Start the day with Reuters on the stories moving U.S. and global markets. Subscribe for $1/week.

Morning Bid U.S.

A Reuters Open Interest newsletter

What matters in U.S. and global markets today

By Mike Dolan, Editor-at-Large, Finance & Markets

Just when markets thought the Iran conflict was stuck at an impasse, the bellicose rhetoric went up several notches on Monday – and so did energy prices.

Brent crude hit $91 per barrel overnight as Iranian officials talked of shifting to a "fully offensive" mode and retaining a tight grip on the Strait of Hormuz.

I'll get into that and more below.

But first, check out my latest column on why financial officials are still fretting about the sustainability of the AI trade, even as Wall Street powers higher.

And listen to the latest episode of the Morning Bid daily podcast, where we dig into rising long-dated government bond yields. Subscribe to hear Reuters journalists discuss the biggest news in markets and finance seven days a week.

Data refreshes every time you open this email. For more U.S. market news, click here. Please send any feedback to morningbid@thomsonreuters.com.

Today's Market Minute

Even as Iran projects resilience in the war with the U.S., its leaders are worried that a threat of more economic punishment by Donald Trump could increase hardships, reignite unrest and further erode the Islamic Republic's legitimacy.
Long-term borrowing costs from the U.S. to Japan and Germany rose to their highest levels in decades on Tuesday, as renewed inflation worries added to lingering concerns of fiscal pressures across major economies.
President Donald Trump-backed World Liberty Financial is collaborating with a Hong Kong-based venture offering AI models developed by Chinese companies the U.S. administration has flagged for national security concerns.
As the U.S. and Iran dig in on both sides of the conflict, the oil market is now behaving as though Middle East energy supply disruptions are not a temporary shock but a new reality, explains ROI Energy Columnist Ron Bousso.
Federal Reserve Chair Kevin Warsh has indicated there are a few routes for returning inflation to target – but the route most likely to succeed is the simplest one, argues ROI Markets Columnist Jamie McGeever.

Yields give way

U.S. President Donald Trump took an uncompromising tone with Tehran on Monday, ruling out an extension of the 60-day memorandum of understanding agreed to in June and even threatening to bomb ally Oman if its talks with Iran interfere with U.S. war aims.

For markets, this suggests the energy blockage in the Gulf could last for many more weeks or even months. This already uncomfortable situation for oil markets – and inflation-pressured government bonds – will get even more tense as winter looms and populations feel a tighter energy squeeze.

The prospect of aggravated inflation through the winter and the potential need for fiscal offsets that raise sovereign borrowing even more has hammered long-dated government bonds around the world yet again.

The 30-year U.S. yield hit its highest in 19 years on Tuesday, as German, French and Japanese long-dated yields also hit multi-year highs. These moves were somewhat surprising given the reduction in Fed rate hike bets after a series of soft economic and inflation readings over the past week.

But long-dated yields – which are likely being pressured, in part, by competition from waves of AI-related corporate borrowing – may simply be reacting to fears the Fed could be unwilling or unable to get inflation sustainably back to target.

All this has doused equity markets early today, with Asian shares closing lower on Tuesday and Wall Street futures in the red before the bell.

Elsewhere, markets will get another read on U.S. consumer resilience on Tuesday with Home Depot's second-quarter earnings, the first in a string of updates from U.S. retail giants that will include Target and Walmart later this week.

With that, onto today's column.

Even as market clouds clear, AI investment anxiety still gnaws

Another blockbuster earnings season has swept Wall Street, powering corporate profits and driving stock indexes back to record highs. But even as the AI investment engine fires on all cylinders, underlying anxiety is still hard to shake.

In terms of headline profits, earnings projections and corporate investment, the numbers keep ringing the bell. U.S. annual profit growth has reached 50% at midyear, while overall capital expenditure this year alone is heading north of $1 trillion and rising.

Graphics are produced by Reuters.