In 30 seconds: Ongoing Iranian shipping attacks in the Strait of Hormuz have reduced oil flows by 3-4 million barrels per day from a September peak, while the US lifts sanctions on Russian diesel exports and Western Canadian Select crude differentials widen to multi-year lows. October University of Michigan consumer sentiment fell to 46.3, missing estimates, while one-year inflation expectations rose to 4.7% and equity risk premiums hit cycle lows amid a mixed picture of robust retail spending but slowing wage growth. The US and EU are negotiating tariff rate quotas to limit Chinese hybrid and EV exports, as surging Asian chip exports signal a widening US trade deficit and China's broad export wave continues despite sectoral trade measures. Corporate AI spending is increasingly concentrated among a small share of companies and bleeding into employment in data center and electronics sectors, while OpenAI revenue transparency concerns triggered a pullback in AI-related stocks including the SMH semiconductor ETF.
Oil flows through the chokepoint peaked at a 16.2 million barrels per day seven-day average on September 24, and since Iran picked up shipping attacks, volumes have dropped by 3-4 million barrels per day, settling at roughly 12-13 million barrels per day over the past two weeks. UKMTO reports another attack in the Gulf, and the pattern is disconcerting: these incidents are drifting west into the Gulf and away from actual transiting Hormuz traffic. The tally now stands at 15 attacks since last Wednesday. Still no retaliatory response from CENTCOM. You might expect crude prices to be screaming. They are not. WTI prompt backwardation is weakening, falling below $1 per barrel — the weakest since mid-August. Meanwhile, the US Treasury is lifting sanctions on Russian diesel exports until April 2027. The announced volume is ~300,000 tonnes, or roughly ~2.2 million barrels. The quantities are, however, quite small to make a meaningful impact. Even through the ban, roughly 100 thousand barrels per day has continued flowing. WCS crude differentials are blowing out — more than $25 per barrel at Hardisty and more than $16 per barrel at Houston, the widest levels since November 2023 and January 2023, respectively. U.S. jet fuel exports up nearly 25 million barrels first seven months of 2026 compared with the same period in 2025.
The current conditions sub-index cratered to 44.7 against expectations of 50.1, down from 50.9. The expectations component, oddly, was the relative bright spot, coming in at 47.3 versus an estimate of 45.7 and a prior reading of 46.3. So consumers feel worse about right now than about later, which is a fun inversion. On inflation, one-year expectations ticked up to 4.7%, above the prior month's 4.6% but actually below the 4.8% estimate. The five-to-ten-year measure landed at 3.5%, matching estimates but up from 3.4%. Johnson Redbook Retail Sales Index year-over-year growth: 8.6%. The 2026-10-08 print on the thirty-year fixed rate hit 7.40%, up 0.12 percentage points on the week. Individual investors, undeterred, have pushed stock exposure to 71.8% of their portfolios as of September, the highest since 2017 and well above the historical average of 61.5%.
The EU believes China has in effect accepted a quota that will reduce its exports of hybrids and plug-in hybrids substantially, with a standard 10% duty applying on a capped volume of vehicles. The announced deal would cut 50% of hybrid imports to the EU. Over the last 12 months, the EU imported roughly 550,000 hybrids from China, and the tariff rate quota is expected to be binding. The "understanding," such as it is, is that China won't retaliate for a quota that preserves some fraction of their current exports. Whether that understanding survives contact with reality is another question. Chinese car exports to Europe have been growing very rapidly, with the annualized import pace reaching 1.7 million cars in the three months to July. The BYD tariff on EVs sits at 27%. The trouble is that China's current export wave is broad based, and sectoral measures won't stop the tide. China's underlying need to export remains strong (weak internal demand), and China's currency remains undervalued (even with the recent move tied to dollar strength). You can cap hybrid shipments and still watch the aggregate trade numbers climb. The US deficit has been trending up since May, and the September surge in Korean/Taiwanese exports (mostly chips) strongly suggests that the September/October US deficit will also rise further. Meanwhile the AI component of the trade deficit is growing, and largely registers as an increase in imports from Mexico, because the Taiwanese and other contract manufacturers have moved to Mexico for final assembly in a big way. The water finds the crack.
A small cohort of firms is driving enterprise AI spending, while increased usage has yet to translate into productivity gains for the broader economy. The data center and investment boom is now bleeding into employment in sectors like nonresidential specialty trade contractors, computer and electronics manufacturing, power generation and supply. A year ago those sectors were running flat; now they are adding almost 20,000 payroll jobs per month. One concern is straightforward: AI company revenue reporting needs actual transparency. For now, the market is sorting real revenue from figures like single-day receipts annualized by multiplying by 365.
Here is what moved this week.
S&P 500: 7,811.54, up 0.59% on the day
Gold: $4,219.90, up 1.51% on the day
US Dollar (DXY): 102.22, up 0.08% on the day
WTI crude: $91.62, up 0.14% on the day
Gas (per gallon): $4.35, down 2.49% on the week
30-year fixed mortgage: 7.40%, up 12 bp on the week
Initial jobless claims: 197,000, down 1.01% on the week
Continuing claims: 1,716,000, up 1.00% on the week
Average hourly earnings: $37.81, up 0.13% on the month