Markets bet on US-Iran deal | Morning Bid

Added: 2026-05-30

[00:00:02]Today, oil heads for a steep weekly drop as markets wait for details on a deal between the US and Iran.

[00:00:08]>> But, US inflation could last far beyond the energy shock.

[00:00:12]>> And Anthropic overtakes Open AI in a $65 billion funding round. [music] >> This is Reuters Morning Bid bringing you unfiltered market news and analysis straight from the Reuters newsroom 7 days a week. I'm Peter Devlin in London.

[00:00:26]>> [music] >> And I'm Elena Casas. It's Friday, May the 29th.

[00:00:31]So, Peter, oil looks on track for its biggest weekly drop in 2 months amid reports that a deal between the US and Iran is on the verge of being struck.

[00:00:40]But, this still hasn't been signed off by President Trump, has it? We also don't have confirmation from Iran that they've agreed to it. So, is the market getting ahead of itself again?

[00:00:48]>> Well, the key point there is, as you said, President Trump hasn't signed off on this. And let's look back to the original Axios report that broke this news and said that Trump would take the next couple of days to really figure out if he wants to agree this deal. And that could be a long weekend for traders. So, let's use this time to look at Trump's three red lines in negotiations. That was the reopening of the strait, Iran giving up its uranium, as well as giving up all aspirations for a nuclear weapon.

[00:01:10]And according to this report, the memorandum of understanding that would be a reopening of the shipping across the Strait of Hormuz, and 30 days for Iran to de-mine the strait as well. So, markets can really grab onto that. I mean, they're looking for any excuse to really go higher. The crowded trade of higher inflation and risks of interest rate hikes coming through. I mean, as quickly that would come through and unwind. I mean, that's why we saw stocks closing at all-time highs yesterday.

[00:01:33]>> Concretely though, 30 days is a pretty tight deadline to de-mine the strait and get a normal volume of ships moving through it. We also don't know if the US would immediately drop its own blockade of Iran's ports, or if it's willing to drop sanctions on Iran's own oil, which could also have huge implications for the oil market. And most oil analysts would, of course, say that even if shipping volumes return to pre-war levels quite soon, that doesn't mean that the shock in the energy market is over because of course energy facilities in the Gulf were hit during this conflict. They will take time to reconstruct those facilities and get output back to the same level. So, we're still looking at an energy shock that could last for several months into the future, aren't we?

[00:02:12]>> There's plenty of reasons to be pessimistic. As you said, this sort of recovery period could take some time.

[00:02:17]That would be a lagging in the ship travel times, as well as the restarting of production. One analyst we spoke to this week said another billion barrels of oil could be lost in this recovery period. But, there's also lots of signals to be optimistic. I mean, let's just look at Iran and these negotiations. We've seen their internet come back on. That's for the first time the most since the pre-war period. More military officials in Iran are coming out and speaking more openly. So, I think that's what markets are really looking for, that more optimism. I mean, look at Brent crude. It's on pace for its biggest drop, monthly drop since 2020.

[00:02:47]>> Those higher energy prices, though, have fed their way into US inflation. The Fed's preferred measure, the PCE price index, came in at a 3-year high this week. But, what's interesting here is that this increasingly doesn't look like it's only about energy, does it? Or that it's transitory. And a number of Fed policy makers have come out and said that they're no longer convinced they can simply see through this and wait for the energy shock to be over. Chicago Fed President Austan Goolsbee said he no longer believes it's transitory this week. Lisa Cook said that she would be ready to raise rates if necessary.

[00:03:17]Christopher Waller has made it clear that he would be. So, this inflation data is increasingly making the Fed's life difficult, isn't it?

[00:03:24]>> That's a quite a scary headline reading, isn't it? But, let's look at the closely watched core month-over-month reading.

[00:03:28]Came in at 0.2% below expectations.

[00:03:31]Still, that's still not a solace for many of the inflation and Fed watchers.

[00:03:35]I mean, it's still above the 0.17% month-over-month pace it needs to bring the annual target to 2%. And there's also an upside risk that more inflation is going to come through as that energy light feeds in. So, as you said, in terms of Fed talk, what does this mean?

[00:03:49]I think it means that they're still on hold for a long time, and they can really expect no cuts coming through this year. But, there is a lot of Fed talk to parse through. I mean, Williams said yesterday from the Fed that the prices could peak in the next few months. Well, Kashkari said this morning saying that there's no indication that a hike could come anytime soon. So, remember we've got just another week until that Fed blackout period before the June meeting. So, a lot of comments to come through from the Fed yet.

[00:04:11]>> What's interesting in the longer term for Kevin Warsh's Fed is that we know that he believes that AI would drive a productivity revolution that should then bring inflation down. But, we've had a number of Fed policymakers including Austin Goolsbee this week say that AI is increasing inflation because of those memory chip prices, because of the increased cost of electricity for data centers, and the sheer scale of AI CapEx now estimated at $800 billion this year is in itself pumping more money into the system and driving up inflation. Well, now it's been a big week in the AI wars.

[00:04:42]Anthropic announced the results of a new funding round. It's raised an extra $65 billion, and that values the company at $900 billion, which is more than OpenAI.

[00:04:51]So, really the enthusiasm for AI is showing no signs of running out of road, is it?

[00:04:56]>> Exactly, and we saw that from Dell's earnings last night as well. Its stock has risen 40% in after-hours trading.

[00:05:01]That's because of just demand for its AI servers. So, there's lots of opportunity there. But, let's look at the sort of pitch for this OpenAI versus Anthropic.

[00:05:09]You can own a piece of the most important companies in the world where AI is dominating the world. But, there's a bit of worries on both sides. I mean, OpenAI, there was a Wall Street Journal piece in April saying that they are really struggling to get their user targets. Also, Anthropic's in a fight with the Pentagon over the use of its products in the military space. And also, let's not forget that SpaceX is coming up to the IPO space this summer, and that could take away some of the limelight. So, there's going to be a close battle between OpenAI and Anthropic. Maybe they've just inched ahead this time.

[00:05:39]>> Well, it's interesting that Anthropic has inched ahead while at the same time trying to pitch itself as the more safety-focused AI company. It's really restricted who is allowed to access its latest model mythos because of concerns it's just so powerful that it could push through banking security and data privacy all across the internet. It's also interesting that concerns about circularity in the AI trade aren't going away. This $65 billion funding round also includes cash from key chip makers, SK Hynix, Samsung, and Micron who of course produce the products that are allowing Anthropic to move ahead with these models.

[00:06:12]>> It's also important to remember that neither of these companies are profitable yet. They still need to acquire a lot of capital to come in to pay for the power that's needed to power their models. So, there's still a lot of uncertainty there.

[00:06:24]>> [music] >> And for today's recommended read, check out Yo-okm Clemens' column which considers what could happen if the AI boom goes into reverse. We'll drop a link in the description.

[00:06:39]>> And for more of any of today's stories, head to reuters.com or [music] the Reuters app. Follow us on your favorite podcast player, and if you're on a smart speaker, just ask for latest market news [music] from Reuters 7 days a week.

[00:06:49]>> And we'll be back tomorrow.