Zerohedge

US Officials Confirm Saudi East-West Pipeline Attacked By Drones, Badly Damaged Summary Saudi oil pipeline attacked: US officials confirmed strikes on Saudi pumping stations, with drones likely launch from Iraq. Houthis expand in Yemen: Houthi forces are gaining control along the Red Sea coast, threatening key shipping routes. Oil and diesel prices rising: Russia's damaged refining capacity & shipping disruptions are also tightening fuel markets. Stagflation risk grows: Higher energy and shipping costs could push inflation higher while weakening global economic growth. //--> //--> //--> Strait of Hormuz traffic returns to normal by November 30? Yes 13% · No 88%View full market & trade on Polymarket US Officials Confirm East-West Pipeline Was Attacked Open source satellite imaging has shown the crucial 'Hormuz bypass' East-West oil pipeline that cuts straight across Saudi Arabia has been on fire. A some 80km to 100km giant smoke plume has been observed. The damaged section is said to be located near the town of Al Mesba'ah. Amid speculation that this is probably the result of a major Houthi attack out of Yemen, CNN in a new Friday report cites two US officials who've given confirmation that the pipeline was struck by projectiles on Thursday. Iraq was named as possible attack origin point. According to the report: An early analysis found that pump stations, which are located next to the pipeline itself, were hit, one of the US officials said. A satellite image taken Friday appears to show extensive fire damage at one pumping station, and an image of a different pumping station, taken Thursday, showed a small fire sending up plumes of thick, black smoke. It could have been the result of a drone attack by paramilitaries operating out of Iraq. "It was not immediately clear who was responsible for the strikes or if sections of the pipeline itself were damaged but one of the officials said it was struck by drones originating from Iraq," CNN reports. "It was also not immediately clear how long it would take to repair the damage, sources said." On Sept. 10, via EUMETSAT/CNN News on Saudi oil has gone from worse to worse, as in Yemen the Houthis have reportedly taken over the entire Red Sea coastline. They have renewed the threats to attack all Saudi (as well as Israeli) shipping, but have also sought to assure transit is 'safe' for other international vessels. The pumping station struck yesterday is located near the town of Al Mesba'ah. According to one of the U.S. officials who spoke to CNN, the drones that struck the pumping station along Saudi Arabia’s East-West pipeline originated from Iraq. It remains unclear whether the pipeline… pic.twitter.com/puOWM5VRlX — OilPrice.com (@OilandEnergy) September 11, 2026 Threats Rapidly Converge Three converging threats to watch are intensifying pressure on global energy markets: damage to Russian refining capacity, ongoing disruption at Hormuz, and new, expanding Houthi threats to Red Sea shipping. The resulting physical market squeeze extends well beyond the Gulf area. Record-high diesel prices in the US and other markets, such as China's return to buying crude, raise the risk that oil markets will remain exceptionally tight into the Northern Hemisphere winter.  What we know so far is that the Russia-Ukraine war has knocked out a whole bunch of refining capacity and halted exports of critical fuels from Russia. The Gulf area has seen an escalation in fighting this week as the Hormuz chokepoint remains open with tanker transits but still limited and far from pre-war levels.  Couple this all with the chokepoint madness still being disrupted and new developments overnight: Iran-backed Houthi forces advanced toward a strategic port near the southern entrance to the Red Sea, threatening to tighten control on a second critical shipping corridor.  Houthis Take Yemen's Red Sea Coast Bloomberg reported that Houthi rebels have gained ground around Mokha, with some geopolitical analysts reporting that the Yemeni port city has fallen.  🇾🇪 Total collapse: The entire coastline from Dhubab to Mayyun island was abandoned. Mayyun, Duhbab and Murd now controlled by Houthi forces as of September 11 A major global event. The Houthis now have the capacity to block ships now more than ever. Bab Al Mandab at their mercy https://t.co/ycUtzCcPq8 pic.twitter.com/EfVc5GdbZv — The Cube (@war_cube) September 11, 2026 Its fall would give the Houthis another coastal stronghold alongside Hodeida and the ability to control more of the Bab el-Mandeb Strait, suggesting commercial traffic could begin to drop and transits would be rerouted around the Cape of Good Hope, increasing shipping time and freight costs.  Alternative Route: Cape of Good Hope On top of this, China has returned to global oil markets, and ex-Goldman Commodities head Jeff Currie warned Thursday that this is the real driver of soaring crude prices.  Saudi Key East-West Pipeline on Fire Also overnight, Saudi Arabia's East-West oil pipeline appears to have been struck by Houthi forces, which the pipeline served as an oil escape route, effectively bypassing the Hormuz chokepoint to the Red Sea. Andrew Farrand, a political-risk analyst at Horizon Engage, described the rapid Houthi advance as a major setback for Saudi efforts in Yemen, warning that it could bring the Houthis closer to territory overlooking the waterway's narrowest section.  Simultaneous disruption of Bab el-Mandeb Strait and Strait of Hormuz creates a two-sided squeeze: less energy can leave the Gulf, while tankers that can move face longer, more expensive journeys. It also threatens Saudi Arabia's Red Sea terminal. Beyond Hormuz and Bab el-Mandeb, these are the main straits to watch:  Global Maritime Chokepoints Where the routes narrow What could interrupt commercial traffic Stage Set for Stagflationary Squeeze? The twin disruptions threaten shipping corridors that carried roughly a quarter of global seaborne oil trade through Hormuz and through Bab el-Mandeb, while jeopardizing a Red Sea shipping route central to trade between Asia and Europe and risking ignition of a stagflationary squeeze as diesel prices soar to new highs that eventually feed into supply chains, freight costs, and ultimately, at a lag, higher prices on store shelves.  Tyler Durden Fri, 09/11/2026 - 12:53

DeepSeek's New Hyper-Efficient Model Stokes Fears Over Korea's Memory Makers Samsung Electronics and SK Hynix each fell more than 3% in Seoul on Friday after DeepSeek said its newest AI model needs a fraction of the memory required by its predecessor. Both stocks had been trying to recover from July's selloff and remain more than 25% below their highs. Local retail traders, who helped drive the rally earlier this year, have sold around $10 billion of the pair this month alone. The trigger came Thursday out of Hangzhou. DeepSeek's V4.1-Flash is fast, cheap and, by the company's own numbers, stronger than its flagship model. But the title of DeepSeek's paper had nothing to do with intelligence benchmarks. It called the release "Pushing the Limits of KV Cache Compression," and its abstract identifies memory consumption during long AI sessions as the main obstacle to making these models cheaper to run. What DeepSeek Shipped V4.1-Flash is a 552-billion-parameter model (parameters are the numerical values a model learns during training). DeepSeek does not activate all 552 billion for every word. It uses 8 billion parameters while processing input and 16 billion while generating output, a design that lowers the amount of computing needed for each step. The model can handle a context window of one million tokens, meaning roughly a million small pieces of text or other input can remain available to it during a session. It also reads images natively, and its model weights are available under an MIT license, allowing anyone with sufficient hardware to run it. Nine providers were serving it through OpenRouter within a day of release. The memory problem needs a little more explanation. As an AI model works through a long document, conversation or agent task, it keeps a running record of what it has already processed so it does not have to recalculate everything from scratch each time it generates another token. That record is called the key-value cache, or KV cache. The cache is normally stored in high-bandwidth memory, or HBM. HBM consists of stacks of DRAM placed next to the processor to move data extremely quickly. It is among the fastest and most expensive memory in production, and booming AI demand for it helped turn SK Hynix, Samsung and Micron into some of the biggest semiconductor trades of 2026. As an AI session gets longer, however, the cache keeps growing. In long-running agent workloads, the memory needed for the cache can eventually exceed the memory occupied by the model itself. DeepSeek has attacked that problem directly. Its new architecture reuses cached information across layers of the network, stores the cache at 4-bit precision and reconstructs part of it when needed rather than storing the entire record. The result, according to DeepSeek, is 890 bytes of cache per token, one-quarter of what the previous Flash model kept in HBM and one-eighth of what it wrote to SSD storage. DeepSeek's post on X gave the commercial reason plainly. Cached input can account for a large share