The Evening Brief: Middle East war reshapes markets and midterm politics as oil nears $108

The evening's dominant theme is the collision between military conflict and financial markets, with oil price spikes forcing central bank action and reshaping the political calendar. Brent crude jumped 6 percent to above $107 per barrel on Thursday, driven by Houthi rebel seizure of Yemen's Mocha port on the Red Sea, placing the Iran-backed group 75 kilometers from the Bab al-Mandeb Strait, one of the world's most critical shipping chokepoints. The territorial gain combined with ongoing U.S.-Iran military strikes created sustained supply disruption fears. The price spike immediately cascaded into government bond markets: the yield on 10-year UK bonds surged above 5.37 percent, the highest since 2007, while U.S. 10-year yields reached 4.92 percent, the highest since 2023. Thirty-year yields in the U.S. hit their highest level since 2007.

Central banks responded with tightened monetary policy signals. The European Central Bank raised its main interest rate to 2.5 percent on Thursday, its highest since March 2025, with ECB President Christine Lagarde stating inflation would not return to target until the end of 2027 due to Middle East conflict driving persistent energy price pressures. Energy markets confirmed the warning: UK natural gas prices rose above 203 pence per therm, the highest since December 2022, and the Dutch wholesale gas contract passed 80 euros per megawatt hour for the first time since January 2023. U.S. gasoline averaged $4.22 per gallon, more than a dollar above year-earlier levels, with diesel reaching an all-time high of $5.94 per gallon overnight.

The administration moved to intervene in bond markets. U.S. Treasury Secretary Scott Bessent announced a $6 billion government debt buyback on Wednesday to address the sell-off, but investors deepened their exit instead. The Federal Reserve meets next week under new chair Kevin Warsh with markets expecting a rate increase, while the Bank of England meets simultaneously but is expected to hold rates at 3.75 percent.

President Trump linked the Middle East war's resolution directly to the November midterms, stating at the Republican convention on September 9 that the conflict will end "very shortly after the election." The statement contradicts his earlier prediction of a four-to-five-week war and frames military conflict as contingent on electoral outcomes. NBC News polling showed 69 percent of Americans disapprove of Trump's handling of the war, with Republican strong approval down 18 percentage points since spring to 30 percent. Trump also announced at the convention a $5,000 "Trump dividend" to every adult U.S. citizen if Republicans win both chambers in November, with Vice President JD Vance suggesting tariff revenue would fund it. Trump provided no funding mechanism or implementation timeline.

On the ground, the military picture widened Thursday. Iran fired 20 ballistic missiles at the Al-Azraq airbase in Jordan on September 9, with Jordanian forces reporting 18 intercepted and two falling in open areas with no casualties reported. The strike marked the latest escalation in a campaign that began two weeks earlier with U.S. strikes on Iranian rocket launchers in the Strait of Hormuz. Separately, Houthi forces seized Mocha on September 10 after fierce clashes with pro-government forces, positioning them within potential artillery range of one of the world's most important trade routes. Government forces have pledged a counter-offensive, setting the next critical test for whether the line can be re-established.

Elections continued reshaping the political landscape. In Rhode Island, Helena Foulkes, a former CVS executive, defeated incumbent Governor Dan McKee in the Democratic primary on September 9, making McKee the first sitting governor to lose a primary in eight years. The race turned on voter anger over a 2023 bridge closure that remains under repair three years later. In New Hampshire, Rep. Chris Pappas won the Democratic primary and former Sen. John E. Sununu won the Republican primary on September 9, setting up a closely watched Senate race in November for the seat vacated by Sen. Jeanne Shaheen.

Morales ran on rent caps, affordable housing, and taxes on corporate polluters and landlords, and received endorsements from Bernie Sanders and the DSA.

Senator John Fetterman (D-Pennsylvania) appeared in a pre-recorded video at the Republican midterm convention on September 9, calling himself a "commonsense Democrat" and pledging to work with Republican colleague Dave McCormick and Trump on steel industry protection. Fetterman maintained he will remain a Democrat and serve as the 51st vote if Republicans hold the Senate, though his standing among Pennsylvania Democrats has eroded sharply; a New York Times and Philadelphia Inquirer poll found only 22 percent of Pennsylvania Democrats view him favorably, while Republicans view him more favorably than McCormick himself.

Other developments: A cargo plane crash at Miami International Airport on September 8 killed five ground crew members when pilots attempted a landing abort that came too late, overrunning the runway by approximately 1,300 feet. Flight data show the pilots attempted a go-around before the aircraft breached the airport perimeter. Missouri's Supreme Court initiated a contempt investigation into Secretary of State Denny Hoskins for violating a redistricting order, with Hoskins caught between conflicting state and federal judicial directives and scheduled to appear for hearing on September 10. The Tate brothers were denied bail on September 9 and remain jailed pending UK extradition proceedings on 59 criminal charges. UC Berkeley Law School was found by the Justice Department and Education Department to discriminate against white and Asian applicants in violation of the Supreme Court's 2023 Students for Fair Admissions ruling. Apple announced the iPhone Duo, a $1,999 foldable phone, with preorders beginning October 16 and retail availability October 23. A ferry fire off the Philippines killed at least five people with 87 remaining missing as of Thursday morning. The Trump administration proposed excluding undocumented immigrants from the 2030 census apportionment count and eliminating questions about race, ethnicity, and sexual orientation. Special education office leader Kelly Rogers resigned effective September 11 as her staff moved to the Department of Health and Human Services.