Geopolitics

Satellite imagery indicates Saudi Arabia is redirecting crude exports away from the Red Sea route via Yanbu toward Persian Gulf terminals, with the number of supertankers there over the weekend reaching the highest level since June. Over the past six days, the kingdom moved 2.9 million barrels a day of crude through the Strait of Hormuz. The shift follows a September 11 drone attack launched from Iraq that shut Saudi Arabia’s East-West pipeline, which can carry as much as 7 million barrels a day.

Disruptions to Black Sea shipping have sharply reduced wheat exports from Russia and Ukraine, with their combined shipments during the July-to-September harvest window expected to be about half of a year earlier. Black Sea ports handle more than 70% of Russia’s grain exports, while about 90% of Ukraine’s seaborne grain normally moves through ports around Odesa that have faced repeated missile and drone attacks. Global food inflation remains relatively subdued for now, but it is expected to start picking up by the end of the year.

Nearly seven months into the U.S. war against Iran, several economic pressure points have been breached, including oil above $100 a barrel, gasoline nearing $5 a gallon and diesel topping $6 per gallon. The Pentagon has told Congress the war’s cost has climbed to $42 billion, above the Congressional Budget Office’s $38 billion estimate. Economists say the outlook is increasingly uncertain and that an exit strategy is not becoming clearer.

WTO Director-General Ngozi Okonjo-Iweala said supply-chain bottlenecks in the Strait of Hormuz are putting global trade at risk of its most severe disruption in 80 years, threatening food and fertilizer prices, according to Anadolu. She noted that global goods trade expanded 4.6% this year, beating expectations, and that 72% of global commerce continues to operate under WTO rules. She also pointed to WTO estimates that crude oil at $90 a barrel could cut overall trade growth by 0.5 points, with prices now above that level.

U.S. officials said U.S. Coast Guard personnel and FBI agents boarded two energy tankers bound for Texas last month after the vessels were hit by cyberattacks while en route to the United States. One was the Liberian-flagged supertanker VL Prosperity heading to Galveston, where its propulsion, navigation and cargo systems were compromised near the Strait of Gibraltar, cutting communications for 30 hours. The ship can carry roughly 2.3 million barrels of oil. Officials warned that malicious code is already available and that artificial intelligence is accelerating the pace of the threat.

Houthi forces have taken control of key ports in Yemen, tightening Iran’s grip over the Bab al-Mandeb Strait and sharply reducing Saudi crude exports through the chokepoint, forcing some shipments to be rerouted. About 4% of global oil supply is affected. The heightened threat has intensified supply risks for both Brent and WTI benchmarks.

Oil prices surged as conflict in the Middle East intensified, sending Brent crude above $100 a barrel. U.S. stocks fell on Wednesday, with the S&P 500 down 0.3%, the Dow off 320 points, or 0.6%, and the Nasdaq down 0.5%. The average U.S. price of gasoline rose to $4.22 per gallon.

The U.S. government is directing funding into quantum computing under the CHIPS and Science Act, awarding $100 million each to D-Wave Quantum, Rigetti Computing and Quantinuum. D-Wave said it plans to build a 100,000-qubit annealing system and a 10,000-qubit gate-model machine. Rigetti will focus on miniaturizing readout electronics and advancing chip fabrication, while Quantinuum will work with GlobalFoundries to expand U.S.-based quantum semiconductor manufacturing. GlobalFoundries also signed a $375 million, five-year federal contract tied to domestic quantum manufacturing efforts, according to The Wall Street Journal.

The US military said it destroyed five Iranian crude oil tankers near Kharg Island after Iran’s Revolutionary Guard Corps targeted a US Navy warship twice with ballistic missiles over two days. Brent crude climbed and approached the $100-per-barrel level as investors weighed the risk of further disruption in the Strait of Hormuz. In China, consumer inflation rose for the first time since April, while factory-gate prices increased more than expected, driven by higher food and energy costs. GrafTech International said it will raise graphite electrode prices by at least 30%, sending its shares up 15%.

India’s Sensex and Nifty slid in early trade on Wednesday, falling to 75,060.61 and 23,506.10. Brent crude futures moved close to the $100-a-barrel level, trading at $99.33, as tensions in West Asia escalated. Heavyweights including HCL Tech and Infosys led the declines, after the Sensex had already ended the previous session down 0.73%.