of the cost of running an AI agent. Shrink the cache, and the bill falls with it. Memory Per Token, Down 437-Fold The figure in DeepSeek's paper that matters most for Seoul is the second one. It tracks the amount of cache memory required for every token across successive generations of DeepSeek models. From the company's first release in January 2024 to V4.1-Flash, that figure has fallen 437-fold. KV cache per token, indexed to the V4 predecessor at full context. Chained from DeepSeek's stated ratios; V4.1-Flash's persistent SSD cache falls further, to one-eighth of V4-Flash. Source: DeepSeek model card; Wccftech. The decline did not begin this week. April's V4 had already cut KV-cache requirements to one-tenth of its predecessor at the full context window. September's model reduced them by another three-quarters. DeepSeek describes V4.1-Flash as the smallest member of a new architecture family designed to scale to larger models. On the other side of that chart are the growth assumptions embedded in the memory trade. Micron says its entire calendar 2026 HBM supply is already contracted on both price and volume. In December, the company told investors the HBM market could grow from about $35 billion in 2025 to roughly $100 billion in 2028. By June it had moved the $100 billion estimate forward to 2027. Micron reports earnings on September 30 and has guided the quarter to roughly $50 billion in revenue, about 350% above the year-earlier period, with an 86% gross margin. How much premium memory each unit of AI work requires is the whole point.  Out With The 'Old'  This seems a little risky, but beginning September 14, DeepSeek will route every request for V4-Pro, its 1.6-trillion-parameter flagship, to V4.1-Flash and charge the lower Flash rate until a V4.1-Pro arrives. No date has been given for the larger model. DeepSeek says the smaller model now beats V4-Pro on performance, cost, speed and the time required to complete a task. Model size alone is becoming a worse guide to how much computing and memory a useful AI system will consume. Against the leading American models, V4.1-Flash fits the pattern that has held for much of this year. On DeepSeek's own benchmark tables, it narrowly beats the best reported score from Claude Opus 5 or GPT-5.6 Sol on Terminal-Bench 2.1, DeepSWE, CyberGym and Humanity's Last Exam when tools are allowed. On newer and harder tests, however, the American frontier remains well ahead. V4.1-Flash scores 30.0 against Opus's 43.3 on Terminal-Bench 3.0, 31.2 against 51.8 on version 4.0, 20.3 against 37.0 on ProgramBench, and 15.3 against GPT-5.6 Sol's 33.7 on ExploitGym. The results have not been independently verified. DeepSeek's open model is clearing benchmarks that defined the frontier last year at a fraction of the price, while the American frontier keeps moving to harder tests. It is the same pattern seen with V4-Flash earlier this year. 86x Cheaper!? According to X user NIK (@ns123abc), V4.1-Flash is 86 times cheaper than the American flagships. This is because AI providers charge separately for input tokens, the material sent into the model; output tokens, the material the model generates; and cached input, previously processed material that can be reused without running the full computation again. At peak hours, V4.1-Flash costs $0.30 per million input tokens and $1.20 per million output tokens, with prices cut in half during off-peak hours. Anthropic charges $5 and $25 for Claude Opus 5. On output, that makes DeepSeek roughly 20 times cheaper at peak and about 40 times cheaper off-peak. Deepseek just dropped v4.1 flash, fully open weights it beats gpt 5.6 sol, opus 5 and every chinese model on coding and cybersecurity at ~86x cheaper cost per million tokens running at 420-507 tok/s = faster than gemini 3.8 flash "smallest model in our new architecture family"… pic.twitter.com/02Fft2OKTB — NIK (@ns123abc) September 10, 2026 The 86-fold figure comes from cached input. Anthropic charges 50 cents per million cached tokens, while DeepSeek charges six-tenths of a cent. Cached input is precisely the cost DeepSeek's new memory architecture was built to reduce. Peak-hour list prices per million tokens, log scale. The 83x on cached input is what the listed rates give; the 86x circulating on X is that post's own math. Source: VentureBeat; Dataconomy. Meanwhile, DeepSeek raised its prices only a month ago. On August 16 it moved V4-Flash from flat rates of $0.14 for input and $0.28 for output to peak rates of $0.44 and $1.32. Thursday's release brought those prices back down, although not to July's levels, while giving V4-Pro customers a reduction of roughly 70%. V4-Flash list prices at launch, after the August 16 hike, and at Thursday's V4.1-Flash release. Off-peak rates are half of peak. Source: TechJack Solutions; VentureBeat. The timing also comes as DeepSeek moves toward the public markets. On Wednesday, Reuters reported that the company had hired CITIC Securities to prepare for a Shanghai listing. That followed a June financing round of about $7.4 billion involving investors including Tencent and CATL, along with reports of another potential round at a valuation near 500 billion yuan. July Was Supply, September Is Demand The July selloff in Korean memory stocks centered on supply. SK Hynix signaled a major increase in spending, while Chinese memory manufacturers continued ramping cheaper output. Friday's scare came from the other side of the market: each unit of AI activity needing fewer memory chips. Micron and SanDisk, which held up overnight, were rising in Friday's premarket after Oracle's cloud results. The Korean names, where leverage and local retail participation are greater, took the immediate hit. Moves of 5% or more in a single day remain common for both Samsung and SK Hynix. Bloomberg notes that volatility remains near levels last seen during the 2008 financial crisis and the Covid shock. The shares also look inexpensive on conventional measures. Samsung trades at about 2.7 times book value and Hynix at 5 times, compared with roughly 11 times for the Philadelphia Semiconductor Index. Both Korean companies trade near 4 times forward earnings, versus 19 times for the index. Within hours, Fibonacci Asset Management's Jung In Yun said cheaper AI could drive more usage and offset the efficiency gains. Eugene Asset Management's Ha SeokKeun called the issue a near-term concern. When Seoul reopened after the Lunar New Year on January 31 last year, eleven days after DeepSeek's R1 release, SK Hynix fell as much as 12% in a day and Samsung dropped 4%. Investors initially feared that more efficient models would weaken demand for AI hardware. Instead, AI spending kept climbing, and the argument that lower costs stimulate greater usage won the year that followed. R1 challenged the amount of computing required to produce useful AI. V4.1-Flash is attacking the amount of memory required for every token, and DeepSeek has published a chart, running back to January 2024, showing that requirement falling by more than 400-fold. The company also says the same architecture is intended for larger models. Export Controls And Huawei's Own HBM Since December 2024, U.S. export controls have barred sales of advanced HBM to China, making access to fast memory one of the hardware constraints on Chinese AI developers. Huawei has been working on a domestic alternative. Its Ascend 950DT uses Huawei-made HiZQ 2.0 memory, with 144 gigabytes of capacity and bandwidth of 4 terabytes per second. That remains well behind the HBM SK Hynix supplies for Nvidia's leading accelerators. DeepSeek's V4 in April was the first frontier model validated on Huawei Ascend hardware alongside Nvidia chips. The company also has a reported order for 160,000 Ascend 950DT processors for a gigawatt-scale data center in Ulanqab. So - a model that needs one-quarter as much memory per token can be deployed more broadly on hardware that has less memory to offer. The V4.1-Flash model card does not identify the hardware used to train the model. DeepSeek has not announced a date for the larger member of the V4.1 family. Micron reports on September 30. Tyler Durden Fri, 09/11/2026 - 12:25

