No Deal, No Relief

Issue #3

28/9/26

US/Global Desk

Competition for Capital

Iwo Wojcik

Week: S&P +1.21%, Nasdaq +3.25%, Dow +0.03%, Russell -0.93%Yields again?

Seems like yields have been the topic of discussion for forever now, but the U.S. 10-year yield just keeps on climbing higher.
This Friday, it hit 5.23%, the highest level since 2007.
Just earlier this month, it was sitting under 4.8%.
But here's where it gets interesting: Brent was down around 2% on hopes of a new U.S.-Iran deal.
That should be good news for bonds, right?
Lower oil should mean lower inflation pressure, thus less pressure on the Fed, and therefore lower yields, but that didn't exactly happen. Yields stayed near their highs, 5.15%-5.20%.

The bond market has stopped trading off crude alone.

Strong growth (this week's PMI showed business activity at its fastest pace since 2021), further Fed tightening, and competition for capital (lots of borrowers are trying to attract the same pool of money from investors) are holding rates up even as oil falls.

Why?

We saw the trigger on Wednesday when S&P Global released their flash PMI, which came in at 58.4, a 62 month high .
The flash PMI is a measure of business activity through new orders, output, employment, and prices, giving us an early reading of the economy's direction. This matters because it shows that the U.S. economy is expanding quickly, despite inflation concerns and the war with Iran. When growth is strong, the Fed has less of a reason to cut rates, making investors have to price in rates staying higher for longer, but it isn't just this growth number that mattered.
The same report containing the PMI number also showed companies reporting their input costs rising (costs of things businesses need to operate, like fuel, transport, and other supplies).
If businesses are able to pass those costs on to consumers while demand is still rising, it keeps inflation elevated. Investors saw strong growth, but renewed inflation pressure at the same time, and that caused the 10-year to jump 15 bp that day to 5.11%. Then came the next bit of data the University of Michigan posted their year-ahead inflation expectations, which rose 0.6 percentage points from 4% to 4.6%, the highest since June.
The market was getting exactly what it didn't want: an economy that isn't slowing down enough, and inflation expectations moving higher.
All of this makes the Fed's job harder and makes investors anxious about how quickly rates can actually come down

US 10 Year Note Bond Yield- Trading Economics

Other key things in the report:

• Backlogs: The amount of uncompleted orders rose at the sharpest rate since May 2022.

• Supply chains: Delivery delays are the most widespread since July 2022.

• Jobs: The hiring pace is one we haven't seen since June 2022.

US equities

The Nasdaq gained 3.25%, while the S&P gained 1.21%, the Dow was almost flat. The Russell 2000 fell 0.93%. Same pattern as last week: normally, higher yields should put pressure on growth stocks, but big tech continued to outperform anyway. Higher yields may not affect them as much as small caps due to them being exposed to fixed-rate bonds locked in years ago, compared to small caps having floating-rate loans, the rates move with the market.

Global

This week we saw Thailand's export growth at a 7-month high coming in at 21.6% year on year. This was mostly driven by electronics and technology-related goods, giving us yet another sign that the global AI and data center cycle is continuously being supported, not just inside the U.S. To add a cherry on top, imports grew even faster, meaning the stronger exports are also helping pull in a larger amount of foreign inputs across the globe. Brazilian and Canadian 10-year yields fell, showing that the rise in global yields is not completely uniform. Canadian yields fell mainly due to investors focusing on weaker domestic demand.

UAE/Gulf Desk

Another Week, Another War

Henry de Salis

Just as Iran talked peace at the UN, the Houthis opened a new front against Saudi Arabia: the Bab el-Mandeb strait is now closed to Saudi-flagged ships. Don't be fooled, however, as Iran dominates the headlines, business is moving under the surface, and some fundamental shifts occurred in UAE financial markets as IHC restructures, and Qatar launches a new investment division under QIA.

A black plume of smoke rises from King Khaled Int. Airport, Riyadh. Last week.

Hormuz Diplomacy Flies and then Crashes

The UN General Assembly last Tuesday brought some hope to the matter – that has since been destroyed. US and Iranian negotiators explored a phased deal that would've seen Hormuz re-opened in just seven days. It was a step forward; nuclear talks, waived sanctions, and a ceasefire were all a part of the proposed deal.

Saturday night however, Trump rejected the deal:

"They want to make a deal where they open the strait immediately because they're losing so badly."

Regardless, hope isn't dead! Iranian foreign minister, Araghchi, is awaiting a more 'official' response from Washington and that they will not step down from demands.

This comes as economic pressure is growing on Iran; Trump thanked the UK, UAE, Turkey, and Oman for introducing economic restrictions on Iran, as the UAE introduced an outright ban on air travel between the two countries as of the 24th.

Abu Dhabi: Stocks Tank as IHC restructures

The UAE's largest company, International Holding Company (IHC), has been booming; after-tax (yes, the UAE has a 9% corp tax) profits has soared 196% year-on-year. Stock price should be booming, right?

Investors are seemingly taking on a bitter attitude to Abu Dhabi, as a high P:E ratio (31) keeps investors on edge. The announcement of a restructuring last week, done to promote long-term equity handover sustainability, sent the stock falling nearly 5%. Broadly, stocks were also seen weaker in the UAE capital after an advisor to Iran's leader warned of potential disruptions to regional air travel and airport services.

Qatar turns Inward

The Qatar Investment Authority (QIA) introduced a new division last week, Doha Investment, initially responsible for overseeing 45 state-owned enterprises that represent nearly one-third of the fund's total assets.

The country is definitely struggling; the closure of Hormuz has made it impossible to export LNG, and Qatar's GDP fell 7% year-on-year in the first quarter of 2026.

The Outlook

The Middle East is stuck in a 'neither war nor peace' holding state, and last week saw risk spread rather than shrink, as Saudi Arabia now faces pressure on two routes at once. Qatar's gas income is frozen and is dipping into its sovereign fund to support the domestic economy.

Despite the investor sentiment this week, the UAE is relatively insulated; energy stocks are benefiting from high oil prices and the property market is holding up.

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This is not financial advice. Read our disclaimer.

Henry de Salis
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