WS #16910

Markets are pricing in a sharp de-escalation of Middle East geopolitical risk following the US midterm elections, with oil prices falling for a fourth consecutive day as ceasefire bets intensify. However, this macro easing is immediately challenged by a fresh, acute supply shock: two oil tankers and a tugboat have caught fire in the Strait of Hormuz. While the immediate physical disruption appears contained, the incident has reignited fears of navigational hazards in the critical chokepoint, creating a volatile tug-of-war between political de-escalation and physical supply risk. Simultaneously, the US CPI print came in hotter than expected at 3.7% (vs 3.6% expected), marking the highest inflation level in four months. This data point, combined with an SF Fed warning about El Niño posing a 'meaningful risk' of higher inflation in 2027, is dampening the post-election rally and keeping pressure on rate-cut expectations. The AI sector continues to bleed, with the selloff extending as investors digest the political implications of the Democratic sweep and lingering concerns over demand. In corporate news, Micron has suspended construction on its $4.5B Taiwan plant due to labor disputes, a significant headwind for the memory chip cycle that contradicts the broader AI hardware narrative. Conversely, Lundin Gold reported a strong Q3 with net income climbing to $293.8M, benefiting from the safe-haven flows driving gold prices higher.