US opens to Russian diesel, no Iran strikes before the election, new ATH

Friday evening, just before power hour, Trump's post landed in my news feed: a call with Putin, Russian diesel on its way. Minutes earlier the Treasury had signed the license that lets it into the US. In September, diesel at the pump hit an ATH, 6.53 dollars a gallon according to the EIA, against 3.81 before the Iran war. My thesis: three weeks before the midterms on 3 November, the White House is doing everything it can to give voters faith in the future, and it is meant to show when they fill up.

1The White House: four moves in one week

Monday: payment of the federal diesel tax is deferred for the rest of the year. Thursday: Trump promises not to attack Iran “before the midterms”. Friday: the license, and diesel prices are to fall “IN RECORD NUMBERS, AND FAST!”, Trump writes. Sunday: Trump declares an “ENERGY CEASEFIRE” that the Kremlin has not confirmed. Hours later a power plant in Kharkiv was hit, according to Zelensky.

2The counterpoint: Iran weighs more than diesel

The first 300,000 tons cover roughly 14 hours of US consumption, and the price was already falling before the license. “Everything” does not hold: the blockade of Iran's ports stays in place, the US sanctioned more ships in Iran's shadow fleet on the same day as the promise, and the promise only runs until the election.

Why fuel prices? According to Reuters/Ipsos, only 21% approve of Trump's handling of the cost of living, the issue most say decides their vote. Faith in the future is lagging: Michigan consumer sentiment fell in October, dragged down by independent voters.

3The Nasdaq handled the yield. AI is the question mark.

Last week's hypothesis, that stocks can handle the yield as long as the market expects at most one more hike this year, held. The Nasdaq 100 hit an ATH on Tuesday, and the 10-year yield closed the week lower, at 5.24%. According to the minutes of the September meeting, most Fed officials saw one more hike as likely, and the market puts it in December. The rates market has not struck out a second hike, only pushed it to early 2027.

Thursday's Nasdaq dip coincided with a Financial Times report: OpenAI's annualised revenue is close to 50 billion dollars, around 20 billion below the figure that had been circulating. If anything wobbled, it was the AI profits in the hypothesis, not the Fed.

Brent rose anyway

Brent rose 1.6% to 104.4 dollars on the week, while WTI, the US's own oil, stood still. I read that as the risk sitting in Hormuz and the Red Sea. On Saturday a missile hit Riyadh's airport: at least twelve dead, the deadliest attack on Saudi Arabia in more than a decade. Will the US join the Saudi strikes on the Houthis? “We may,” Trump replied. None of that was in Friday's prices.

The week ahead

• Tonight: oil opens, the first trading after Riyadh and the Houthis' unconfirmed claims of strikes on Aramco.
• Wednesday 14:30 CET: September CPI, expected to rise to around 3.6% from 3.4%. The last one before the election. Same day: the EIA's first fuel prices since the license.
• Thursday: the IEA board meets, and IEA head Fatih Birol wants member countries to consider releasing more diesel from emergency stocks. At 08:00 CET TSMC reports, a big AI test after the OpenAI report.
• Friday 05:30 CET: Fed Chair Kevin Warsh speaks, the day before the Fed goes quiet ahead of the 28 October rate decision, the only one before the election.

WTI is lower-hanging fruit than Brent

Now the focus shifts from the yield to oil. My hypothesis stands, slightly adjusted: the White House can get the price at the pump down a bit before 3 November, Brent is more uncertain, and as long as Brent rises, the likelihood grows that the market once again prices in two more hikes before year-end.