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Overnight we explained why the AI supercycle now hinges on the ever faster issuance of more and more debt, so critically needed to fund trillions in capex in the coming years...

... and which according to Goldman will look something like this.

The problem is that as spreads keep blowing out as more investors do the ugly math (discussed extensively here), the pace of debt issuance is starting to slow as credit markets get cold feet.

The latest example comes courtesy of the same Oracle which we profiled as the "first AI domino to fall", back in November '25, and whose $18 billion in leveraged loans tied to a New Mexico data center leased to the company slid into stressed territory on Friday, highlighting investors’ fear that increasing local backlash will derail the tech group’s massive AI infrastructure build-out. 

According to the FT, loans linked to the $165 billion “Project Jupiter” were quoted at 89 to 91 cents on the dollar by syndicate banks including Santander and Jefferies. Healthy debt typically trades within a tight band near par.

What makes the price slide from par in just a few months especially concerning is that the 1,400-acre data center campus in Doña Ana County is at the heart of Oracle’s landmark $300bn contract with OpenAI to provide computing power. The marquee project secured $18Bn of loans from a consortium of banks late last year to kick-start construction, along with billions of equity investment from Blue Owl.

According to the FT report, efforts to offload the debt to a broader group of investors have hit a wall due to concerns around Oracle’s massive borrowing and declining creditworthiness. The debt secured a private investment-grade rating from credit rating agencies but that's largely thanks to the SPV structure which is synthetically boosting the project's overall credit rating (as discussed previously).

Indeed, as Barclays wrote in its latest credit report on ORCL, despite the overall improvement the bank has seen in the credit, one area that remains less comfortable is "the timeline for its data center projects, particularly for those that have faced setbacks such as New Mexico/Jupiter."

And amid the growing grassroots pushback to data centers, the market is also turning increasingly less comfortable, with the company's gargantuan debt load is not helping.

Oracle’s corporate credit rating currently sits just one notch above junk following a downgrade from S&P in July. That, together with the recent meltdown in lower-rated AI credits, meant that banks were now forced to hold more Oracle-linked project debt on their balance sheets than initially planned. And judging by the trajectory of Oracle's CapEx, which is now growing at an explosive pace, they will end up holding much more in the coming months.

Separately, Oracle’s 82-year-old co-founder Larry Ellison abruptly cancelled a $7.5Bn share-trading plan last weekend, just one day after unveiling it, without explanation.

One thing that is very clear is that the market is not giving the company much if any credit for its massive, if questionable, backlog, which has been made possible only thank to the company's even more massive debt spree.

Oracle’s stock has plunged 50% since it unveiled its $300bn deal with OpenAI a year ago.

And if the massive debt wasn't enough of a problem, Project Jupiter has faced its own share of delays due to fierce local opposition over concerns about its impact on the local area’s water supply and air quality. The project was initially going to be powered by 2.2 gigawatts of gas turbines, but the state land office blocked a request to run a natural gas pipeline to the data centre.

In April, Oracle announced that it would power itself with Bloom Energy fuel cells, which emit less sulphur and nitrogen oxides, but permission to connect a pipeline to feed these was also blocked. 

The project’s air permit application was paused in August after lawsuits from two environmental groups, although a judge said the process could continue on Thursday. 

Deb Haaland, New Mexico’s Democratic gubernatorial nominee and a former US Interior secretary, said she would pause all new data centres if elected in November and require developers to heavily invest in renewable energy.  State filings show Oracle donated more than $12,000 to her campaign in late August.

It is not clear how a moratorium could affect the company’s sites, although it would like lead to even more delays.  

“Big Tech’s mantra may be ‘move fast and break things’, but here in New Mexico, we do things our way,” Haaland said in a press conference.

Comparable to nationwide trends, a recent poll by New Mexico's Albuquerque Journal found that 65% of its residents were against the development of large data centres, versus only 20% of respondents supporting such construction. 

Project Jupiter’s initial phase is as of this moment at least seven months behind its proposed date to come online, according to market intelligence firm SynMax. It was expected to be completed by November this year. It won't be; in fact it may not be completed for years. 

Authored by Tsvetana Paraskova via OilPrice.com,

India's coal power generation did not grow between the first half of 2024 and the first half of 2026, for the first such two-year period in over 50 years in which coal power has remained flat in the world's second-largest coal consumer, a new analysis by the Centre for Research on Energy and Clean Air (CREA) for Carbon Brief showed.

