Oil hits highest since May as war fears grip markets

Market snapshot:

• Gold slipped $24 to $3999
• WTI crude added $4.01, reaching $103.47
• The S&P 500 declined 0.5%
• 10-year US Treasury yields rose 4.6 bps to 5.00%
• AUD led while CHF lagged

Strong cross-currents are running through markets right now. The newest one is an oil surge into the weekend, with Brent at $117, its highest since May. Evidence is mounting that Trump will escalate against Iran as a way to break the impasse and upend polling that looks grim for him ahead of the midterms. At a rally shortly before the close, he said a "little Epic Fury" was possible, which aligns with some reporting about a short-term bombing campaign against nuclear sites and other infrastructure. Investors will watch closely what happens after the close, and then the question will become how Iran might retaliate.

The oil jump drove Treasury yields higher and pulled gold lower, though it was not the only factor in play. The euro is still getting dragged down by protests in France and across other countries. The market is picking up on political change and the likelihood of additional state spending to calm unrest and preserve the current order.

In the meantime, the AI trade is shifting, with investors increasingly asking where the money to fund it all will come from. The apparent answer is equity markets, and nobody is certain those markets can absorb that much capital raising. The bond market has already flinched, so I'm skeptical. Meta lost another 1% after dropping 7% the day before, as it gears up to introduce a new share class. Telecom names were also lower on indications that Elon Musk is moving Starlink to earth, where he will set up cell phone towers or buy space on existing ones.