A Rejected Truce Pushes Oil Higher And The Bond Selloff Goes Global

President Trump rejected Iran's offer of a seven-day truce on Saturday, and markets got their first chance to price it on Monday. Oil rose close to 3%, the Treasury selloff that paused Friday resumed, and Germany's 10-year government bond yield reached its highest level since 2009. That last one is new, because the move has stopped being an American story.

Fast Facts

• Oura, the smart-ring maker, went public Monday in one of the year's biggest IPOs, betting Wall Street will value the health data it collects (Read More)
• $400 million from Goldman Sachs went into Cyera, a cybersecurity startup, in an extension funding round (Read More)
• Nvidia released AI safety software it says could have stopped the attack behind the recent Hugging Face hack (Read More)
• Anthropic chief executive Dario Amodei is set to dine privately with President Trump at the White House, their first one-on-one after a year of tension (Read More)
• California Governor Gavin Newsom signed a bill restricting meme coins tied to public officials (Read More)
• Glasses, not a phone, are where Meta is putting Muse, its new AI agent, as big technology companies race to build dedicated AI hardware (Read More)

Global News

• European gas prices climbed on the prospect of prolonged disruption to liquefied natural gas flows after the truce was turned down (Read More)
• TotalEnergies plans to invest $14 billion to $17 billion a year from 2027 to 2032, targeting 2% to 3% annual oil and gas output growth after 2030 (Read More)
• Cryptocurrency transactions are not anonymous, China's Ministry of State Security warned, pointing to their use in espionage recruitment and money laundering (Read More)
• China's industrial profit growth slowed again in August, and Asian shares split on Monday as traders weighed the odds of another Federal Reserve rate increase (Read More)

Trump Rejected Iran's Truce Offer, And Monday Repriced Oil, Bonds And Gold At Once

Iran's foreign minister, Araghchi, proposed a seven-day halt to hostilities at the UN General Assembly on Friday, September 25. It would have reopened the Strait of Hormuz, the shipping chokepoint this conflict is about, on three conditions: that the United States end its naval blockade, stop what Iran called acts of aggression, and release frozen Iranian assets. President Trump rejected it on Saturday, September 26, telling reporters that "they made a proposal but I rejected it." Markets were shut all weekend, so Monday, September 28 was the first session that could price any of it.

Brent crude, the international oil benchmark, gained close to 3% on Monday, toward the $107-a-barrel area, and U.S. crude rose a little less. Treasury yields, the annual return a buyer earns for holding a government bond to maturity, resumed rising after pausing on Friday, with the 10-year and the 2-year each up a few basis points, or hundredths of a percentage point, in early trade. U.S. stock index futures, which track where traders expect those indexes to open, slid, Nasdaq-100 futures down almost 1%. Germany's 10-year Bund yield, Europe's benchmark government borrowing cost, went to a 2009 high. And gold futures fell 3%.

Those moves fit together. A chokepoint that stays closed keeps oil scarce and expensive, and expensive oil raises the cost of almost everything that gets shipped or made. Inflation is the main risk a long-term bondholder is paid to carry, because it eats the value of every fixed payment still to come. When the odds of it go up, buyers demand a higher yield before they will lend. That is what Monday did to Treasurys. Gold is the counterintuitive leg: it usually goes up when the world looks dangerous, but the same oil spike lifts the odds that the Federal Reserve, which raised rates on September 17 for the first time in three years, raises them again. Gold pays no interest, so it loses its appeal exactly when the interest available elsewhere is climbing. And the Bund moving on the same headline as the U.S. 10-year says this is a global inflation risk, not an American one.

None of this is settled. Trump told Axios on Sunday, September 27 that he expects more U.S. talks with Iran in the coming days, so the proposal he turned down may not be the last version of it. On the Treasury's published curve for Friday, September 25, most maturities eased: the 10-year closed at 5.17%, down one basis point, and the 2-year at 4.81%, down six. There is no published curve for Monday yet. The pause was real, and it lasted one session.

Sources: WSJ on oil · WSJ on the Bund · WSJ on gold · Axios · U.S. Treasury · Rapunzl, the September 25 briefing

The Energy Secretary Publicly Talked Down A Diesel Export Ban

Energy Secretary Chris Wright told The Wall Street Journal that the administration is not pursuing a full halt to U.S. diesel shipments abroad, even after President Trump floated banning or restricting those exports to relieve record diesel prices for truckers and farmers. He called an outright ban "a blunt hammer" and said it would raise gasoline and jet fuel prices immediately. Instead, according to Wright, the administration is discussing voluntary measures to increase the diesel available to buyers at home.

