US-Iran Attacks Send Shockwaves Through Energy Markets as Brent Crude Surpasses $100

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Summary:

US and Iranian forces target oil tankers in the largest wave of attacks since the war began; EIA expects Middle East oil supplies to gradually recover...

【Highlights】

1. Iran says it has strong retaliatory capabilities and outlines conditions for a ceasefire

2. US Treasury sets $6 billion cap for long-term Treasury buybacks

3. US and Iran target oil tankers in largest wave of attacks since the war began

4. Trump: Iran war will end immediately after US midterm elections

5. Bessent publicly pressures BOJ to raise rates, claiming to have asymmetric information

6. EIA expects Middle East oil supplies to gradually recover, with Brent projected to fall to $74 per barrel in 2027

【Details】

Iran says it has strong retaliatory capabilities and outlines conditions for a ceasefire

On September 9 local time, Iran’s Islamic Revolutionary Guard Corps (IRGC) spokesman Hossein Mohebbi warned in a statement that Iran currently has strong retaliatory and deterrent capabilities. If the enemy strikes two or three Iranian targets, Iran will respond by targeting 20 enemy targets, he said.

The spokesman added that if the opposing side wants to bring the current situation to an end, it must meet the following conditions: completely halt military operations and abandon any further threats; withdraw Israeli forces from Lebanon; lift the blockade of Yemen; unfreeze $24.4 billion in Iranian assets; and stop interfering with Iran’s nuclear capabilities and missile development programs.

US Treasury sets $6 billion cap for long-term Treasury buybacks

The US Treasury Department announced that, under its expanded Treasury buyback program, it will purchase up to $6 billion of long-term government bonds in its first operation. After Treasury Secretary Scott Bessent publicly indicated that the buyback could exceed $4 billion, some dealers raised their forecasts for Thursday’s operation.

Bessent reiterated on Tuesday that although he cannot change the equilibrium price of US Treasuries, his goal is to reduce market volatility and prevent a narrative that could damage the Treasury market from gaining traction.

After the Treasury announced the buyback size, Treasuries extended their decline. The 10-year Treasury yield rose 6 basis points to 4.85%.

The market reaction suggested that some investors had expected a larger buyback. Before the announcement, Guneet Dhingra, US rates strategist at BNP Paribas, said a $7 billion buyback would be needed to surprise the market, while any amount below that level could trigger selling pressure.

It remains to be seen how effective the expanded buyback program will ultimately be. After the Treasury announced the expansion of the program last month, Treasury yields initially declined but soon moved higher again. The benchmark 10-year yield reached its highest level since 2023 last week.

US and Iran target oil tankers in largest wave of attacks since the war began

Iran said on Wednesday that it had attacked 10 vessels near the Strait of Hormuz following the US sinking of five Iranian oil tankers, marking the largest round of retaliatory attacks on shipping since the US-Iran war began six months ago.

Amid reports of escalating tensions in the Middle East, the benchmark Brent crude futures price broke above $100 a barrel for the first time since July, reaching as high as $101.58, up 3.74%. New York crude futures rose as much as 4.07% to $96.82.

According to the latest report from Iran’s Fars News Agency, explosions were heard in Jask in southern Iran, with the sounds reportedly coming from the direction of the sea. Iran said it had launched ballistic missiles at a US military base in Jordan.

Since late August, the mutual attacks have shattered a month-long period of relative calm, with military, shipping and energy infrastructure all coming under attack.

The IRGC said it would significantly escalate its response to any further attacks. If the enemy strikes two or three targets, Iran would retaliate against 20 targets, it said. The IRGC also said Iran would soon release a new and expanded map of maritime exclusion zones, with the restricted area extending along the Iranian coastline to Chabahar, near the border with Pakistan.

Trump: Iran war will end immediately after US midterm elections

Trump said energy prices driven higher by the war in Iran would not fall until after the US midterm elections. The midterm elections are scheduled for November 3, leaving less than two months until the vote.

Speaking to reporters at Joint Base Andrews on Wednesday before departing for Texas to attend a Republican midterm election rally, Trump said the war with Iran would end immediately after the US midterm elections because, he claimed, the Iranians could not hold out much longer.

Trump has repeatedly claimed that the United States has already won the ongoing war with Iran.

Trump also said oil prices would fall sharply after the midterm elections, adding that he expected gasoline prices to drop below $2 per gallon.

He accused Iran of urgently seeking to influence the US elections and bring weaker leaders to power who would allow Iran to obtain nuclear weapons. Trump emphasized that Tehran must not be allowed to acquire nuclear weapons.

Bessent publicly pressures BOJ to raise rates, claiming to have asymmetric information

US Treasury Secretary Scott Bessent’s public campaign to push the yen higher has increased market expectations that the Bank of Japan could undertake monetary tightening on a scale not seen in more than a generation. If policymakers fail to deliver, markets could become volatile.

In an unusual episode of public pressure on monetary policy, Bessent claimed on Tuesday that he possessed asymmetric information about the BOJ’s next move and described himself as “the house.”

Speaking at an event at Southern Methodist University in Texas, the former hedge fund trader went beyond his usual comments on central bank policy, claiming that he knew broadly what Japanese policymakers were planning.

Bessent did not specify exactly what he wanted the BOJ to do, but just last week he publicly urged Japanese officials to “do the right thing.” Markets are already pricing in a 25-basis-point rate hike next week, while pressure is mounting on BOJ Governor Kazuo Ueda to deliver a sufficiently strong signal of further tightening at the meeting. Failure to do so could disappoint markets and erase the yen’s recent gains.

Bessent’s remarks highlight the unusually prominent role he has taken in Japan’s economic policymaking. Japan is the largest foreign holder of US debt. In late July, Bessent coordinated with Japan’s finance minister on the first joint intervention to support the yen since 1998.

EIA expects Middle East oil supplies to gradually recover, with Brent projected to fall to $74 per barrel in 2027

According to the EIA’s Short-Term Energy Outlook, Middle East oil production is expected to increase over the coming months, mainly as oil flows through the Strait of Hormuz gradually recover and alternative export routes outside the region are utilized.

However, the EIA assumes that restrictions on Middle East oil exports will remain in place through the end of this year. As a result, regional crude oil production is expected to remain below its pre-conflict average through the second quarter of 2027.

The EIA forecasts that Brent crude spot prices will average around $90 per barrel in the second half of 2026. As oil production increases and inventories recover in 2027, Brent prices are expected to gradually decline to an average of $74 per barrel.

【Today’s Key Events】

20:15 (UTC+8) ECB October interest rate decision

20:45 (UTC+8) ECB President Christine Lagarde holds a monetary policy press conference

20:30 (UTC+8) US August PPI annual rate

22:00 (UTC+8) US August existing home sales, annualized

TBD (UTC+8) OPEC releases its monthly oil market report

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