WS #14043

The dominant narrative remains Middle East tensions, but the market is increasingly decoupling oil prices from geopolitical headlines. Oil settled down ~2% (WTI $81.25, Brent $87.07) despite ADNOC confirming two vessels attacked in the Strait of Hormuz and the US threatening an indefinite naval blockade of Iran. The pullback was driven by a hefty 17.4M barrel US crude build (largest since Jan 2023) and IEA/OPEC cutting 2026 demand forecasts. This decoupling is a key signal: supply risk premium is fading as demand destruction and inventory builds dominate, though diesel cracks at record highs and Hormuz traffic at 8 ships/day (vs ~130 pre-war) keep two-way volatility alive. The Fed narrative is genuinely split three ways: Hammack (hawkish, act now), Barkin (agnostic), and Goolsbee (patient, tariff/oil shocks should fade), with markets pricing ~1/3 chance of a September hike, down from ~1/2 after soft PPI. S&P 500 hit a record close at 7,798.99 (+0.65%) on tame inflation, led by Sandisk (+13.7%) and Micron (+4.2%), while Cisco fell 8.4% on conservative guidance. Reddit jumped 8.5%+ after-hours on S&P 500 index inclusion, and OpenAI's annualized revenue run rate reportedly surpassed $40B, supporting its IPO narrative. Trump signed a proclamation imposing tariffs on drone imports (100% on sensitive drones, 25% on smaller, 15% on EU/Japan/Korea/Taiwan, 10% on UK), a new sector-specific trade action. The SEC abruptly pulled Friday's crypto rules meeting, adding uncertainty to tokenization/crypto regulatory signals.