Mideast Chaos Sends Supertanker Rates Soaring To Near Record $1 Million A Day Summary: Gulf Tanker Rates Hyperinflate  A day later: Mideast Chaos Sends Supertanker Rates Soaring To Nearly $1 Million A Day  Mideast Chaos Sends Supertanker Rates Soaring To $800,000 A Day Supertanker rates on the Baltic Exchange's benchmark Middle East-to-China shipping route have jumped to nearly $1 million a day. The jump in tanker rates comes as the Bab el-Mandeb Strait in the southern Red Sea falls further under the control of Iran-backed Houthi rebels, while the Strait of Hormuz remains highly contested, an indication that two critical maritime chokepoints are under severe threat. The squeeze on shipping costs extends beyond the Persian Gulf area, with VLCCs traveling from Oman to China costing $571,000 a day, even though Oman’s ports sit outside Hormuz. That is roughly 10 times last year’s average. For buyers seeking alternative supplies in the Gulf of America, shipping crude from the US Gulf to China now adds about $18 a barrel. The windfall for shipowners is becoming a cost shock for the wider energy market. The Breakwave Tanker Shipping ETF (BWET), which gives investors exposure to the cost of transporting crude oil by sea through tanker freight futures, has had an impressive run so far this year: With inventories falling and buyers competing for supplies, freight is threatening to become another bottleneck, keeping available barrels from reaching the markets that need them. Mideast Chaos Sends Supertanker Rates Soaring To $800,000 A Day  Supertanker rates on the Baltic Exchange's benchmark Middle East-to-China shipping route have surged to a staggering $800,000 a day. With US forces having destroyed five Iranian-linked tankers and Tehran threatening further escalation in recent days, prospects for near-term stabilization remain limited. The freight surge signals that crude oil and refined products continue to flow but are becoming increasingly costly to transport out of the Gulf region to global markets. According to Bloomberg, US Gulf-to-Asia shipments on very large crude carriers average about $29.5 million per voyage, equivalent to $15 a barrel before any additional war-risk charges or unexpected delays. Kpler expects VLCC earnings to remain above $100,000 a day into early next year, compared with historical levels that exceeded $45,000. Morgan Stanley analysts point out that two-year leasing rates could surge another 20% to 30%. Manu Sehgal, vice president of strategy and feedstock supply at Indian refiner HPCL-Mittal Energy, told Bloomberg that "crude volume is there. What's hampering it is the transit; what's hampering it is the shipping." A fleet of tankers conducting ship-to-ship transfers in the Gulf of Oman is helping keep barrels flowing through the Hormuz chokepoint. Vitol's CEO estimated earlier this week that roughly 10 million barrels a day were crossing the waterway, while Goldman analysts put that figure at around 15 million. The Baltic Exchange's new Gulf of Oman-to-East Asia benchmark has surged 85% since inception, reaching almost $386,000 a day this week. This means surging tanker rates add another layer of inflation pressure for global central banks. Those costs can filter through to gasoline, diesel, freight, and ultimately consumer goods on store shelves.  Tyler Durden Fri, 09/11/2026 - 11:52

Rate-Hike Odds Soar Despite Lowest Core Consumer Price Inflation Since 2021 Following fuel-driven jump in Producer Prices, consensus was for a concomitant jump MoM in Consumer prices this morning, after last month's decline as energy prices have rebounded (though we warned that amid all the interventionist-y chatter, nothing would surprise us less than 'cool' print to offset the PPI scare). And analysts were right with headline CPI rising 0.4% MoM (exactly as expected) - biggest MoM since May - but prices rose 3.5% YoY (in line with expectations and flat to the prir month)... Core Services accelerated... ...BUT Fuel prices dominated the rise in headline CPI... Headline CPI rose 0.4% MoM in August, after rising 0.1% in July. Over the last 12 months, the all items index increased 3.4%. The index for energy increased 2.1 percent over the month: The index for gasoline rose 3.9% in August, accounting for over one third of the monthly all items increase. The shelter index rose 0.3 percent in August after rising 0.1 percent in July. The index for food increased 0.1 percent over the month, as the index for food away from home increased 0.3 percent. Just like we saw yesterday with PPI, the rebound in crude (and refined product) prices snapped CPI's Energy component notably higher...  Energy helping on a 6m annualized basis but hurting on a 3m annualized basis... Core CPI rose 0.3% (0.29% rounded up) MoM (hotter than the 0.2% exp) but on a YoY basis it decline from 2.5% to 2.4% - the lowest since March 2021... Core CPI rose 0.3% after increasing 0.2% in July. Core CPI rose 2.4% over the year, following a 2.5% increase over the 12 months ending July. Indexes that increased over the month include communication, lodging away from home, airline fares, education, and used cars and trucks. Conversely, the index for medical care and the index for motor vehicle insurance were among the major indexes that decreased in August. MoM Core CPI (0.3%) Details The shelter index increased 0.3% over the month after rising 0.1% in July. The index for owners’ equivalent rent rose 0.2% in August as did the index for rent. The lodging away from home index rose 2.4% in August after falling 2.8 percent the previous month. The index for communication increased 2.3% over the month after rising 0.6% in July. The airline fares index rose 2.7% in August, and the education index increased 0.8%. The index for used cars and trucks increased 0.4% in August, and the index for new vehicles rose 0.3% The personal care index and the household furnishings and operations index also increased over the month. The medical care index decreased 0.2 percent in August after rising 0.4 percent in July. The index for dental services fell 0.6 percent over the month. The hospital services index, physicians’ services index, and prescription drugs index were all unchanged in August. The motor vehicle insurance index declined 0.8 percent in August after falling 0.3 percent in July. The index for apparel was unchanged in August as was the index for recreation. YoY Core CPI (2.4%) Details The shelter index increased 3.0 percent over the last year. Other indexes with notable increases over the last year include airline fares (+23.4 percent), recreation (+2.7 percent), medical care (+1.6 percent), and personal care (+3.8 percent). Shelter dropped... Shelter Inflation rose 0.26% MoM, and up 2.75% YoY, down from 2.86% YoY in July and the lowest since March Rent inflation rose 0.23% MoM, same as July, and up 3.04% YoY, down from 3.18% in July and the lowest since March The much-watched SuperCore CPI (Services ex-shelter) rose notably on a YoY basis... ...with a big spike in Education & Comms costs... Driven by a record jump in Telephone Services... Which was all Wireless Telephone price hikes... Here's JPMorgan with an explainer: Education and communication goods: This category posted a near-record 1.3% rise in July, led by computer prices, as Apple repriced its Mac and iPad products. Memory prices should continue to put upward pressure on computers and phones, which sometimes takes the form of new features being combined with price increases.  One more thing... Bloomberg's Simon White notes that the fastest-changing input in the CPI report betrays signs that AI spending is leaking into consumer prices via the information and information processing sector. The chart below shows the change in each CPI component’s contribution (based on its weight in the basket) to the year-on-year headline number between July and August. The information processing sector is contributing only 0.03 percentage points to the headline rate of 3.4% at the moment, but this has risen faster than any other sector. It includes IT hardware, where prices are starting to rise for semiconductor and memory chips, as data centers are massively fueling demand. Apple recently announced a rise in the price of its iPhone. If the impact from data-center spend continues, then it’s clearly an upside risk for CPI, but it should be borne in mind along with leading indicators for inflation, which are rolling over and anticipate a more subdued backdrop for price pressures over the next few months. As an aside, real average hourly earnings growth was negative for the 5th month in a row (is it any wonder consumer confidence is low)... On the bright-side, we are decoupling from the 19070s CPI analog... Understandably, a lower CPI print is better for markets, and JPM's market scenario analysis affirms that: Core MoM prints above 0.30%. SPX declines 1.5% – 2.5%; Odds 10.0% Core MoM prints between 0.25% – 0.30%. SPX declines 25bp – 1%, Odds 25.0% Core MoM prints between 0.20% – 0.25%. SPX gains 50bp – 1.25%, Odds 30.0% Core MoM prints between 0.15% – 0.20%. SPX gains 1% – 1.5%, Odds 25.0% Core MoM prints below 0.15%. SPX gains 1.5% – 2%, Odds 10.0% For now, rate-hike odds soared to over 90%, almost certain pricing for a 25bps move higher by Warsh and his pals next week... Rate-change expectations for 2026 has swung wildly this year from over 60bps of cuts in Feb to now 47bps of hikes (the highest of the cycle)... Wall Street is now convinced Warsh is cornered... Top Goldman short-term macro trader, Brian Bingham, noted that: “The Fed is now in the most paradoxical of all positions, beholden to a single data print and potentially reactive to the rounding on the ECO screen… Warsh told the market in his first press conference that he didn’t want to focus on the number to the right of the decimal point, but now it’s the number to the right of that one that will be the determinant. Waller’s speech on Thursday was surprisingly and overtly dovish, confirming our view that the Board skews heavily if not unanimously dovish relative to the regional presidents, but offered little new information beyond implicitly confirming a 30bp core CPI will merit a hike. The market appears to be penciling the over/under at 25, but we struggle to see a meaningful rally on an in-line 20bp core print following this week’s jobs report; in a world where the meeting goes in pricing greater than 50% chance of a hike, the risk of the bond market interpreting a hold as a policy error seem far greater than the harm of hiking into above-target inflation.” UBS FX team noted a somewhat muted reaction in currencies (dollar spiked then slipped lower)... Warsh painted himself in a corner here. Well, we've gotten the hard language tough guy speech at Jackson Hole. His remarks were prepared and his messaging was intentional. Now, we've gotten the data - labor market print more robust, inflation still supported. September FOMC pricing goes to just under 23bp immediately, so the market is pretty much fully expecting a hike to come. At this point, it would be a massive blow to credibility if they fumble the football on following through with the adjustment, but the market seems to have been correct to lean into this data with a long USD gamma bias. Interestingly, the yield curve is flattening rapidly (Fed credibility at the long-end? locked in hike will slow growth?)