Saudi Aramco Headquarters Hit in Houthi Attack as Iran Escalates Hormuz Ship Strikes

Good morning, this is Horizons: Middle East & Africa. Oil jumps as Houthis strike Saudi Aramco headquarters and attacks in Hormuz threaten the export recovery. One and done: John Williams says he sees one more rate increase for 2026, but for now he does not believe further hikes in 2027 will be necessary. And we are live at Bloomberg's New Economy Forum in New Delhi. Stay tuned for interviews with Cisco's Chuck Robbins plus Canada's international trade minister. It has just gone 8 a.m. across the Emirates.

A quick look at what markets are doing. We are seeing a rebound across the board, S&P futures tilting higher after a negative performance yesterday. Nasdaq also higher, and Asian equities 0.6% higher after that selloff in semiconductors that started on Wall Street. The shift in sentiment came after John Williams, as we mentioned in the headlines, alluded to the fact that we may see another rate hike in 2026, but perhaps no more hikes in 2027. Of course, key data out of the U.S. today: U.S. CPI comes out, so we keep an eye out for that. And oil prices, of course, a little bit higher this morning, $106 per barrel. Two things happening: Houthi attacks on Saudi Aramco, but also disruptions in Hormuz. That is the focus for the first part of the show. U.S. 10-year Treasury yield holding gains from Tuesday again as we await the CPI data later today and the Fed rate decision later this month.

Turning back to the oil picture, oil prices jumped as traders grappled with increased uncertainty in the Middle East. The Saudi government says the Aramco executive headquarters were hit yesterday in a missile attack by Yemen's Houthi militants. Houthis have ramped up strikes in response to an offensive launched by Saudi-backed forces. Joining us now to discuss wider energy news is Stuart Livingston-Wallace and our oil trading reporter Yongchang. I want to start with the latest in terms of those attacks by the Houthis. What can you tell us more about that?

It is in the same vein as we saw previously, although obviously the geography is spreading out. I think that was largely propelled by going after the pipeline or the pumping station of the pipeline. As you know, obviously devastating attacks in the airport, and now we are back to the Eastern Province. It did cause a small fire that was extinguished with no injuries, so in terms of the immediate impact, somewhat limited. Symbolically, it is quite important as well. But I think it shows a determination to show the reach they have, and it reminds us of the number of strategic assets that have to be protected over this vast area.

Yongchang, I want to turn to you first and talk about the disruptions, because now this is Aramco getting hit, but we are also reporting on possible disruptions in the Strait of Hormuz. We've already seen movement reach potentially pre-war levels, now we are reporting on perhaps a little bit of an alleviation to that movement. What can you tell us about that?

So indeed, there were strikes on Aramco's HQ, but also attacks on shipping in the Strait of Hormuz. What we have seen recently are four vessels attacked, a ratcheting up of strikes, more vessels than usual being attacked by forces. It has therefore caused a slight drop in the number of vessels transiting into Hormuz. Definitely more supply disruption. However, it is also worth noting that while for now flows have slowed, there are expectations in the market that perhaps this is temporary, this may resume. What we see for sure suggests that for now flows might be reduced, but overall sales over the next few weeks and months might still go on as planned.

Speaking of that and what Saudi Arabia decides to do next, President Trump overnight had said that he might not get involved until after the midterm elections. Saudi Arabia has been keen on getting the help of Western allies, namely the United States. What can officials do next as a response to those attacks?

In the short term, it has a pretty formidable arsenal, but it has a very difficult territory to try and defend. Going forward, as you say, it is asking allies to help out. They are looking for direct U.S. help, but the strategy, or at least the tactic, seems to be in the short term from the U.S. to try to contain things at least until the midterms, to keep the lid on energy prices. That feels part of the same effort. There's not that many weeks to go until the midterms. I guess we will get some sort of visibility going into November.

Only a couple of weeks left or so. Thank you both for your time. Back to markets: Asian stocks edged higher after New York Fed President John Williams said he continues to view one more rate hike as appropriate this year and sees no further need for tightening. Investors are now awaiting the CPI report, with a stronger-than-expected reading likely to revive expectations for a tighter Fed policy. Joining us now to unpack all of this is our chief investment strategist. Good morning, glad to have you with us. What are you expecting out of that later today, and what consequences does it carry for the Fed tightening path and the market?

Thank you for having me back. Certainly, I think a big focus for markets is where the CPI number lands, and I do think from what consensus has been telling us that the headline could be a little bit uncomfortable for the markets. I think the idea here is really to look deeper than the headline itself, because we do know that that is probably getting lifted higher because of what we are seeing in the energy space. And while that does remain a concern, that is not exactly the risk that the Fed has to address. Just a rate hike from the Fed does not change the energy situation in the Middle East or globally at all. I think the biggest focus for me is how that impact of energy prices is filtering through the economy, more on the services side. That will absolutely be more relevant here. Certainly watching out for that, the consensus looking for about a 0.2% month-on-month increase. And of course, if we do see a softer print, with what John Williams said yesterday, I do think that could be a little bit more constructive for the markets right now. But again, it does not make the Fed pivot. It could give them enough room to pause, but one CPI print really does not change the trajectory of where the Fed is still moving.

