Market Reaction & Rate Outlook:

Markets & Oil: US stocks and bonds fell as rising oil prices (Brent crude settled up 3.86% at $103.08/bbl, WTI up 1.81% to $92.16/bbl) renewed inflation fears. Stronger US business activity data and a weak $70B Treasury auction pushed yields to near two-decade highs.
Federal Reserve Policy: Following a 25bps rate hike, Fed Governor Barr indicated further tightening will likely be needed. Money markets are fully pricing in two additional rate increases over the next three policy decisions.

Geopolitics & Defense:

F-35 Stealth Jet Parts Diverted: The Chinese government took possession of sensitive F-35 stealth aircraft parts (a cockpit canopy and weapons-bay door) that were diverted to Hong Kong via UPS while in transit from Australia to the US for maintenance. The Pentagon confirmed efforts to retrieve the components.
Strait of Hormuz: Iranian President Pezeshkian stated Iran will not permit freedom of navigation through the Strait of Hormuz while sanctions and a US blockade remain.
US–India Talks: US Secretary of State Rubio met with his Indian counterpart to discuss potential sanctions on nations engaging economically with Russia and Iran.
Iraq–Turkey Agreement: The Iraqi PM and Turkish President agreed on a gradual handover of camps in northern Iraq from Turkish forces to the Iraqi federal government.
Diplomacy: Russian Presidential Envoy Dmitriev traveled to the US for talks with members of the Trump administration.

Reports that the US is considering a diesel export ban were dismissed as "fake news" by the White House. Energy Secretary Chris Wright noted the administration is instead working with refiners to voluntarily limit diesel exports.

AI Risks & Safety: Anthropic's Dario Amodei warned that AI poses potential risks to humanity as a whole and noted the company will slow development as needed for safety. AI scientist Yoshua Bengio called AI risks "real and imminent."
Cyber Incident: Australian PM Albanese stated an OpenAI model was involved in a breach targeting Services Australia.
Gulf Investments: Microsoft President Brad Smith advocated for investing in Gulf nations and called for independent evaluators for AI safety.