Weekly · Energy shock and geopolitical tension · October 18–24, 2026

Key points

Energy crisis: The Strait of Hormuz and prices

The Islamic Revolutionary Guard Corps (IRGC) continued attacks on vessels in the Strait of Hormuz, using sea mines and missiles. On October 19, the sinking of the container ship GFS Pride was confirmed, triggering a spike in Brent crude prices to $109.50 per barrel. By October 24, the IRGC declared the strait closed to unauthorized transit, reporting new incidents involving supertankers. In parallel, European gas prices reached record levels: TTF futures exceeded $1,050 per 1,000 cubic meters for the first time since December 2022, while the Asian JKM index surpassed $30 per MMBtu. Low storage fill rates in the EU (74% compared to an average of 86%) exacerbate risks for the winter period. Russia has expressed readiness to supply diesel fuel to the United States, with the first tankers already en route, a move made possible by a temporary exemption from sanctions.

France: Protests and debt market stress

Mass protests in France, which began as school walkouts, escalated into nationwide riots involving arson and clashes with police. Authorities imposed curfews in major cities and mobilized 70,000 police officers. The economic consequences manifested immediately: the yield on 10-year French OATs rose to 5.113%, surpassing the yield on comparable U.S. Treasuries for the first time since 2013. The spread between French and German government bonds widened to 170 basis points, reaching a maximum since the start of the eurozone debt crisis. Rating agency Moody's maintained France's rating at Aa3 but with a negative outlook. The government lowered its economic growth forecast for 2026 to 0.5%, while insurance losses are estimated at €1.2 billion.

The Fed and global financial conditions

The U.S. Federal Reserve raised interest rates for the first time in three years, leading to an increase in the yield on 10-year Treasury bonds to 5.3%. The market is pricing in up to three rate hikes by the end of the first quarter of 2027. Investors and economists are criticizing Fed Chair Kevin Warsh for uncertainty in communication. Meanwhile, the Central Bank of Russia kept its key rate at 14% but raised its forecast for the average rate in 2027 to 12.5–13.5%, signaling a prolonged period of tight monetary policy. In Japan, inflation reached the Bank of Japan's target level of 2%, which could lead to a shift in monetary course.

Sanctions and trade wars

The United States exempted India from potential 100% tariffs on purchasing Russian oil, utilizing Section 115 of the Graham Act, thereby paving the way for a trade agreement. Secretary of State Marco Rubio's visit to India underscored strategic partnership, particularly in the area of oil refining. At the same time, the EU is preparing its 22nd sanctions package against Russia, including 117 new restrictions, creating a divergence in the transatlantic sanctions approach. China proposed export controls on 40 technologies, including AI and solar energy, and introduced prior approval requirements for the exchange of advanced AI models. In turn, the United States proposed expanding restrictions on foreign investments in biotechnology and hypersonic systems.

Credit stress in the AI sector

Investors have begun reassessing the risks associated with financing the construction of artificial intelligence infrastructure. CoreWeave shares fell by 15.5%, while the yield on its bonds maturing in 2032 reached 15%. Credit default swap (CDS) spreads for Oracle widened to 315 basis points, reflecting concerns about the debt burden of hyperscalers. Meta reported negative free cash flow and raised its capital expenditure forecast to $135–145 billion, leading to a drop in its market capitalization by $135 billion over four sessions. These events cast doubt on the sustainability of the current cycle of AI investment.

Geopolitics: The Middle East and Eastern Europe

In the Middle East, the situation remains tense: Israel imposed a full blockade of the West Bank following an attack in Hebron, drawing condemnation from the EU and calls for sanctions. In Sudan, drone attacks have resulted in the deaths of more than 300 civilians over three weeks, with the UN Security Council warning of potential war crimes. In Ukraine, mutual strikes on infrastructure continued: Russia attacked Kyiv and Odesa, while Ukraine struck St. Petersburg and energy facilities in Russia. An incident involving a Ukrainian drone that landed in Lithuania sparked a diplomatic dispute between Vilnius and Warsaw regarding the flight path.

What this means

The energy shock is intensifying inflationary pressure and supply chain risks. If you have exposure to energy markets or logistics, cost volatility and supply disruption risks are increasing. It is necessary to review hedging of energy risks and assess the resilience of supply chains to a prolonged closure of the Strait of Hormuz.

Political instability in France and the Fed's hawkish rhetoric are raising funding costs in the eurozone and the United States. If your liabilities are sensitive to interest rates, expect further pressure on margins and debt costs. It is recommended to review debt structures and assess refinancing risks.

The divergence in sanctions policy between the U.S. and the EU creates a complex compliance environment. If you have counterparties or assets linked to Russia or India, the risk of secondary sanctions increases. It is necessary to update counterparty lists and verify compliance with new regulatory requirements.

Credit stress in the AI sector indicates potential corrections in the technology sector. If you have investments or partnerships in AI infrastructure, it is advisable to assess counterparty credit risks and the sustainability of their business models. It is recommended to review exposure limits to technology companies with high debt loads.

Under the radar: hidden trends

Despite high-profile events, several trends remain in the shadows but may have long-term consequences. First, China is actively using export controls as a tool of geopolitical pressure, which could lead to the fragmentation of global technology supply chains. Second, the growth of gold loans in India (up 88% year-on-year) creates risks for asset quality in the banking sector. Third, the expanded use of AI agents in cyberattacks (as seen in attacks on Latin American banks) requires a review of cybersecurity approaches. Fourth, Japan is considering reclassifying energy expenditures as defense-related, signaling the militarization of its economy.

Our read

The period is characterized by intensifying escalation against the backdrop of an energy shock and geopolitical tension. Attacks in the Strait of Hormuz and protests in France have led to higher energy prices and debt costs, amplifying inflationary pressure. The Fed and other central banks are tightening policy, narrowing the room for maneuver and increasing risks for financial markets. Credit stress in the AI sector points to a potential correction in the technology sector, which could spread to adjacent industries. Sanctions policy is becoming more fragmented, creating challenges for global companies. Overall, signals indicate a transition to a period of heightened volatility and uncertainty, where systemic failure risks are rising, though they remain under control due to regulatory actions. Signal strength: mixed.

This analysis was produced automatically by a large-language-model system from the public sources listed below. It is AI-generated content: it reflects the sources and the model's processing, not an editorial opinion, and may contain inaccuracies. It is not investment, financial or legal advice and contains no call to action; base decisions on the original sources and on advice from qualified professionals.

Sources