His objection is a point about how a refinery works. A refinery does not produce diesel by itself. It takes in a barrel of crude oil and splits it, in roughly fixed proportions, into diesel, gasoline and jet fuel at once. A refiner cannot make less diesel for export without making less gasoline and jet fuel too. An export restriction leaves more diesel sitting in the U.S. at first. Keep it on long enough and refiners respond the only way the equipment allows, by running less crude. That shrinks the supply of all three fuels, not just the one the policy was aimed at.

Goldman Sachs put arithmetic on the tradeoff. While U.S. storage tanks still have room for the diesel that would otherwise ship out, Goldman estimated that every week of export restrictions could lower domestic diesel prices by roughly 25 cents a gallon. Once those tanks fill, which the bank put at nine to ten weeks under a meaningful cutback, the model flips: each additional week would add roughly 30 cents a gallon to U.S. retail gasoline prices. That is a tradeoff anyone can check against the sign at the nearest filling station. Goldman's analysis also has European wholesale fuel prices moving higher, because the U.S. supplies roughly 32% of the European Union's diesel imports. Every one of those figures is conditional on a restriction that does not exist. Nothing has been banned or restricted as of Monday morning, and the official closest to the decision is on record against the version Goldman modeled.

Sources: WSJ · MarketWatch · Rapunzl on record diesel prices, Sept 23

Australia's Largest Gold Miner Turned Down A $27 Billion Offer

Northern Star Resources, Australia's largest gold miner, rejected an unsolicited takeover proposal from South Africa's Gold Fields, meaning an offer Northern Star never asked for. The terms mixed stock and cash: 0.3125 new Gold Fields shares plus A$7.25 for every Northern Star share, valuing the company at A$38.7 billion, or roughly $27.1 billion, when the proposal was made on September 14. Northern Star's board rejected it unanimously and called it "highly opportunistic." The offer, it said, materially undervalued the company's assets ahead of the ramp-up of its Fimiston Mill. The board also said the premium on offer, the extra amount above market price a buyer pays to persuade shareholders to sell, fell short of the roughly 30% typical in Australian takeovers. On Monday, Northern Star rose as much as 9% and closed up about 6%, while Gold Fields fell more than 12% in Johannesburg.

Two stocks moving in opposite directions on the same headline is the ordinary pattern in a takeover fight: the target climbs toward a price someone has now shown they might pay, and the buyer falls when its own shareholders think it is paying too much, or issuing too many new shares to do it. Cash is a fixed amount of money. Stock is not: 0.3125 Gold Fields shares are worth whatever Gold Fields shares happen to be worth, so Monday's 12% drop shrank the buyer's own proposal. That drift was already underway: the A$38.7 billion headline reflects where Gold Fields traded before the proposal, and by Friday, September 25, the same terms implied closer to A$36.1 billion. A board that says no on valuation, rather than on principle, is making a claim the market gets to settle: that the company standing alone is worth more than what was put in front of it. With gold prices near record levels this year, which is what turned miners into takeover targets, that is an argument neither side can end alone.

Sources: Bloomberg · CNBC · Investing.com

What To Watch

Jefferies Financial Group is expected to report after the close today, and analysts' average estimate is $1.04 a share against $1.05 a year ago. Vail Resorts follows, and with its ski season not yet started, analysts look for a seasonal loss of $5.37 a share against a loss of $5.08 a year earlier. Twenty-one companies in all are scheduled to report Monday.

Tuesday brings Carnival before the open, expected at $1.36 a share against $1.43 a year ago, and CarMax at $0.67 against $0.64. Micron is expected after Wednesday's close, with Jabil and FactSet before the open the same day, and Accenture and Nike on Thursday. All of those are estimates, not results.

Wednesday is the week's crowded day for data. The Bureau of Economic Analysis is expected to publish Gross Domestic Product, Corporate Profits, and Personal Income and Outlays, which carries the inflation gauge the Federal Reserve watches most closely. Four Fed governors are scheduled to speak between Monday and Wednesday: Lisa Cook, Michelle Bowman, Michael Barr and Christopher Waller, on subjects from bank supervision to the economic outlook. None of that is a rate decision. The Fed's next policy meeting is scheduled for October 27 and 28.

The Classroom Takeaway

Monday is a clean example of one headline moving oil, bonds and gold through a single question: what it does to the odds on the next interest rate decision. The fastest way to feel why that question matters is to set those rates yourself.