Rising tensions in Yemen; Altman on AI - what’s moving markets

Investing.com - Futures linked to the main U.S. stock indices inch down, suggesting a cautious start to the trading week as investors assess the potential trajectory of Federal Reserve interest rates. Yemen’s Saudi-backed government launches an offensive against Iran-aligned Houthi militants controlling a key chokepoint for oil shipping, while Tehran vows not to reopen another nearby Gulf waterway until its conditions for a ceasefire with the U.S. are met. Yet indications that oil exports are continuing to make it out of the Middle East and the release of G7 emergency reserves push down oil prices. Elsewhere, OpenAI CEO Sam Altman says he would accept "some bad things happening" due to AI because of the possible benefits presented by the nascent technology.

1. Futures lower

U.S. stock futures pointed lower on Monday. By 02:58 ET (06:58 GMT), the Dow futures contract had fallen by 33 points, or 0.1%, S&P 500 futures had dipped by 9 points, or 0.1%, and Nasdaq 100 futures had declined by 24 points, or 0.1%.

Equities on Wall Street advanced to end the prior week, bolstered in part by cooler economic data and comments from dovish Fed officials which increased wagers that the central bank will stand pat on rates at its October gathering. Hopes for a rebound in Middle East oil exports and energy reserve releases have also weighed on oil prices, possibly soothing fears of a prolonged bout of energy-driven inflation.

"However, none of this really alters the broader backdrop, which is still defined by upside energy price risks and elevated borrowing costs," analysts at Vital Knowledge said in a note.

2. Yemeni government launches offensive against Houthis

Meanwhile, the conflict in the Middle East once again appears to be spreading. Over the weekend, Yemen’s Saudi-backed government said it had launched a military offensive against Iran-backed Houthis, aiming to recapture parts of Yemen controlled by the militant group.

Yemeni President Rashad al-Alimi said in a televised address that the assault would continue until "the country is liberated from the grip of the terrorist militia."

Despite attacks from Saudi Arabia, the UAE and their Western allies, the Houthis currently dominate a number of populated areas in Yemen, including the capital Sanaa and territory in the northwest. Crucially, recent advances have given the Houthis leverage over the Bab el-Mandeb Strait, a shipping chokepoint linking the Red Sea with the Gulf of Aden.

Worries have abounded that Houthi control over the Bab el-Mandeb will further dent Middle East oil flows, which have already been crimped by Iran’s effective shuttering of the nearby Strait of Hormuz. However, media reports have indicated that some supplies are continuing to make it out of the region.

3. Iran says Hormuz will not reopen until conditions are met

Iran, for its part, has stressed that the Strait of Hormuz will not be unblocked until seven of its conditions laid out in a June interim agreement with the U.S. are met.

On Sunday, Iran’s parliament speaker said the position of the Islamic Republic is "completely clear and firm," adding that Washington "must understand that the period of dragging out the [diplomatic] process and dictating one-sided demands is over."

At the United Nations General Assembly in September, Tehran reportedly offered to reopen Hormuz and restore normal maritime passage within seven days in exchange for meeting its conditions. The U.S. replied to the proposal last week through Qatari mediators, but the substance of that response remains uncertain.

Qatar has been serving as a frequent messenger and moderator between the U.S. and Iran, pushing to find a diplomatic resolution to a war which began with a joint U.S.-Israeli attack on Iran in late February. Tehran moved to shut down the Strait of Hormuz shortly after the assault started, cutting off a key waterway through which roughly a fifth of the world’s oil and liquefied natural gas traversed before the conflict.

4. Oil slips

Still, the possibility of resurging Middle East crude exports and a release of G7 oil stocks was enough to help tamp down crude prices on Monday.

As of 03:32 ET, benchmark Brent crude futures had fallen by 0.8% to $101.50 a barrel, while U.S. West Texas Intermediate crude futures had retreated by 1.3% to $89.90 a barrel.

Oil exports out of the Middle East topped pre-war levels in four of the seven days of the final week of September, according to shipping data cited by Reuters, even as vessels faced the threat of attacks as they attempted to sail through the Strait of Hormuz.

Meanwhile, G7 countries agreed late last week to release 100 million barrels of diesel and crude from their emergency reserves and hold off on imposing energy export restrictions, in a bid to keep a lid on oil prices and respond to pressure from U.S. President Donald Trump.

On Sunday, OPEC+ also said it had agreed to keep output targets for November steady. The producer group has been widely tipped to leave its output policy unchanged until next year. However, OPEC+ output levels are still well below quota, meaning that oil markets remain tight, an analyst cited by Reuters flagged.

5. Altman on AI benefits and risks

The world should accept "some bad things happening" in order to enjoy the benefits of artificial intelligence, OpenAI Chief Executive Sam Altman has said.

Instead, Altman said he wouldn’t "take a trade of saying, We’ll make sure there’s no major hacks, there’s no misuse of this technology, there’s zero scams, ​there’s zero all the other bad things that will happen[.]’"

"Because I think people ​will do tremendously — orders of magnitude more — good stuff than bad stuff," he said

Speaking to Politico, Altman, whose company has become one of the most recognizable figures of the AI boom thanks to the runaway success of its ChatGPT model, said he backs a "lighter-touch regulatory stance" compared to that supported by rival Anthropic.

Altman suggested that there is "a lot of daylight" between the worldview of OpenAI and Anthropic, whose CEO Dario Amodei has issued dire warnings about the dangers posed by unchecked AI development and has called for tighter government oversight of the AI industry.

(Reuters contributed reporting)

Original Article

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