... So while the world and his pet rabbit was watching for 0.2% or 0.3% - knowing energy would be a driver - it turns out it was cellphone carriers hiking prices that had forced Warsh into a corner. Bottom line: surging cell phone prices (thanks to memory) were the deciding factor between the Core CPI printing 0.2% and 0.3%. https://t.co/KehMJOCgUj — zerohedge (@zerohedge) September 11, 2026 The jawboning is over... it's shit or get off the pot time for Kevin (every new Fed head is tested early on by the markets). Tyler Durden Fri, 09/11/2026 - 11:30

Democracy, As Scheduled By Molly Schwartz, cross-asset macro strategist at Rabobank After breaking above $100/bbl on Wednesday, the rally in Brent crude oil continued yesterday, climbing almost 7% on the day and closing at $108/bbl, the highest price since May. US Treasury yields followed with a sharp bull-flattening, with the 2-year marking its highest level since July 2024 at 4.58%, and the 10-year making its way up to 4.96%—the highest level since October 2023. Meanwhile, US 30-year Treasury yields jumped 7.3bp to 5.36%, the highest level since 2002 and 2-year inflation expectations soared to 2.6%, their highest level since June and more than 0.71ppt above the July lows. As the US midterm elections approach, many are anxiously trying to gauge whether GOP will be able to retain control of both houses of Congress. As mentioned in yesterday’s installment, one strategy the Trump administration is trying to use to ensure a victory is the promise of a $5,000 “Trump dividend” issued to every American adult if, and only if, Republicans win both houses. Logistics remain unclear as to how the dividends would be funded or issued, especially given Trump’s “condition” that they could only be spent in America, with Trump saying that “we don’t want you going to Canada to spend the money. We don’t want you going to China, to Germany.” Of course, money is fungible, and a $5,000 “America coupon” allows Americans to spend $5,000 elsewhere, especially on their favorite shiny imports. However, regardless if the midterms mark a turning point in the Trump Administration or not, it is possible that they will at least mark an inflection point in the war overseas. Brent crude oil prices are stretched in part due to the continued hostilities in the Middle East, but American voters generally care more about gasoline prices than military intervention on the other side of the world, and with gasoline prices headed higher and equity prices headed lower, it doesn’t look good for the GOP. This past Tuesday, Trump “truthed” that “Oil prices will drop precipitously, like everything else is dropped, when we WIN the war with Iran. Three Dollars a gallon, but ultimately, below Two Dollars a gallon. It will all happen quickly, and Iran will never have a Nuclear Weapon. MAGA!” and later told reporters that “the war is going to end immediately after the election because [Iran] can’t hold out any longer.” HISTORY: diesel has crossed $6/gal nationally for the first time ever, according to live GasBuddy data. every truck, every delivery, every package, every grocery run just got more expensive. the cost of moving everything in america just hit a record. Statement⬇️ (9/10/26, 3p CT) pic.twitter.com/zijqu6vD9i — Patrick De Haan (@GasBuddyGuy) September 10, 2026 But American voters want lower prices now, and Iran is well aware of the US electoral calendar. Even as Trump shares his timeline for when he wants to wrap up the war in Iran, the IRGC has an incentive to escalate going into the midterms and drag out the conflict for as long as possible. The Wall Street Journal recently reported that VP Vance and Secretary of State Rubio estimate that the war could last through January 2029—creating additional problems for both of them, who may put their names on the presidential ballot in 2028. In the meantime, energy prices screaming higher and inflation expectations are soaring. If Trump wants Fed cuts going into the midterms, the market expects him to be disappointed. The US OIS curve implies investors are pricing in more than a 70% chance of a hike (17.7bp) at the September 16 FOMC rate decision. This still stems from Warsh’s generously forward-guidance-laden speech at Jackson Hole two weeks ago, but renewed fears about the war in Iran have further stoked the markets’ hawkish bias. That said, economists surveyed by Bloomberg see things differently, with 66 out of 78 analysts forecasting a hold, including ourselves. Read more from Rabobank’s resident Fed whisperer, Philip Marey, here. Hawkish expectations are shared across the pond after the ECB announced its decision to raise the deposit facility rate by 25bp to 2.50%, with ECB President Lagarde referring to the decision as a “no-brainer.” Rabobank’s ECB watcher Bas van Geffen argues in an ECB Post-Decision Report that “the ECB is now at the top end of the neutral range, and any next policy decision will be a trade-off between the risks that face the Eurozone economy,” and therefore urges caution with regard to future policy hikes. Nonetheless, OIS curve pricing implies investors are positioned for more than four ECB hikes by July 2027. Rabobank sees 2.50% as the terminal rate and does not forecast any additional hikes or cuts through the end of 2027, though the upside risks to our view have increased. Canadian PM Mark Carney has apparently been speaking to Trump in recent days, but not necessarily about trade…rather, about Ukraine. Bloomberg reports that Carney and Zelenskyy spoke at a joint press conference yesterday, during which both parties signed a “declaration of a 100-year partnership…and Canada pledged to boost its drone production capacity and send one-third to Ukraine.” Other promises include Canada’s launch of a national drone marketplace and increased industrial cooperation between Canadian and Ukrainian drone and defense manufacturers. Tyler Durden Fri, 09/11/2026 - 10:40

UMich Sentiment 'Expectations' Plunge Near Record Lows As Republicans Lose Faith, Inflation Fears Rebound After July's rebound to pre-war levels, a re-escalation in the MidEast (and soaring fuel costs) sent confidence back towards YTD lows. Preliminary September data was expected to show UMich headline sentiment sliding further. 'Slide' is not exactly how we would describe preliminary September confidence data's collapse (headline from 51.7 to 47.8 vs 51.0 exp). The current conditions gauge fell to 50.9 from 51.9 in the previous month, while the expectations index plunged to 45.8 from 51.5 - just off record lows. Democrats and Republicans alike posted sizable declines, while independents were little changed from August. “Opinions of the government’s economic policy worsened about 10% this month and remain substantially below February 2026, just prior to the Iran conflict,’’ Joanne Hsu, director of the survey, said in a statement. “Notably, even Republicans, who generally supported economic policy under the current administration, have exhibited a marked decline in favorability.’’ Year-ahead inflation expectations jumped from 4.0% last month to 4.6% this month, the highest reading since June. BUT... umm... How is this possible: Democrat inflation expectations dropped, Republican and Independent inflation expectations unchanged... yet overall inflation expectations jumped the most since May 2026!? Even more ridiculously, while the 5Y expectation was flat, Independents and Democrats signaled plunging inflation expectations... In contrast, labor market expectations were little changed this month. Nominal income expectations held steady from the August reading. The expected probability of losing one’s own job ticked down, though it still remains well above the historical average. Aggregate unemployment expectations softened a bit, with 61% of consumers expecting unemployment to rise in the year ahead, up from 57% last month but down from 65% a year ago. For the first time since 2023, a majority of consumers expect interest rates to tighten in the year ahead. The share of consumers anticipating rate increases surged to 62% in September, up from 49% last month and just 23% a year ago. As such, consumers broadly expect the Fed to act to restrain inflation With a resurgence in fuel prices and trade tensions, consumers anticipate greater pressures on their pocketbooks to come. Five-year expected business conditions remained stable at readings well below their historical average, suggesting that consumers believe that emerging risks this month may not have further worsened the long-run outlook.  Overall, sentiment is now 16% below February, prior to the start of the Iran conflict, and 13% lower than a year ago. Finally, as we noted earlier, real wage growth has now been negative for five straight months... Not exactly confidence inspiring. Tyler Durden Fri, 09/11/2026 - 10:10

