Fed Delivers First Rate Hike Since July 2023; Saudi Moves to Restore Oil Flows After Pipeline Damage

Huo Xing Finance reports: Global markets swung sharply this week as investors weighed the Federal Reserve's policy shift, mounting Middle East risks, and fresh worries about an AI "slowdown." On Sept. 19, the Fed lifted rates by 25 basis points to 3.75%–4%, marking its first increase since July 2023 and the first policy adjustment under Chair Wosh. The dot plot showed 16 of 18 officials expect at least one additional rate hike by 2026. The median 2026 rate projection rose to 4.1% from 3.8%. Wosh said inflation remains "too high and has lasted too long," adding that current financial conditions are not yet restrictive. Former President Trump argued U.S. interest rates "should be 1% or lower." Japan's central bank also tightened, raising its policy rate by 25 basis points to 1.25%, a 31-year high, and said it would keep adjusting policy if growth and inflation evolve as expected. With the move largely priced in and two policymakers dissenting, the yen weakened further, pushing USD/JPY above 157. Geopolitical stress in the Middle East fed into energy and shipping markets. Continued friction around the Strait of Hormuz led to attacks on multiple commercial vessels and tankers, driving shipping costs sharply higher. Houthi forces kept targeting Saudi energy infrastructure, increasing risks in the Red Sea and the Bab el-Mandeb Strait. Saudi Arabia has started building a bypass for its damaged east-west oil pipeline to restore transport capacity quickly. Iran has been approved to send its president and foreign minister to New York for the UN General Assembly, a sign of limited de-escalation in U.S.-Iran relations, though the risk of military escalation remains. The AI sector also became a new source of uncertainty. Leaders at Anthropic, OpenAI, and xAI have recently called publicly for slowing the pace of frontier-model advances while strengthening safety testing and audits. OpenAI introduced a "model mismatch" disclosure framework and reported six instances of anomalous behavior. Meta and NVIDIA have taken different positions on the idea of an industry-wide coordinated slowdown. At the same time, U.S. courts have accepted civil lawsuits against Anthropic, OpenAI, xAI, and Google, putting AI safety, regulation, and capex in focus as new market variables. In Turkey, equities were hit by a liquidity shock. The BIST 100 fell throughout the week, dropping 5.54% on Wednesday alone and briefly sliding more than 7%, triggering a circuit breaker. The selloff was driven by domestic fund redemptions and liquidity strains, with several funds unable to meet redemption requests on time. The central bank expanded its repo financing capacity to 300 billion lira, while regulators suspended certain fund trading activities and lowered margin requirements for financing trades. The market rebounded on Thursday. A Russia-Ukraine "energy ceasefire" has yet to take shape. Although Trump said both sides had agreed to halt attacks on each other's energy infrastructure, no formal agreement has been confirmed and strikes on refineries, energy facilities, and ports have continued. Reuters data shows three of Russia's six largest diesel refineries have halted or sharply reduced output due to drone attacks. Russia is reportedly preparing to extend diesel export restrictions. In corporate developments, Kioxia is moving ahead with plans for a U.S. ADS listing. Bloomberg reported the company is considering raising at least $10 billion via ADRs, potentially as early as 2027, though final size and timing are not set. Separately, SK Hynix's subsidiary Solidigm is evaluating construction of a NAND flash memory production facility in the eastern United States. Rising demand from AI data centers is lifting storage-chip prices and revenues, prompting memory makers to accelerate expansion of U.S.-based operations.