"The period from the first half of 2024 to the first half of 2026 saw the largest increase in non-fossil power generation on record in India," Lauri Myllyvirta, lead analyst at the Centre for Research on Energy and Clean Air (CREA), wrote in the analysis.

Moreover, the clean energy boom led to the first time in more than 50 years that India has seen no growth in coal power generation over a two-year period, even as electricity demand grew overall.

Despite the record clean energy growth, India continues to pursue major capital investments in fossil fuels, including new coal-power capacity, plans for conversion of coal-to-chemicals, and efforts to boost domestic coking coal production for the steel sector, CREA noted.

A total of 43 gigawatts (GW) of coal-power capacity was under construction in India as of the end of June 2026, according to the analysis.

Overall coal-fired capacity installations in India continue to rise, and coal remains a key pillar of India's electricity mix - about two-thirds of total power output.

Despite booming renewable capacity additions, India continues to rely on coal to meet most of its power demand as authorities also look to avoid blackouts in cases of severe heat waves.

Coal will still be a key part of India's power system for the next two decades, Rajnath Ram, adviser for energy at the government policy think tank, NITI Aayog, said at the end of last year.

"We cannot be subjective about coal. The question is how sustainably we can use it," the official noted.

Update: The situation for Merz's party just went from "disaster" to full Titanic as projections signal the CDU will get just 4.9% of the vote - below the critical threshold required to enter parliament...

This would be the first time the CDU failed to enter state parliament since the founding of the federal republic in 1949.

Two days ago Friedrich Merz said Germany was "a country of immigration."

Today, his party collapsed. ???? pic.twitter.com/d8dvWPe92r

— Inevitable West (@Inevitablewest) September 20, 2026

Merz's approval rating is at a record low...

*  *  *

German Chancellor Friedrich Merz's political troubles deepened as exit polls put his Christian Democrats on course for their worst-ever result in a state election.

MERZ'S CDU PARTY POSTS WORST RESULT EVER IN A GERMAN STATE VOTE

AFD AHEAD OF SOCIAL DEMOCRATS IN NORTHEASTERN STATE VOTE

ANTI-CAPITALIST LEFT PARTY LEADING IN BERLIN ELECTION

— zerohedge (@zerohedge) September 20, 2026

Right-wing Alternative for Germany (AfD) is set to win most votes in the state of Mecklenburg-Western Pomerania while the socialist Left Party has surged to first place in Berlin, according to initial projections.

Local outlet Deutsche Welle adds more color:

In Mecklenburg-Western Pomerania, the AfD is projected to take 37%, edging out the center-left Social Democratic Party (SPD) on 35.5%.

The center-right Christian Democratic Union (CDU), the party of Chancellor Friedrich Merz, is projected to slump to 5.5%, barely above the threshold to enter the state parliament.

In Berlin, the CDU suffered another alarming setback, polling at just 20% against 24.8% for the far-left anti-capitalist 'Left Party'.

AfD is third on 15.7%, up 6.9 points. 

Sunday’s showing could mark the first time the CDU is expelled from a state parliament since the founding of the federal republic in 1949.

“We can’t sugarcoat it, it was a disaster,” Merz told reporters in Berlin in a statement directly after exit polls were released, but offered no sign that he would step down.

He gathered senior CDU officials to party headquarters, where he sought to gauge their support for his leadership.

Lars Klingbeil, the SPD co-leader and vice chancellor, said the government needs to take stock and ask why voters voiced such uncertainty about policymaking in Berlin, where Merz’s coalition has struggled to sell its plan to overhaul the pension system and take on more debt to boost spending on defense and infrastructure.

“I take this very seriously,” Klingbeil told ARD.

“I also believe that we need to look at results like these with humility and ask ourselves: What can we do differently? What can we do better?”

The AfD party’s national co-leader, Alice Weidel, said Merz was the “wrong chancellor” and doing damage to his party.

“He’s dragging the CDU down with him,” Weidel told ARD.

“The CDU must ask itself — especially now — whether it wants to continue with this chancellor and with these left-wing policies. Because it won’t be able to carry on like this.”

AfD wrote on X:

"Chancellor Merz is not stepping down after the CDU disaster - no, instead he's telling the citizens that there won't be any 'back to the good old days'.

But, Mr. Merz. There will be. With the Alternative for Germany, which aligns its policies exclusively with the interests of its own citizens—and which will replace the CDU. Everywhere,"

"I am taking over this responsibility because I want to bring our country forward," Merz said.

