(The opinions expressed here are those of the authors.)

By Anna Szymanski

May 29 (Reuters) -

Everything Mike Dolan and the ROI team are excited to read,

watch and listen to over the weekend.

From the Editor

Hello Morning Bid readers!

The holiday-shortened week began - and is ending - on a hopeful

note amid apparent signs of progress toward a U.S.-Iran

ceasefire extension. The situation remains tenuous, however, as

many purported "breakthroughs" in this three-month-old conflict

have come to naught.

But markets are cautiously optimistic. Before the bell on

Friday, crude prices were down and global equities - buoyed by

the AI buildout and memory chip boom - continued to hit record

highs.

Oil prices have gyrated with the Iran headlines throughout the

week. Brent crude tumbled below $100 per barrel early in the

week, as reports emerged of a potential U.S.-Iran peace

deal involving a 60-day ceasefire extension and an eventual

reopening of the Strait of Hormuz.

Prices then crept higher as President Donald Trump claimed he

was "not satisfied" with the proposed deal and both sides traded

blows, only to slump again on Thursday following news that an

agreement on the outline of the ceasefire extension had

reportedly been reached, pending Trump's approval. Crude is on

track for a weekly drop of more than 10%, with Brent trading at

around $92/bbl early on Friday.

As we enter the fourth month of the conflict, it's clear that

the near-total closure of Hormuz has rewired global oil, fuel

and LNG flows. For more on that front, take a look at these six

key charts tracking how the crisis has reshaped energy and

shipping sectors.

For equity investors, the news out of the Gulf remained

mostly background noise, with chip stocks largely responsible

for keeping the party rolling in both the U.S. and Asia.

Two more chipmakers, Micron Technology and South Korea's SK

Hynix, hit $1 trillion in market value this week, joining

Samsung Electronics in this growing club. Samsung also saw its

shares surge after its workers approved a pay deal that would

avert a massive strike and award some of them supersized

bonuses.

Somewhat remarkably, the S&P 500 has climbed more than 9% since

the start of the war, with Goldman Sachs on Wednesday lifting

its target for the index from 7,600 to 8,000 by year-end, citing

strong corporate earnings.

But if anything can spoil the fun, it will likely be rising

borrowing costs. While Treasury yields have fallen modestly this

week on hopes for a reopening of Hormuz, they are still up

meaningfully since the outbreak of the conflict, with the

benchmark 10-year yield up nearly 50 basis points since February

28.

In the past few months, yields have mostly risen in tandem with

resurgent stocks, but an inflection point could be on the

horizon. Some models suggest that if borrowing costs creep

upward again, they could soon cross a point where equities will

start to suffer.

And there are plenty of reasons to believe higher borrowing

costs could be in the cards. The Personal Consumption

Expenditures (PCE) price index - the Federal Reserve's preferred

inflation gauge - jumped 3.8% in April, nearly twice the Fed's

target, largely due to the energy price spike.

Even if a 60-day deal is reached in the Middle East and the

strait is reopened, crude prices are unlikely to fall back to

pre-war lows anytime soon given the physical damage in the Gulf

and the need to replenish inventories.

This could cause a headache for newly appointed Fed Chair Kevin

Warsh, who was expected to push for lower interest rates this

year.

Fed futures are pricing in at least one rate rise over the next

year and Fed policymakers are sending increasingly hawkish

signals. Governor Lisa Cook said on Wednesday that she was

prepared to raise rates if inflation didn't ease, while

erstwhile dove Christopher Waller urged the removal of the

apparent "easing bias" in the Fed's latest statement.

Even President Trump - who has made no secret of his preference

for lower rates - appears to acknowledge that the macro reality

has fundamentally changed. He has recently rowed back his calls

for immediate rate cuts - at least for now. The president has

indicated to Warsh that he should act as he sees fit, telling

him at his swearing-in ceremony that he should be "fully

independent".

If this change in tone persists, it could signal a shift in what

many believe to be the administration's soft dollar policy, as

the greenback is unlikely to weaken in a more hawkish

environment.

Elsewhere, rate hikes are expected in the euro zone and Japan as

soon as next month. ECB board member Isabel Schnabel told

Reuters on Tuesday that the central bank should raise rates in

June even if a U.S.-Iran peace deal is reached, owing to the

size and persistence of the current energy shock.

In corporate news, BP shocked the energy industry on Tuesday

by ousting Chairman Albert Manifold for alleged aggressive

conduct less than eight months after he joined. That comes

within three years of CEO Bernard Looney's dismissal for

improper relations with colleagues. These repeated leadership

scandals suggest the British energy giant's board is quickly

becoming a liability.

For more data-driven insights on markets and commodities, check

out Reuters Open Interest. You can learn:

* Which unlikely countries are big winners from the Iran

war?

* Why is corporate America increasingly looking like a safer

borrower than the U.S. government?

* Why might the growing gap between major inflation gauges

be a big problem for Kevin Warsh?

* How might Asia's early heatwave impact global coal and gas

markets this year?

* Why is the AI capex boom unlikely to end in a crash even

as it eclipses the dotcom mania?

* Why should the copper market pause before second-guessing

the Trump administration?

I'd love to hear from you, so please reach out to me at .

This weekend, we're reading...

MIKE DOLAN, ROI Finance & Markets Columnist: If you're worried

about a squeeze on the world's main reserve currency or a

pullback by the global lender of last resort, look to the Battle

of Trafalgar, argues this Bank for International Settlements

working paper. Disrupted transatlantic trade routes in 1805-06

cut Europe off from Latin American silver, the high-powered

global money of the day, sending the continent into a credit

shock.

GAVIN MAGUIRE, ROI Global Energy Transition Columnist: Denver

has a plan to heat and cool downtown buildings using sewage -

gross, yes, but potentially a template for decarbonising other

cities, explains this Canary Media piece.

ANDY HOME, ROI Metals Columnist: This Reuters article by Clara

Denina looks at the surge in U.S. listings by metals companies

explicitly targeting the defence sector.

JAMIE MCGEEVER, ROI Markets Columnist: Are UK politicians too

deferential to "bond vigilantes"? That's what Daniela Gabor,

professor of economics at the University of London, argues in

this Guardian article. She believes that Britain's borrowing

problem can be tackled without simply bending to the bond

market's demands, starting with the Bank of England.

We're listening to...

JAMIE MCGEEVER, ROI Markets Columnist: As billionaire wealth

soars and calls to "tax the rich" grow louder, University of

California economist Gabriel Zucman - an inequality expert and

architect of the proposed "Zucman Tax" - joins Lewis Goodall on

the UK podcast The News Agents to discuss his new book We Need

to Tax Billionaires.

And we're watching...

CLYDE RUSSELL, ROI Asia Commodities and Energy Columnist: In

this podcast, energy analyst Mukesh Sahdev argues that the

Strait of Hormuz crisis is existential for Gulf states but

merely an "excursion" for the U.S.

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Opinions expressed are those of the authors. They do not reflect

the views of Reuters News, which, under the Trust Principles, is

committed to integrity, independence, and freedom from bias.

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