What about the AI selloff that we saw over the past couple of days, the beginning of this week? It is moderating now. Does that change your perspective at all about the stretched valuations, or is this another reset we are seeing in the equity space?

I think the earnings season that we get ahead of us is going to be absolutely critical to decide where the AI trade goes. For me, AI itself as a structural trend doesn't go anywhere. That is the biggest story right now. But whether or not it remains the right investment has really seen a lot of concerns. We have considerably moved away from that phase where every mention of the word artificial intelligence moved the markets. I think the bar has gotten higher. We've moved toward monetization, which has been on pause again because the cost of capital concerns have certainly become much bigger. So I think for now, as we get into this earnings season, especially when tech starts to land, I think the real test for those tech companies would be certainly how they are ramping their commitments. Are they able to fund those from their own balance sheets? I think that would be the test for investors to understand. This is a market where a lot of things are getting questioned. Supply has been questioned, just because supply is ramping up, from the kind of competition we're getting from China. So a lot of factors to really assess those assumptions based on which we saw the initial phase of the AI rally, and it would be a test of those questions.

Another thing that is being questioned right now in the market are those elevated yields that we are seeing, not just out of the United States, but globally. The IMF this week in Bangkok warning against the fact that higher yields might be the biggest fiscal concern facing the world right now. What do you do with that? 6%, is that far-fetched?

Certainly, and I think it is very important for bond investors. That is exactly the story that has started to come into the minds of the equity investors. We did see a little bit of a rally yesterday in the bond space, but I would say it was very much a move driven by the risk-off that we saw in the equity markets. I would still call it a little bit of a tactical rally at this point. I think the structural factors are still pointing towards higher yields. You look at the kind of supply we are getting from the Treasury, the fiscal deficits where they are, and competition getting from the tech and AI space also in terms of a lot of that as well. The term premium is going to be sticky at this point. Investors are going to demand more yields to stay in the long end of the yield curve. What is interesting for sure is the short end, because the income is becoming quite competitive and compelling at this point.

We are going to have to leave it there this morning, but thank you as always, chief investment strategist. Bank of America has been fined more than $1.2 billion by U.S. regulators over money laundering and sanctions violations. Regulators say the bank prioritized revenue over compliance, leading to hundreds of apparent sanctions breaches tied to countries including Russia and Iran. The penalties come just ahead of BofA's earnings report. And OpenAI says an employee has been arrested and charged with placing a hidden recording device inside one of the company's San Francisco offices. The device was found in an executive conference room used for highly confidential discussions. OpenAI says it has found no evidence that any source code, AI models, or customer data were compromised, though the investigation is still ongoing. Now, the Bloomberg New Economy Forum continues for its second day, bringing together public and private sector leaders on shifting geopolitics and changing global supply chains. Let's go to the forum.

Geopolitics, as you say, is top of mind right now, especially with the escalating tensions in the Middle East. One of Japan's top trading houses says it has business around the world. Its CEO joins me now. The latest on what is happening around the Middle East: you do business with raw materials, energy. How much of that is being felt across what Marubeni does?

Thank you for having me. It is an opportunity for global trading. We are one of the largest importers into Japan, approximately 80%. We have to find all of that in South America, India, or the other parts of the world. But to be able to manage this situation is also giving us the opportunity to really activate our global network.

How much of that shortfall were you able to make up, and what is next?

A pretty stable amount. We were indeed able to source from all over the world.

From raw materials prices, you have metals businesses as well. Tell us a little bit about the net impact on you, because you were also expecting your results to be lifted this year because of higher oil prices.

The secondary impact is perhaps LNG. We are one of the larger traders, around 5.5 million tons. I guess this volume has been a little bit hit from the Middle East, but because of our global network, we are able to capture from the U.S., from South America, and from Africa. LNG prices are going up at the moment, incremental revenue in the next quarter, and copper is actually trading around $14,500 today, and we do lots of copper production and also global supply trade.

I was going to say, when it comes to imports into India, were you able to diversify the sources for this country?

It is becoming quite liquid at the moment in terms of demand point and supply point. Not only the production, but also supply point, numerous supply points around the world.

If India wanted, but are they doing that right now?

I guess mostly in the U.S. And we also have volume where we have investment in Peru, which is also a potential source.

When it comes to the copper products, how much demand do you see going forward, especially given here at the forum we are talking so much about artificial intelligence and technological advances?

People need to think about copper and the data center, because in order for AI data centers to increase, you need to have transmission, you need to have a transformer. You need to have an enormous amount of AI data center growth.

How much demand growth is there in India?

Of course it is growing forward. Sharing supply into India is also something we want to contribute.

Is India your brightest market at this point? When you look back home in Japan, you are seeing rate hikes by the Bank of Japan, for example. Is business becoming more challenging?