MbS Begs Trump For Bigger Anti-Houthi Intervention, As Over 100 US Advisers On Ground We've been documenting the Houthi rapid advance along Yemen's western coast, as the Iran-aligned rebel group closes in on owning more vital Red Sea chokepoint coastal real estate. As of Friday, after having the day prior entered the strategic port of Mocha, it is being widely reported including in Al Jazeera that the Houthis have taken control of Yemen's entire Red Sea coastline. This gives the group, and by extension Tehran, immensely greater leverage over the Bab al-Mandab Strait and vital global energy chokepoint. Earlier this week Ansar Allah attacked four Saudi cities, including Aramco sites across southern KSA. The Saudis are said to be in a panic as the front lines of the Sanaa-based government they've long backed and weaponized collapse. In some cases Saudi coalition fighters are simply abandoning their armored vehicles and convoys. Seeking more Washington support from the air and on the ground, Saudi Crown Prince Mohammed bin Salman (MbS) has already made two urgent phone calls to President Trump. Axios is reporting that in the Thursday calls MbS urged his American counterpart to launch strikes against the Houthis before they solidify control of the vital Red Sea chokepoint. The report indicates that "Trump declined, and US officials stressed the administration has no plans to intervene directly against the Houthis for now." But also, "Adm. Brad Cooper, the commander of U.S. Central Command, traveled to Saudi Arabia on Thursday for urgent coordination meetings, two sources with knowledge of the matter said." So the Iran war is has now officially gone regional. I'd like to extend my heartfelt thanks to the American taxpayer for their generous and apparently ongoing sponsorship of Ansar's expanding toy collection. Your contributions are greatly appreciated. pic.twitter.com/GHVGHExmaI — روني الدنماركي (@aldnmarki) September 10, 2026 Of course, Washington and Riyadh been through all of this before but to no effect, given the brutal air war and intermittent ground campaign of the Saudi-UAE-US coalition in Yemen from 2015 to 2022. In more recent years amid the Gaza conflict, major US Navy actions in the Red Sea did nothing to push back the Houthi threat. Repeat Israeli bombings have also done little. But the Pentagon is still intervening in what can be called a long-running proxy war in southern Arabia, as CNN reported Thursday that over 100 US military advisers are on the ground in Saudi Arabia assisting Riyadh with intelligence and targeting support. One unnamed official even put the number at more around 200, as part of a new Yemen-focused task force amid the ongoing escalation. A huge worry remains the safety of Hormuz crude transit 'bypass' routes. New Houthi military announcement via Telegram: Yemen’s armed forces say maritime navigation is safe for all companies except Saudi vessels, which are subject to a blockade, and vow to continue striking Saudi troop buildups and escalating until the aggression and blockade on Yemen end. The big news overnight was a report that Ansar Allah claimed to have hit Saudi Arabia's East-West pipeline, which feeds an export terminal on the Red Sea and effectively bypasses the Hormuz chokepoint.  Sometimes a short clip says more than pages of analysis. Here, a Houthi commander who was previously detained by government forces explains why the Bab el-Mandeb Strait matters so much strategically. He tells his soldiers that they no longer need drones or missiles. They could… pic.twitter.com/ZpxHOjfGpJ — Basha باشا (@BashaReport) September 11, 2026 The Gulf crisis shows no signs of slowing as US forces took out several Iranian tankers this week and Tehran warns of further escalation. But Trump doesn't appear to be any closer to articulating, much less seriously contemplating, an offramp to this war of his own making - which is also becoming increasingly unpopular at home. Tyler Durden Fri, 09/11/2026 - 09:35

Futures Rise As Oil Prices Drop Ahead Of CPI Report Futures are higher thanks to an overnight retreat in oil prices (which is unlikely to hold now that Houthi rebels effectively control the entire Red Sea) and bond yields which track oil tick for tick, but the tone could quickly shift with the week’s biggest catalyst, August CPI data, due before the cash open. As of 8:00am ET, S&P and Nasdaq futures gain 0.6% with Mag 7 stocks are mostly higher, led by AMZN (+0.6%) and META (+0.7%). In premarket trading, ORCL rose 7% as its AI cloud backlog beat estimates. MSFT is planning to more than triple its data center capacity to ease computing shortages. WTI crude fell 3% overnight amid the report that Gulf states are weighing a meeting with Iranian officials to discuss the future of the Strait, the first gathering since the war began more than six months ago. Oil is on track for a 8% jump since Monday, and the International Energy Agency warned higher prices would hit consumption. Bond yields are 1-3bp lower although they remain sticky near 3 year highs: 2Y and 10Y yields are 3.2bp and 2.4bp lower, respectively. While the meeting itself was net positive for risk assets, the situation in the Middle East remains uncertain, particularly regarding renewed developments in Yemen, as Houthi rebels seize a key Yemeni port city and struck Saudi oil infrastructure. US retail diesel prices topped $6 a gallon for the first time. Commodities are mostly lower except for precious metals. All eyes are on CPI at 8:30 am ET. We also get the September preliminary UMich sentiment (10 a.m.), 2Q household change in net worth (12 p.m.) and August federal budget balance (2 p.m.). Fed speakers remain in external communications blackout period ahead of Sept. 15-16 FOMC meeting In premarket trading, Mag 7 are mostly higher (Nvidia +0.7%, Amazon +0.7%, Meta +1.1%, Alphabet +0.5%, Tesla -0.2%, Microsoft +0.3%, Apple -0.06%) Adobe (ADBE) falls 4% after the company gave an outlook for sales that narrowly missed analysts’ estimates, adding fuel to concerns that artificial intelligence upstarts are hurting the software maker’s business. Copart (CPRT) rises 4% as the vehicle auction firm is set to acquire all outstanding shares of ACV Auctions for $10.50 per share in cash. ACV (ACVA) surges 44%. Kroger (KR) slips 2% after the company trimmed its annual sales guidance, a sign that fierce competition for grocery spending is weighing on the retailer. NuScale Power (SMR) falls 4% after UBS cut its recommendation on the small modular reactor company to sell, citing sees increased competition. Oracle (ORCL) gains 6% after the software company’s results featured better-than-expected cloud revenue amid strong AI demand. In other corporate news, OpenAI is considering slowing down the development of cutting-edge artificial intelligence, with CEO Sam Altman hoping other AI companies will do the same. activist investor Oasis Capital has nominated directors at Vail Resorts in preparation for a proxy fight, Semafor reports. Tesla China launched the new Model Y Performance All-Wheel Drive version, with a starting price of 369,000 yuan ($54,975). In deals, online vehicle auctioneer Copart is making its largest-ever acquisition in the shape of ACV Auctions, a digital marketplace to buy and sell cars, for $1.9 billion in an all-cash transaction. Billionaire financiers Mark Walter and Todd Boehly are nearing a deal to sell their stakes in Chelsea FC to majority owner Clearlake Capital. After surging yields and a rally in crude left the S&P 500 facing its worst week since June, index futures rebounded 0.5% as WTI crude fell 3% overnight amid the report that Gulf states are weighing a meeting with Iranian officials to discuss the future of the Strait. Oracle Corp. jumped 6% in early trading as its data center bets showed signs of paying off.  The AI trade got renewed optimism in the form of Oracle and Microsoft overnight. Oracle’s cloud infrastructure revenue jumped +121% to $7.4 billion, beating estimates. Microsoft’s announcement of plans to more than triple data center capacity to 38 gigawatts by 2032 will give AI infrastructure bulls fresh ammunition. Second derivative improvements in Oracle’s slowing rate of change of free cash flow losses (-$5 billion versus the Street at around double the burn) on healthy operating cash flow (+184% to $23 billion) provides some relief. Meanwhile, Oracle’s ability to charge more for aging GPUs challenges fears that rapid obsolescence will erode hyperscaler returns. There are some cracks in the AI narrative. Ramp AI highlights that AI spend declined in August among the top 1% of businesses investing in the technology. Adobe’s guidance miss resurrects questions about AI monetization for software incumbents. Anthropic’s monthly report describing misuses of its AI model shows it blocked possible efforts to build biological weapons Traders are bracing for Friday’s inflation print at a time when worries over oil-driven price pressures have pushed global bond yields to the highest in years. Money markets price a 67% chance of a Fed hike next week.  