Yet deindustrialization is really what's on the ballot, as Merz and the German political establishment have failed the nation.

Germany's political landscape is fragmenting in three directions at once: the CDU in the center, the AfD on the right, and the Left Party on the far left. No single coalition appears to be taking shape. This comes weeks after AfD's victory in Saxony-Anhalt. The results intensify pressure on Merz only 16 months into his chancellorship.

Andrzej Szczepaniak, a senior European economist and executive director at Nomura International in London, wrote in recent weeks that Europe has entered an 18-month election cycle that could accelerate the continent's shift toward populism, with high-profile elections already underway. 

Szczepaniak emphasized the "seeds of political change" are already here, indicating that "politics in Europe is lurching towards more populism." 

Read the full report here. 

The political shift extends well beyond Europe. In Brazil, foreign capital is beginning to flow in as right-wing challenger Flávio Bolsonaro leads socialist President Luiz Inácio Lula da Silva, suggesting investors are positioning for a potential change in economic policy. 

President Trump in a Sunday morning Fox News interview repeated some of his talking points about a big decision he is preparing to make regarding what comes next in the Iran war

He told the outlet he's currently in "deciding mode" on Iran and that "very big things" are coming, and once again suggested it would either involve major military escalation or else a drawdown in tensions.

The president said: "My question is, if and when do I blow the entire nation up? They better behave."

But he went from saying that he's mulling the destruction of an entire society, to then suggesting it could be the opposite - top negotiations could happen, to the point that he could meet Iranian President Masoud Pezeshkian.

He said he might allow Iran to "rot" economically or else a deal could be forged, adding that "very big things are going to be happening in the not-so-distant future."

Interestingly, the US actually issued visas to allow Iranian top officials and diplomats to travel for the UN General Assembly meeting through this week. According to Iran's PressTV:

Iranian President Masoud Pezeshkian is set to travel to New York to attend the 81st session of the United Nations General Assembly next week.

Pezeshkian is scheduled to address the General Assembly on Wednesday, September 23, where he’s expected to present the Islamic Republic’s stance on international developments and the US-Israeli war of aggression against the country.

On the sidelines of the gathering, the president is also expected to hold meetings and consultations with world leaders.

Trump was asked about the high level UN meeting which opens Monday, and surprisingly signaled a willingness to engage diplomatically, going so far as to say he would "probably be open" to meeting with Iranian President Masoud Pezeshkian.

In Trump's mind, there seem to be three options on the table, or as he put it--"to obliterate Iran, letting it rot economically or reach a deal."

Iran has meanwhile over the weekend once again warned US allies in the region that they'll be considered "complicit" if the US resumes it military assault on the Islamic Republic. The Iranian military HQ stated that "any mistakes will result in painful attacks."

Tehran further indicated Sunday that it is still awaiting Trump's response to its conditions for ending the war. Mohammad Bagher Ghalibaf confirmed to AFP that Iran's demands were sent to Washington via the Qataris.

??General Staff of the Iranian Armed Forces:
According to intelligence received, the US has once again decided—with the green light from certain regional countries—to resume actions against Iran during a joint meeting in a European nation.

— IRIB (Islamic Republic of Iran Broadcasting) (@iribnews_irib) September 20, 2026

These conditions have been summarized as "the end of the war on all fronts, the release of frozen assets and the end of the naval blockade."

Releasing all frozen funds is a tall ask, given the White House has only become more aggressive it waging economic war on the Iranians. But Iran has blasted the theft and hijacking of its funds and sovereign assets.

* * *

Submitted by Almonty Industries CEO Lewis Black, 

The UK just invested £71m to restart a tungsten mine, with an option on half the output. Other governments will follow. I should be pleased – I've spent years arguing the West needs to fund its own supply.

The problem is I've seen what happens next. In 2008, Japan and South Korea poured billions into securing critical mineral supply chains. They funded projects across Australia and Canada. The result: no material produced. The money went to a generation of junior mining executives. I remember them on their boats in Monaco – very grateful, very happy. Governments have good ideas. The people they back to deliver on them are sometimes another matter.

The challenge is that a government is a jack of all trades – it can't tell a good mine from a bad one, so it hires engineers who write glowing feasibility reports with a waiver in the small print. And there is no shortage of people who call themselves management. Most of them are clowns who shouldn't be left alone with a box of matches.