India is by far the fastest-growing market. No other country would actually be able to say the country's economic growth is more than a few years. Hence, India is a very important market.

Really good to have you here at the New Economy Forum. Thank you so much. We are both headed to a panel on the supply chains today, so do stay with us in New Delhi.

Good luck with the panel, excellent conversation. Coming up, our coverage of the New Economy Forum in New Delhi continues. We will be joined by the chief executive of Cisco Systems and the Canadian minister of international trade. That is coming up next. This is Bloomberg.

Welcome back to Horizons: Middle East & Africa. Let's take you back to New Delhi and listen in on a panel discussing the moment facing the world's middle powers.

The answer to that is exclusion. And that is what all the numbers tell you also, whether it is in the U.S., Western Europe, Northern Europe, or even in the poorest countries. So that is the challenge. One should hope that the new solutions would be driven from the excluded world, so their inclusion in the overall process. So the rule-based system does not exist anymore. It is not a factor. Sad but true. The sooner we accept it, the better progress we will make.

Did you have a spy camera in the last meeting?

You mean the rules system doesn't work even with some of the policies that we are talking about?

What was it based on? It was based on the UN Security Council. And they were never meant to disagree. The day they disagree, progress stops. That party is over. They disagreed.

I wouldn't say let's give up.

The core of the system has to be more inclusive. What percentage of the global population is in the UN Security Council? Simple. The answer is right there, we are just not willing to accept it.

Countries will have to map out their future based on the levels of development, the size of their population, and finally, they will also have to consider that in this world, at the end of the day, if people let down each other, it is not about disagreement, it is about the willingness to listen to each other's point of view. The moment we start listening to each other, we find solutions.

Funny enough, there's a bunch of questions and several of them touch on basically the same point. So I believe the last question to you, following up on that point: do you think India's relationship with the U.S. will improve after this president? [Laughter]

Of course it is already very good. I don't see any problem as we speak. And to my mind, the relationship with the U.S. that India enjoys is very substantial, if not very consequential for the world, with two large democracies. We must bear in mind that it's not only about trade, which of course...

And you can continue watching Bloomberg New Economy Forum on the terminal or at bloomberg.com. Now for a look at some of the other stories that we are following: after Africa's biggest oil processing facility reached full capacity, in the nine months to end-August, income surged to $4.7 billion from a loss in the year earlier. It comes as the refinery prepares for its anticipated IPO, with demand exceeding its $1.6 billion target. And Bloomberg understands that Senegal's year-end target to finalize a deal with the IMF is already facing delays with international audit. Bondholders awaiting a debt relief agreement have warned the government of significant delays to a debt restructuring if they are asked to take losses. And Bloomberg also understands that Botswana is near an agreement on their future ownership stakes. The deal is likely to see Botswana increase the stake to around 25%, though it has not yet been finalized. An agreement would allow the potential sale to progress to the final stages, clearing the way for Anglo American to exit the business. And coming up, tech stocks rebounding from their latest selloff as the future of the AI trade remains very much in focus. We will discuss with Cisco Systems' Chuck Robbins next. Stay with us. This is Bloomberg.

Good morning, this is Horizons: Middle East & Africa. Our top stories this morning: oil jumps as Houthis strike Saudi Aramco headquarters and Iranian attacks threaten the export recovery. One and done: John Williams says he sees one more rate increase for 2026, but for now he does not believe further hikes in 2027 will be necessary. And we're live at Bloomberg's New Economy Forum in New Delhi. Stay tuned for interviews with Cisco's Chuck Robbins plus Canada's international trade minister. It has just gone 8:30 a.m. across the Emirates. I'm Abeer. Let's start you out with another quick market check, and we are still seeing a rebound in the futures picture outside of the United States. That is seeping into the Asian session this morning. This is pretty much what we had mentioned in the headlines. This is the sentiment returning to equities after New York Fed President John Williams said that he saw no need for tightening for the time being in 2027. So you're seeing a rebound after that semiconductor selloff that plagued markets at the start of this week. The big story in the Middle East continues to be Brent crude prices that are now $106 a barrel. Two things are happening at once: the attacks continue to escalate, but we are also seeing some disruptions in the Strait of Hormuz after movement had reached reportedly pre-war levels. And then watch out for data out of the U.S. today: the CPI print comes out, that is what the bond market is anticipating. We are looking at the benchmark yields, and they are at 5.20 percent, dropping more than a basis point this morning. Now let's turn to Bloomberg's New Economy Forum, where Haslinda is standing by with a guest for us.

Not just a guest, but a very special guest. We are talking about Cisco CEO Chuck Robbins. There's been a lot of discussion about how we need to slow down AI development. You have access to advanced models. How do you weigh in on that?

But there are security and safety concerns. Are they valid?

So what would you like to see from partners like Cisco, from governments, so that the security and safety concerns can be addressed?

We're talking about vulnerabilities. I want to move into opportunities. Horizons Middle East is the name of the show. What opportunities do you see?