Economists expect the consumer price index to have risen 0.4% in August, an acceleration from a month earlier, due in part to higher gasoline costs (our full preview is here). Bloomberg Economics expects to see firmer core PCE forecasts after the CPI print, raising the odds of a Fed rate hike next week, after the PPI components feeding into the PCE deflator came in well above expectations yesterday. “We had the Oracle numbers as a reminder that there’s a tech story that’s still very, very vibrant,” said Guy Miller at Zurich Insurance. “That’s what investors keep coming back to. We know for at least the next two quarters that earnings are going to be really robust.” August’s CPI report is probably the most anticipated in years, with Fed policymakers — particularly Waller — signaling that the decision at next week’s FOMC meeting hinges on evidence that inflation is moderating. Bloomberg Economics leans “slightly toward the Fed holding rates steady at the September meeting. But it will be a very close call.” That said, as Goldman trader Brian Bingham lays out, Warsh is facing a bit of a dilemma “The Fed is now in the most paradoxical of all positions, beholden to a single data print and potentially reactive to the rounding on the ECO screen… Warsh told the market in his first press conference that he didn’t want to focus on the number to the right of the decimal point, but now it’s the number to the right of that one that will be the determinant. Waller’s speech on Thursday was surprisingly and overtly dovish, confirming our view that the Board skews heavily if not unanimously dovish relative to the regional presidents, but offered little new information beyond implicitly confirming a 30bp core CPI will merit a hike.  The market appears to be penciling the over/under at 25, but we struggle to see a meaningful rally on an in-line 20bp core print following this week’s jobs report; in a world where the meeting goes in pricing greater than 50% chance of a hike, the risk of the bond market interpreting a hold as a policy error seem far greater than the harm of hiking into above-target inflation.” Elsewhere, BofA strategists note there’s no sign of “panic anywhere” despite the spike in bond yields and commodities. The pace of flows into global equities is slowing, with US stock funds registering their biggest three-week outflows since January at $14.2 billion. For the current bull market in stocks, the fear is a full-fledged hiking cycle, not a single move. The Stoxx 600 is gaining 0.6% to staunch three days of losses. Banks, insurers and telecoms stocks are leading the way.Here are the biggest movers Friday:  Trainline shares climb as much as 8.8% after the train ticket retailer reported strong results in its first-half trading update. The group reiterated its revenue forecast for the full year and announced a new buyback C&C shares rise as much as 8.9%, the most since 2022, after the alcoholic beverage maker delivered in-line interim results and said it is buying Asahi UK’s wholesale businesses. Analysts said the deal should provide scale Everplay Group shares soar as much as 14%, hitting their highest level since February, after a strong launch of the video game company’s latest title, Wardogs, according to analysts Omnia shares jump as much as 14%, hitting their highest level since 2017, after the fertilizer and chemicals maker said it’s in advanced discussions regarding a potential offer for all of its issued ordinary shares GEA Group shares rise as much as 1.8% as the German machinery firm is upgraded to overweight from equal-weight at Barclays, which touts it as a high quality business with a compelling valuation Novo Nordisk shares fall as much as 3.3%, hitting a three-month low, after the obesity drug giant was downgraded at Morgan Stanley. Analysts believe its valuation does not reflect “subdued” mid-term growth prospects FlatexDEGIRO shares fall as much as 11% after the German online brokerage announced that the chairman of its supervisory board had resigned Applied Nutrition shares drop as much as 5% after the protein-powder maker’s chief executive and chief operating officer offloaded shares at a discount to the last close. The shares remain above the offer price Chemometec declines as much as 11%, the most in three weeks, after the Danish laboratory equipment firm reported its latest earnings and announced its latest guidance Markets in Asia echoed Thursday’s US moves. Asian stocks slumped as US bond yields climbed to their highest levels since 2023 and rising oil prices weighed on risk appetite. The MSCI Asia Pacific Index dropped as much as 1.9%, led by South Korea and Taiwan. SK Hynix and Samsung Electronics were among the biggest decliners after DeepSeek said it managed to reduce the amount of high-bandwidth memory needed for its latest model, stoking worries about the outlook for semiconductor demand. A gauge of Asian chip stocks is poised for its biggest drop in three weeks.  Investors are looking ahead to Friday’s US consumer-price report for clues on the Federal Reserve’s interest-rate path, with rising bond yields and oil prices adding to market concerns. The MSCI Asia Pacific Index is down 0.7% this week, on track for its biggest weekly drop in almost two months. Attention is also turning to upcoming central bank decisions in the region. The Bank of Japan is due to announce its monetary policy decision on Sept. 18, while Taiwan’s central bank is scheduled to decide on rates next week. The Bloomberg Dollar Spot Index remains muted, with the New Zealand dollar the outperformer among major currencies as the rise in oil prices firmed up bets on rate hikes. In rates, treasuries hold modest gains led by short tenors ahead of August CPI data at 8:30 am ET time as oil prices fall for the first day this week. Front-end yields are about 3bp lower on the day after tenors across the curve reached new YTD highs. US yields are at least 1bp richer across the curve with 2s10s and 5s30s spreads steeper by 0.5bp and 1bp. 10-year is around 4.94%, less than 2bp richer on the day, trailing UK counterpart by 2bps. German yield curve leads global steepening move with front-end yields more than 5bp lower on the day. IG dollar issuance slate empty so far and unlikely to grow because of risk posed by the CPI report; six offerings totaling $6.3 billion were priced Thursday, with borrowers paying about 5bps in new issue concessions on deals that were 3.3 times oversubscribed In commodities, oil prices are down more than 3% after the International Energy Agency warned about a deteriorating outlook for consumption. WTI crude oil futures are down 3.2% near session lows. Gold is rising, having come close to dipping below $4,300/oz. Diesel prices rose above $6 a gallon for the first time ever, raising the risk of further energy-driven inflation just ahead of peak demand season for the workhorse fuel of the global economy. Inflationary pressures showed up in corporate earnings with National Beverage saying results were hurt by higher packaging and ingredient costs. The US economic data slate includes August CPI (8:30 a.m., September preliminary University of Michigan sentiment (10 a.m.), 2Q household change in net worth (12 p.m.) and August federal budget balance (2 p.m.). Fed speakers remain in external communications blackout period ahead of Sept. 15-16 FOMC meeting Market Snapshot Top Overnight News The lightning Houthi advance down Yemen's Red Sea coast this week came with direct guidance from Iran's Revolutionary Guards seeking to open a new front in Iran's war with the U.S., according to Yemeni government, Iranian and ‌regional sources. By seizing the southwestern port city of Mocha, the Houthis have strengthened their chokehold on the Bab el-Mandeb Strait, a key waterway whose disruption further constricts global energy supplies after Iran's blockade of the Strait of Hormuz. Reuters Iran and GCC states are considering meeting next week for talks on the Strait of Hormuz, people familiar said. The Houthis advanced toward coastal areas near the strategic Bab al-Mandeb Strait. Oil retreated. BBG US average retail diesel prices topped $6 a gallon for the first time, adding to price pressures ahead of peak demand season. BBG Fund managers wading back into South Korean memory makers’ stocks got a fresh gut check after DeepSeek’s latest artificial intelligence model raised doubts on the strength of demand. SK Hynix Inc. and Samsung Electronics Co. shares dipped 2.2% and 3.5% each in Asia, paring their nascent rebound from July’s steep selloff. DeepSeek’s comment that it has reduced the amount of high-bandwidth memory required in its AI models. “Oracle’s GPU renewal pricing averaged 20% higher, highlighting the industry’s supply-demand imbalance and supporting Oracle’s and other cloud peers’ infrastructure outlook”. “The company’s commitment to keep fiscal 2027 funding needs unchanged also stands out despite a sequential $26 billion rise in remaining performance obligations to $664 billion”. BBG Japan’s finance minister said Scott Bessent referring to himself as “the house” sounded “scary” when translated into Japanese. The US Treasury Secretary clarified his remark, saying