Japan and South Korea learned. They stopped trying to pick winners and pushed the risk onto their industrial base – the companies that buy the stuff. Those companies know how to protect a dollar. If the new money follows that model, the checks might land somewhere useful this time.

Tungsten markets

Michael Dornhofer, ISBP – assessment as of 11 September, 2026

Tungsten prices in the USA and Europe stay unchanged for another week and are still around 3000 USD/mtu WO3. Reports from China show their domestic price trend moved to an upward tendency.

The reason is quite simple: There is not enough raw material! As the APT price in China is only about one third of the western price, Chinese APT producers are not willing to buy western concentrates on western price level. But without a significant amount of imported raw material, the industry is running short on raw material. Soon it will become clear whether the Chinese domestic prices will go up towards western levels, or China might reduce output of downstream products for export.

The coming weeks will show us. And there's another interesting development that even some "experts" overlooked. On 5 August, China placed several foreign entities under sanctions and banned them from operating in China. One entity on this list is the non-profit organization RBA.

RBA (Responsible Business Alliance) is the world's largest industry coalition dedicated to promoting responsible business conduct. RBA has more than 600 member companies including Apple, Tesla, Microsoft, Amazon etc. and runs the RMI (Responsible Minerals Initiative) program.

Nearly the entire western downstream industry insists on RMI certificates for their total supply chain. When, due to the ban of RBA, no RMI audits and certificates are possible in China, western downstream producers cannot accept any tungsten material or downstream products coming out of China.

China wants to replace the RMI audits by audits performed by CCCMC (Chinese Chamber of Commerce for Metals & Chemicals). But knowing that China imports thousands of tonnes of concentrate from countries like Myanmar and North Korea, and so material from these countries are in the tungsten supply chain in China, it's questionable who would trust Chinese audit certificates.

So, this easy-to-overlook new regulation in China could lead to an additional "firewall" between China and RoW, which might have a very significant effect on the tungsten world market.

Michael Dornhofer is founder of ISBP (Independent Supply Business Partner) in Graz, Austria. He has spent more than 20 years in tungsten, including 13 years at Wolfram Bergbau und Hütten, Sandvik's tungsten business, and has worked as an independent agent and consultant to the tungsten and hard metal industry since 2019.

From January, the door shuts

Since 2023, the Pentagon has barred Chinese, Russian, Iranian and North Korean tungsten from defense contracts. From 1 January 2027, that restriction moves upstream. It will no longer matter where the tungsten was melted or processed. What matters is where it was mined. Ore, feedstock, recycled material: if it started life in one of those four countries, it is out. The route that kept the loophole open – mine in China, process somewhere friendlier, sell it as non-Chinese – closes for good.

That's the American side. On the other side, producer countries are shutting their own doors. Zimbabwe banned exports of tungsten ore and concentrates in July, confirmed by the Ministry of Mines and reported by Bloomberg last week. Vietnam's industry ministry has drafted a proposal to pull tungsten off the permitted-export list entirely. Vietnam is the world's second-largest producer, at around 3,400 tonnes a year. If that draft becomes law, the non-China supply pool gets a lot smaller.

Zimbabwe barely produces any tungsten. The volume is negligible. But the pattern is worth watching – one more producer country pulling raw material off the open market. The list of places you can actually buy tungsten outside China keeps getting shorter.

Opinion

People ask why we don't branch out. Gold is on a run. Lithium gets headlines. Every commodity has someone telling you it's the one to watch. We do tungsten and molybdenum. We don't know anything else – and I would rather say that than pretend otherwise.

A vet treats everything that walks through the door. Dogs, cats, parrots. A doctor specializes. The guy who whips out your appendix does not do brain surgery, unless you're on a budget.

Mining is the same. Every deposit has its own geology, its own metallurgy, its own set of problems you only discover once you are underground. The companies that chase whatever commodity is fashionable learn everything at surface level and nothing underneath. We have been at this long enough to know what we don't know – and we don't know gold or lithium or anything that's not a refractory metal.

We are the doctor.

In the media

The analysts have arrived. Jefferies has initiated coverage of Almonty with a Buy rating, citing the tightening tungsten market and the growing need for supply outside China. With the shares up considerably over the past year, interest in both Almonty and tungsten has clearly moved on.

What matters now is execution – bringing new supply into a market that badly needs it.

