-through into broader inflation is currently quite subdued, though risks remain. Separately, external Monetary Policy Committee member Megan Greene said it is dangerous to assume markets will do the BoE's work for it and said UK pay awards look set to run at about 3.5% next year. Greene has voted for a rate increase at each of the last three meetings.

Banxico Minutes Show Rate Hold at 6.50% With Upside Inflation Risks

The Bank of Mexico's September meeting minutes showed policymakers left the benchmark interest rate unchanged at 6.50% while acknowledging that inflation risks remain tilted to the upside. The account signalled that the central bank is keeping a cautious stance even after pausing further tightening.

Commodities & Currencies

Gold Rebounds as Markets Weigh Fed Path and Energy-Driven Inflation Risks

Gold recovered from a two-month low and traded near $4,140 to $4,150 an ounce in Asian dealing. The move came as markets reassessed the Federal Reserve's rate path and the inflation implications of higher energy prices following the latest Middle East disruptions.

Dollar Holds Broad Range as Markets Digest Fed Signals

The U.S. dollar traded without a decisive break after the latest Fed commentary. The Dollar Index held near 102.30 and remained inside the range it has occupied since October 1, even after Waller reiterated that further rate hikes are needed.

Across major pairs, GBP/USD traded around 1.3230 after a 0.14% rise, EUR/USD was little changed as lower U.S. yields tempered dollar momentum, AUD/USD traded near 0.6950 as elevated Treasury yields continued to support the greenback, and USD/CAD hovered around 1.4210.