he was trying to give the market “good framing so that they don’t panic.” BBG Sanae Takaichi’s push for a more assertive military with US support will be tested as voters in Japan’s Okinawa pick a governor Sunday. Anger over US bases is overshadowed by worries about China. BBG European Central Bank officials expect to raise interest rates further, with another increase possible as soon as next month. While policymakers’ views will continue to hinge on incoming economic data, tighter monetary policy may be required to contain inflation that’s stuck above 3%, said the people, who asked not to be identified discussing private conversations. BBG   Trump reiterated a pledge to provide a USD 5,000 Trump dividend to adults if Republicans win the Midterms and will make Trump tax cuts permanent, while he separately commented that the Trump dividend won't be a big problem at all and that he is doing it as a reward and not for the vote. Trump said in a recorded interview with Fox News that they're going to take care of USD 40tln debt through growth, while he spoke with Johnson and Thune regarding USD 5,000 dividends. Bessent said they have the best-performing bond market in the world and will get to the other side of the energy supply shock, while he added that the Treasury market is in very good shape and term premium is at the lowest differential in many years. Bessent stated regarding the Treasury buyback operation that they didn't buy back as many as he said, because they buy cheap. Pentagon is in talks to get into AI infrastructure funding with a USD 5bln loan: WSJ. Goldman expects a 0.23% increase in August core CPI (vs. +0.2% consensus), corresponding to a year-over-year rate of +2.40% (vs. +2.4% consensus). GS expects a 0.39% increase in headline CPI (vs. +0.4% consensus), reflecting higher energy prices.  Net and gross hedge-fund leverage remains well below this year’s highs, according to our Prime Services desk, suggesting positioning remains relatively cautious. Goldman Prime Brokerage A more detailed look at global markets courtesy of Newqsuawk APAC stocks were pressured with global risk sentiment weighed by a further surge in oil prices and upside in yields, as the geopolitical escalation in the Middle East threatens shipping in the Bab al-Mandab Strait, while there were social media reports citing satellite images that suggested a potential strike by Houthis on Saudi's East-West pipeline. ASX 200 declined amid higher yields, with the Australian 3yr yield at its highest in over 15 years, while Citi revised its call and now sees two more rate hikes by the RBA this year. Nikkei 225 underperformed owing to higher oil prices and yields, while participants also brace for a widely expected BoJ rate hike next week. KOSPI was dragged lower amid tech-related pressure, with notable losses in the industry heavyweights. Hang Seng and Shanghai Comp conformed to the broad risk-off mood in the region, with underperformance seen in miners, while recent comments from PBoC Deputy Lu Lei that they will refine the RRR framework and conduct open-market operations more flexibly and precisely failed to provide inspiration, with today's OMO remaining at an inconsequential amount. Top Asian News The Japanese Trade delegation is reportedly preparing a China visit in September, according to Kyodo. Fitch assigns Softbank (9984 JT) a "BB+" rating; outlook stable. European bourses are modestly firmer this morning (STOXX 600 +0.4%), benefiting from falling energy prices and cooling yields. For the UK specifically, the FTSE 100 (+0.5%) is largely unreactive to a strong GDP reading for July. But ultimately it will have little impact on the BoE next week, which is expected to keep rates on hold. European sectors hold a slight positive bias. Banks, Insurance and Telecoms form the top three; Tech, Basic Resources and Chemicals  underperform. Top European News The French Finance Minister said the government has lowered the 2026 GDP forecast to 0.5% (prev. 0.7%), sees 2027 GDP at 1%, and that debt service costs are seen at EUR 65bln (EUR 4.5bln above original plans). ECB’s Moulin said France is not in economic danger. The heatwaves cost the economy 0.1ppts of growth, and the economy will restart at a moderate pace. BoE/Savanta Quarterly Attitude Survey (Aug): 1-year ahead 3.2% (prev. 4%), 2-year ahead 2.9% (prev. 3.5%), 5-year ahead 3.2% (prev. 3.9%). FX Snapshot: G10s are mixed against the USD this morning. NZD is the clear outperformer, as traders increased their bets of further hikes at the RBNZ, with markets now pricing in four hikes at the Bank. Elsewhere, the CHF lags a touch. USD is steady and trades within a 99.00 to 99.17 range. Thursday saw the release of a mixed PPI report, which ultimately spurred little reaction in the USD. But the Dollar did strengthen in the prior session on account of higher yields. Focus today is solely on the CPI report, which will be a decisive factor into the Fed policy meeting next week. A benign report showing continued progress on underlying inflation would strengthen the case for the Fed to remain on hold, particularly given Waller's stated reaction function. Conversely, a hot report or evidence that disinflation is reversing would likely reinforce expectations for a 25bp hike. EUR is flat this morning and holding within a 1.1595 to 1.1617 range, in the aftermath of the ECB policy decision on Thursday. Thereafter, ECB source reports suggested that officials expect more tightening this year, with the debate potentially as soon as October. As such, sell-side banks have broadly pulled forward their bets of another hike at the ECB; the likes of Citi, Barclays and UBS see another round of tightening in December. Interestingly, Danske Bank believes that the Bank will deliver two 25bps hikes, each in October and December. JPY is slightly firmer this morning, with USD/JPY holding around 154.20, in a 153.96 to 154.61 range. Overnight, a Reuters source report reiterated that the BoJ will raise rates next week, and potentially signal its readiness to speed up hikes. The report, alongside some scaling back of the pressure seen in the prior session, has helped the Yen this morning. The next hurdle for the currency will be US CPI, where a hot report will likely see yield differentials widen once again. GBP is currently flat, but did see some mild upside following a strong GDP report earlier. In July, the UK economy grew 0.4% (exp. 0.00%), largely thanks to a boost in AI. While the data signals economic resilience, it is unlikely to alter expectations for next Thursday’s BoE policy decision. It does, however, provide the MPC’s hawks with ammunition to argue for tighter policy. Fixed Income Global fixed income benchmarks have steadily climbed off earlier lows, as energy prices ease off best levels. USTs (+1 tick) reside at the upper end of its 106-04+ to 106-14+ range, with the US CPI on the docket later today. Yields remain towards elevated levels (US 10yr 4.94%), and a hot inflation report today will likely give the 10-year enough of a reason to breach the 5.00% mark; a level not seen since Oct’23. Bunds (-1 tick) pare some of Thursday's losses, with the 10yr yield holding around 3.50% in the aftermath of the ECB policy meeting and the surge in energy prices. To recap, the ECB meeting was largely as expected, with nothing to significantly shift market pricing as we await further data and energy developments. Thereafter, ECB source reports suggested that officials expect more tightening this year, with the debate potentially as soon as October. Gilts (+28 ticks) opened slightly higher, in line with their peers. Strength which comes amidst cooler energy prices, though despite a strong UK GDP report. The UK economy continues to show resilience despite higher energy prices, with July GDP printing at 0.4% (exp. 0%) while the 3-month average also held steady at 0.4% (exp. 0.3%). Manufacturing and industrial production figures were also solid. This set of data is unlikely to change expectations for the BoE rate decision next Thursday. Australia sells AUD 800mln 2.75% November 2029 bonds: b/c 4.47x, avg. yield 5.0396. Commodities WTI and Brent futures pull back slightly following a week of hefty gains on the back of escalating geopolitics. The downside today comes amid reports that Iran and Gulf states are planning to meet, pushing to iron out a deal for the Strait of Hormuz. Moreover, sources suggested Iran’s Foreign Minister and Pakistan’s Army Chief reportedly discussed ways to restore diplomatic efforts to de-escalate the conflict on all fronts. Talks reportedly focused on the US-Iran war, the possibility of returning to negotiations and Houthi attacks on Saudi Arabia. Modest downside was seen in crude prices after the IEA slashed its 2026 world oil demand forecast. WTI Oct resides in a USD 99.50–104.46/bbl range (vs yesterday’s USD 95.37–104.04/bbl range) compared to Monday’s USD 90.87–94.73/bbl range. Brent Nov trades in a USD 103.85–109.97/bbl range (vs yesterday’s USD 100.19–109.68/bbl range) and compared to Monday’s USD 95.97–98.06/bbl band. Dutch TTF has also pulled back from EUR 83/MWh intraday extremes before finding support just under EUR 80/MWh, oscillating on either side of the level. It’s also worth noting that US diesel prices hit a record USD 6.06 per gallon, with California approaching USD 8 per gallon. Metals are mixed, with precious metals cheering a slight pullback in oil prices, whilst base metals remain capped amid elevated energy levels. Spot gold trades on either side of its 100 DMA (USD 4,336/oz) in a current USD 4,300-4,361/oz range (vs USD 4,433/oz weekly high). 