*  *  *

On the tungsten news front, Almonty partnered with Rwanda's government last Monday, securing a foothold in Africa's largest tungsten-producing nation. By Thursday, the miner, which expects to become the leading Western producer of conflict-free tungsten (ex-China), tapped Swedish mining equipment maker Sandvik's Wolfram Bergbau und Hütten AG unit to process existing tailings from its Los Santos mine in western Spain.

As last week's news proved, Almonty's move is about bringing the most immediately available tungsten supply to the West as resource wars and China's critical materials chokehold on the world collide with the US rearmament supercycle set to kick off in the near term.

In other words, the West doesn't have the time to open new mines. 

via Christian Keller, Barclays' global head of economics research

Without critical materials, the West's rearmament supercycle, reindustrialization, data center buildouts and a nearly endless list of other projects would not be possible. Wall Street should refocus on producing miners that can deliver today because they're the ones providing the building blocks that make Western reindustrialization possible. 

Iran's central military command has announced it believes the United States has made the decision to resume military attacsk on the Islamic Republic.

Citing the country's General Staff of the Iranian Armed Forces, state media IRIB states that "According to intelligence received, the US has once again decided - with the green light from certain regional countries - to resume actions against Iran during a joint meeting in a European nation."

At the same time Iranian leadership again warned US allies in the region that they'll be considered "complicit" if the US resumes it military assault on the Islamic Republic. The Iranian military HQ stated that "any mistakes will result in painful attacks."

Tehran further indicated Sunday that it is still awaiting Trump's response to its conditions for ending the war. Its chief negotiator Mohammad Bagher Ghalibaf confirmed to AFP that Iran's demands were sent to Washington via the Qataris.

Starting Saturday night there was an avalanche of online chatter over potential new escalation, given President Trump abruptly cut short a visit to Camp David.

Some pundits saw in this a sign of some kind of imminent military action in the Middle East, also amid reports that extra military hardware is being sent to the region.

But others have suggested this is just setting up for another TACO moment, and reports of escalation is just the White House trying to instill fear and uncertainty in Tehran.

There's also speculation that Washington could be moving towards direct intervention in the Saudi-Yemen conflict, after the Houthis have been attacking key Saudi Aramco oil sites. Also, Riyadh has just come under attack for the first time of the war.

INSIGHTS: There’s a TON of very obvious signaling taking place right now for imminent massive escalation against Iran.

President Trump, just after Camp David, is returning early to the White House (and reported on by Barak…).

Bibi Netanyahu is cutting his U.S. Tour a day… https://t.co/ntsZHwJj00

— Brett Erickson (@BrettErickson28) September 19, 2026

In the background is a new State Department warning to Americans to avoid all travel to the Middle East. A statement indicated that the Iran war could quickly worsen.

“This military conflict has the potential to escalate rapidly. Americans outside the Middle East should seriously reconsider travel to and through the region,” the State Department said late Saturday on X. It said that Americans currently in the region should "exercise heightened vigilance and be aware of potential flight cancellations, airspace closures, and travel disruptions."

By Peter Tchir of Academy Securities

With the Fed Behind Us…

The 10-year Treasury sold off after the Fed bounced Thursday, only to resume selling, finishing the week just under 5%. Stocks, which seemed to move up and down with Treasuries, decided to move to the beat of their own drum into the close on Friday. Similarly, for the past few weeks, it seems that if you knew oil was up/down, you could predict yields would be up/down. Not on Friday.

On this special day we will build on Thursday’s post-FOMC report: Back to Regularly Scheduled Programming. You might be wondering “what makes today special”? Well, for the first time ever, the T-Report has the same access to the White House as CNN, though not quite how we hoped it would happen. The ban definitely seems weird. Not sure what to make of it, and maybe it will be nothing, but it does seem strange at the very least.

In Thursday’s report we touched on:

• Oil and energy prices, which we will focus on more today.
• Japanese Yen. Support has broken the 155 level solidly (closing at 156.9), which is likely to cause it to weaken further as a lot of people were willing to bet on I Am the House Now Bessent.
• Compute Build and AI Spend. Increasingly, this is likely to be a focus of this week’s Trump/Xi summit.
• Space. We need to do more to focus on the opportunities and risks (commercial and national security) for space. Working with some of Academy’s GIG members to more thoroughly assess this, as the national security aspect seems to be gaining more attention.

