WS #16425

Geopolitical tensions in the Middle East are escalating sharply, with reports indicating preparations for a new phase of heavy combat operations against Iran and a ceasefire pause only around Oleshky in Ukraine. This escalation is driving risk-off sentiment in Israeli markets and increasing energy supply concerns, though US crude production remains on track for records in 2026. Concurrently, the US Federal Reserve is expected to hold rates steady in its final meeting before the midterms, a move that dampens immediate macro volatility but leaves growth and high-multiple assets exposed to geopolitical shocks. In corporate earnings, the AI infrastructure narrative remains robust, led by Vertiv's significant beat and SK Hynix's earnings fueling a 7% surge in the Kospi. European banks like BNP Paribas also posted strong results with buybacks, supporting financial sector stability. However, mixed signals emerge from the automotive sector, with Stellantis reporting a massive cash drain, contrasting with the broader tech rally. Consumer sentiment shows strain, with surveys indicating rising financial anxiety and budget cuts for the holidays, suggesting underlying demand fragility despite the tech-led market gains.