Crude oil shipping due to US and Iranian attacks, yields soar as Fed becomes hawkish

Hello, my name is Anique Bao from Singapore. Welcome to another edition of CNBC’s Daily Open.

Those hoping the Iran war would end soon are now facing disappointment.

Today is Groundhog Day in the Gulf region, with Washington and Tehran exchanging strikes and promising further developments in the future. Investors are now treating the loop as background noise, resetting oil and bond prices and factoring in a hawkish Fed.

The United States and Iran exchanged fresh attacks on Tuesday, with U.S. Central Command launching attacks on Iranian targets and Tehran claiming retaliatory operations targeting U.S. assets in the region.

Explosions were heard over Jordan’s Aqaba after Iran announced it was countering a US attack. However, it is unclear what caused the explosion or whether Iranian missiles or drones were actually behind it.

Oil prices rose on rising military tensions, with Brent crude futures soaring to $94.52 per barrel and U.S. WTI futures hitting levels not seen since July.

Amid renewed concerns over conflict in the Middle East, Fed Governor Michael Barr echoed Fed Chairman Kevin Warsh’s recent speech by saying he would support raising interest rates “if inflation does not appear to be easing sufficiently.” The market is leaning toward a quarter-point rate hike this month, with benchmark interest rates already at 3.50-3.75%, according to CME Group’s FedWatch tool.

At the Regional Security Council, Russian President Vladimir Putin expressed support for Iran, saying that Iran would try to support it in its war with the United States.

The Shanghai Cooperation Organization summit in Kyrgyzstan brought together leaders including President Vladimir Putin, Chinese President Xi Jinping, and India’s Narendra Modi for two days of meetings.

Although they did not directly name the United States, bloc leaders condemned the military attack on Iran in a joint statement that “caused numerous civilian casualties and significant damage to the country’s economy.”

As trade tensions between the United States and Canada drag on, Canadian Prime Minister Mark Carney on Tuesday accused the Trump administration of “meme-playing and throwing shade” and urged the United States to “stop trying to be tough” if it wants serious trade talks.

He added that Ottawa remains open to “mutually beneficial trade agreements.”

Carney’s comments came in response to a reporter’s question about Trump officials mocking the Canadian military in social media posts and comments and President Donald Trump signing an executive order directing Lake Ontario to be renamed “American Lakes” for federal use.

The cost of artificial intelligence tokens fell to new lows this week as open-source Chinese models like Moonshot’s Kimi K3 offered lower prices than alternatives from leading Frontier Labs.

Meanwhile, Anthropic announced a complete review of how long it retains customer data after enterprise customers balked at its June policy requiring it to retain traffic for 30 days for security monitoring purposes.

New “Enterprise Frontier Safeguards” will allow Anthropic to perform automated safety scans at no additional cost without human review of customer data and will be rolled out through the fall.

— Anique Bao

India rejects court order upholding decades-old water-sharing agreement with Pakistan

India’s government has firmly rejected an arbitration award that would have forced it to abide by a decades-old water-sharing agreement with Pakistan and limit the construction of hydropower projects in the disputed Kashmir region.

The Permanent Court of Arbitration (PCA) in The Hague on Monday ruled in Pakistan’s favor on the 1960 Indus Water Treaty, saying the historic agreement remains fully binding and India has no legitimate reason to terminate or suspend it.

India moved to “suspend” the agreement last year, but said its decision remained in effect.

— Sam Meredith, Priyanka Salve