The Houthis and Saudi Arabia

Should we be treating what is going on between the Houthis and the Saudis as a subset of the Iran/U.S. war? The Houthis are, after all, a proxy of Iran. The Saudis have been working with the U.S. and the President, so are they merely just an ally? A subset, an extension, or something in its own right?

While Iran is likely influencing the Houthis and certainly has given them the tools to cause havoc and mayhem, the Houthis seem to be taking the initiative. Maybe they see the U.S. as distracted with Iran. Maybe they see the U.S. testing the Saudis’ loyalty as an ally. In any case, it seems like they have seen an opportunity and are taking strides to set their agenda in and around the Red Sea. They have seemingly gone out of their way to avoid any attack against U.S. assets. Instead, they are hitting the Saudis where it hurts: their energy industry. And according to reports, that includes jet fuel facilities at the airport.

We cautioned about getting excited that the pipeline damage inflicted on the “alternative to the Strait” pipeline would be repaired quickly. One, the damage seemed more extensive than just to the pipeline. Two, and more importantly, there is no evidence that new strikes could be thwarted. It seems like we should start pricing in “disruptions” to the energy complexes that are outside the scope of the U.S./Iran conflict.

Will the Saudis be able to defend themselves? Will they “beg” America to get involved more directly? If they do, will the U.S. get involved? Will they try to disrupt traffic through the Red Sea? If so, how much can they do before the U.S. gets involved? I’d ask how much before Europe would get involved, but that seems like it is too unlikely to even think about (they probably should, but it doesn’t seem imminent).

Markets seem to only react badly when actual events affecting energy prices occur. Markets seem to react positively to any story, rumor, or hope that is positive. That relationship may need to change…

Even My Mother Knows Diesel Prices are High!

Usually, by the time my mother knows something is affecting financial markets, it is a pretty good time to fade the trade as it has become totally consensus. I’m not so sure about that this time.

Since the war began, we’ve been focused not as much on oil, but more on LNG and Diesel. Both are “tighter” than oil itself. More susceptible to supply chain disruptions. Less flexibility to work around. So rather than “fading” something we’ve argued that people should focus on, we should just embrace that people (including my mother) are now thinking about the dangers of rising diesel prices: for industry, transportation, and agriculture (and maybe the “back up” generators at some data centers).

We already busted through the “red circle” that we had in last week’s version of this chart.

This is a big deal and has created some chatter about restricting diesel exports from the U.S. As discussed in prior reports, that is not likely to work (even with restrictions, the domestic price isn’t likely to deviate too far from Global Price minus Transportation minus Storage). It is also likely to hurt U.S. companies going forward as customers entering into new contracts need to consider this possibility (plus there are likely to be some legal challenges).

Rising diesel prices are high on my list of inflation pressures that are mounting and difficult to control (unless you are in charge of the war efforts).

One Path to Victory with Iran

Anything could happen. We could all wake up on Monday to find that there is a “deal” that is on the table and close to getting done. We did have an MOU after all (though from day 1, it seemed that although we all saw a written version, there were “unwritten” versions or promises made, that were inconsistent and it seemed like neither side had really listened to what the other side had said or wanted). I won’t discount some sort of “deal” but it seems difficult to believe that it will be one the U.S. can claim as a major victory, if it happens now (given the current news flow surrounding the war).

The economic sanctions could pressure Iran into a deal. The blockade has been very successful. Iran seems to be able to “contain” the amount of trade going through the Strait against their interests (some is going through, but Iran is still able to scare many into not trying to run through the Strait).

• Can the increased focus on sanctions work? Sure, but in a matter of weeks? Hmmmm…I find it difficult to believe that a nation that kills its own citizens on an industrial scale will collapse in weeks, or even a couple of months. They have had experience with evading sanctions for decades, albeit sanctions not being enforced as strictly as they are supposedly being enforced now.
• It remains unclear how sanctions will work unless the U.S. is willing to go after China (and Turkey) to the full extent of what Bessent has outlined. So far, that doesn’t seem to be happening. It will almost certainly be a discussion point this week for Trump and Xi.

Sanctions are helping and might be enough to force a good deal, but that doesn’t seem like a “tomorrow” sort of event.

Increasingly, we are being asked about “knocking out” Iran’s infrastructure. Could that happen? Yes, but here is a quick assessment:

• Anything clearly military focused has already likely been hit and destroyed.
• That leaves “dual use” facilities. Facilities that have both a military use and a commercial use. Let’s say energy sources close to military facilities that also service communities. Some of these are viable targets as the military usage is enough to justify going after them. Similar for some bridges necessary for moving troops or armaments. But this can be tricky: on a legal and humanitarian level. Global perception, while not necessarily at the top of the admin’s concerns, should still be a concern.

This is a possible path for the U.S., but it could be a difficult balancing act of doing enough to force change, without doing too much reputational (or even legal) damage.

Taking the Islands that control the Strait: after the midterm elections.

One theory that General (ret.) Bellon discussed this week is taking action to secure the islands that control the Strait, culminating possibly with Kharg Island.

The rationale is:

• Wait until after the midterms, because risks to U.S. troops will increase, but it won’t be as politicized as it would be prior to the elections. Prior to the election, IRAN WILL HAVE MORE OPTIONS than after the elections. Basically, if Iran believes the midterms represent a hurdle to Trump, they can take different actions than they can after the midterms have occurred. There is no longer some “deadline” for Trump, giving him more flexibility and changing Iran’s response function. This makes a lot of sense.
• Sanctions may work to create a deal, but anything resembling a different regime is not likely. Taking the islands that control the Strait, and eventually Kharg Island itself, would cripple their energy industry and demonstrate real weakness on their part. It will be difficult to do without loss of further life, but when so many other options leave us with a “kick the can” option, the President may decide an option that has horrible costs may be better than going through this effort every few years.
• Signaling the will to do this might be enough to change Iran’s negotiating stance. Taking even one small, relatively insignificant island that is the easiest to defend may also change the calculus for Iran. The U.S. might win not by taking every Island, including Kharg, but the start of turning a threat into reality could be enough.

What to watch for:

• The U.S. moving vessels with top-notch medical facilities into proximity (less than 1 hour by helicopter, say as a guideline) would be a good indication. The military’s commitment to saving each and every life possible, and providing the best care possible, is real. So, they would need to move these vessels that can perform state-of-the-art surgery and operations, close enough to help any soldiers needing aid.

Of all the discussions that I’ve heard around a “post-midterm” victory, this path seems reasonable. Maybe the theory would even be that once Iran sees the ships moving in, and knows the President isn’t potentially hamstrung by upcoming midterms, it capitulates and looks for a deal? Maybe a bit optimistic, but it resonates with me.

Greenland Deal

The President announced a deal. I will reserve comment until we see the terms of the actual deal (so far, as has become the norm, there are all sorts of assertions from a variety of sides, with little documentation).

The deal could be a real game changer, as the President implied via Truth Social. It might just be an updated formulation of agreements already in place (never hurts to update something that was written long before the polar ice caps were melting, when computers were the size of a house, and rare earths and critical minerals weren’t required in vast amounts).

A win in any case, but how much of a win remains to be seen. And could it have been done without all of the “annex” / “take” Greenland rhetoric?

Trump and Xi

We will provide a full take on this on Tuesday morning, as we work with the GIG to figure out what is likely the highest priority on both sides.

A few months ago, trade, rare earths, and critical minerals would have been high on that list. A few weeks ago, Iran and global energy had to be high on that list.

Now, cyber, AI, and compute have to be highest on the list.

At first blush, on most of these issues, the U.S. seems to need more from China than they need from the U.S. Never a great way to enter into a summit with China, but we will delve deeper on Tuesday.

Bottom Line

I’m running out of time in Vermont, and it might be nicer to spend it outside rather than at my laptop (and the Wi-Fi is spotty at best).

Diesel and the Middle East are key to rates.

For now, I think the path for energy prices (and stocks) and rates (globally) is higher. The news flow has not been positive this weekend, and it is difficult to see that changing quickly as Trump seems to be focused on dealing with Iran from a “stronger” position after the midterms (not stronger in terms of having the support of the House and the Senate, stronger because the perception that he has a deadline is gone).

For compute, Cheap Chinese Compute remains a concern.

It is difficult to get all “warm and fuzzy” about the outcome of this summit for markets. More choppiness seems to be the order of the day, with a bias to the downside for me on the compute spend story (though good for their credit spreads).

We get to bookend this week with a Monday morning appearance on CNBC and Friday morning on Bloomberg to analyze the results of the summit!

Should be another interesting week that we all have to navigate. Even with the Fed behind us, we will be paying attention to the data that may determine the next move for the Fed, but Iran, the Houthis, diesel, rates, and the summit are all going to move markets (hopefully in accordance with how we are recommending positioning).