3M LME copper resides in a narrow USD 14,170.78- 14,356.00/t range at the time of writing. IEA OMR: 2026 world oil demand to fall by 2.5mln BPD (vs prev. forecast of a 1.6mln BPD fall), citing impasse in US-Iran talks on resolving their conflict; sees total world oil supply 1.74mln BPD lower than demand in 2026 (vs prev. forecast of 1.27mln BPD lower); now sees full recovery in oil supplies from Gulf producers deferred until 2027; the need for progress in resolving Middle East and Russia-Ukraine conflicts is greater than ever to avoid further oil market tightening. US retail diesel price tops USD 6 per gallon, according to AAA. US Interior Secretary Burgum said every idea is on the table when asked about diesel export controls. China's NDRC raised gasoline and diesel prices by CNY 435/t and CNY 420/t respectively, effective September 11th. Trade/Tariffs Canadian PM Carney said the latest US trade measures against Canada are modest and he reiterated that Canada is always ready to sit down and negotiate with the US. South Korea's PM Han said talks on strategic investment projects with the US are progressing, and that the government will ease regulations and improve conditions for foreign investment. Han added that South Korea does not discriminate against companies based on nationality, and that US strategic investment talks must deliver mutual benefits and commercial returns. Central Banks The French Finance Minister said the government has lowered the 2026 GDP forecast to 0.5% (prev. 0.7%), sees 2027 GDP at 1%, and that debt service costs are seen at EUR 65bln (EUR 4.5bln above original plans). ECB’s Moulin said France is not in economic danger. The heatwaves cost the economy 0.1ppts of growth, and the economy will restart at a moderate pace. BoE/Savanta Quarterly Attitude Survey (Aug): 1-year ahead 3.2% (prev. 4%), 2-year ahead 2.9% (prev. 3.5%), 5-year ahead 3.2% (prev. 3.9%). Geopolitics: Middle East Gulf Foreign Ministers plan to meet with their Iranian counterpart in an effort by Oman and Iran to secure a deal on shipping through the Strait of Hormuz, according to FT. US President Trump said Iran has some missiles, but most were knocked out, while he maybe won't go full into Iran because of the election. Trump also stated that the Iran war will end after the US midterm elections and that Iran is waiting for political change in America. US VP Vance privately sought assessments from US military commanders who warned that the Iran war was draining critical stockpiles of Patriot interceptors and long-range missiles, and could weaken US deterrence against China, Russia and North Korea, NYT reported. It added that commanders told Vance that Iran was more resilient than expected and willing to absorb heavy damage without collapsing, prompting Vance to advise President Trump and become more involved in efforts to end the conflict. US Treasury Secretary Bessent said they are going to sanction a large bank on Monday. Iran’s Foreign Minister and Pakistan’s Army Chief reportedly discussed ways to restore diplomatic efforts to de-escalate the conflict on all fronts, according to sources. The talks were focused on the US-Iran war, the possibility of returning to negotiations and Houthi attacks on Saudi Arabia. Al Jazeera reported the entirety of Yemen’s Red Sea coastline is now under Houthi control. It was later reported that the Houthis captured Dhabab and that Yemeni government forces have reportedly withdrawn from Peim Island. Iranian sources said that Tehran ordered the Houthis last week to intensify attacks on Saudi Arabia and promised to provide more funding, weapons and senior officers, according to Iran International. Furthermore, Yemen military sources said the IRGC directed a recent Houthi campaign along the Red Sea coast. Iranian President Pezeshkian said that he does not support the continuation of the war, and Iran must withstand the coming circumstances so that negotiations with the "enemy" are not under other conditions, Al Jazeera reported. Saudi Crown Prince MBS called President Trump twice on Thursday, urging him to launch strikes against Houthis, but Trump declined, and US officials stressed the administration has no plans to intervene directly against the Houthis for now, according to Axios. Houthis launched a missile attack on southern Saudi Arabia, according to IRNA. UAE is reportedly revising plans for its 5GW AI campus following Iranian attacks, according to sources. Geopolitics: Ukraine The European Commission resumed work on options that could persuade governments in the bloc to approve the use of Russia’s frozen assets for Ukraine, according to FT. US Event Calendar 8:30 am: Aug CPI MoM, est. 0.4%, prior 0.1% 8:30 am: Aug Core CPI MoM, est. 0.2%, prior 0.2% 8:30 am: Aug CPI YoY, est. 3.4%, prior 3.4% 8:30 am: Aug Core CPI YoY, est. 2.4%, prior 2.5% 10:00 am Sep P U. of Mich. Sentiment, est. 51, prior 51.7 2:00 pm: Aug Federal Budget Balance, est. -211.1b, prior -344.79b DB's Jim Reid concludes the overnight wrap It's hard to believe it but it's 25 years today since the attacks of 11 September 2001. I was on holiday in Spain at the time and watched the events unfold on a small television in disbelief. I remember the horrendous shock of seeing the towers that I had visited clients in only weeks before collapse. I also remember selfishly wondering how I would get home, whether people would ever work in high-rise buildings again, and feeling that the world was going to change forever. Time tends to push life back towards normality more quickly than you expect. Yet it's also fair to say that many of the geopolitical forces shaping the world today can be traced back to those attacks. And with no obvious end to the US-Iran conflict in sight, markets continued to slump yesterday as fears about stagflation cascaded across multiple asset classes. Yet again, the main driver was a big jump in energy prices, with Brent crude surging above $107/bbl, whilst European natural gas (+3.53%) hit its highest level since 2022. So that led to mounting speculation about faster rate hikes, while a hawkish ECB decision and a smaller-than-signaled Treasury buyback then gave the selloff even more momentum. As a result, the relentless rise in yields showed no sign of easing, with Germany’s 2yr yield (+16.6bps) posting its biggest daily jump since the debt brake reform announcement 18 months ago, while 10yr Treasury yields (+12.2bps) neared the 5% level. So it was another terrible day for bonds, and that put further pressure on risk assets too, with the S&P 500 (-0.58%) posting a 4th consecutive decline for the first time since June. The cross-asset sell off has continued into Asian markets this morning, with the Nikkei (-2.24%) and KOSPI (-1.85%) sharply lower and 10yr JGB yields +6.7bps higher even as 10yr US yields, US equity futures and oil are fairly stable as we await today's important US CPI.   Once again, it is geopolitical fears driving everything. In terms of the latest Middle East headlines, yesterday saw growing concerns over the safety of Red Sea shipping, and the potential knock-on effects for Saudi oil exports, as Houthi rebels captured Yemen’s port city of Mokha, which is located close to the Bab el-Mandeb Strait on the southern end of the Red Sea. The mood also wasn’t helped by news that Saudi Arabia’s oil output has fallen to its lowest since 1990. Beyond that, investors continued to digest the newsflow over recent days which has suggested that the Strait of Hormuz would not reopen anytime soon. For instance, President Trump’s own remarks on Wednesday night suggested he thought the war was going to end after the midterm elections in November. Meanwhile, a WSJ report we mentioned yesterday said that White House advisers had privately raised the prospect with Trump that the war could continue for the rest of his term. With no signs of de-escalation, investors faced up to a longer closure of the Strait of Hormuz, and oil prices saw a relentless surge higher. For instance, Brent crude (+6.34%) ended the session at $107.63/bbl, its highest level since May, whilst WTI (+6.69%) was also up to $102.48/bbl. Moreover, the entire oil futures curve moved higher, with the 6-month Brent future (+3.21%) also at its highest since May, at $88.85/bbl. So it was clear investors are pricing a more protracted period of high energy prices. And the tightness has been even more pronounced in refined product markets, with US wholesale diesel prices trading within 1% of their 2022 peak this morning.   That backdrop was cemented by the ECB’s latest decision, which had several hawkish elements. They delivered a 25bp rate hike as expected, taking their deposit rate up to 2.50%. But the statement had a new line that “inflation is set to remain well above target for an extended period”, and ECB President Lagarde called the hike “a no brainer”. In addition, their latest forecasts also moved hawkishly, with both inflation and growth upgraded for the years ahead. Most notably, the 2028 core inflation forecast was revised up two-tenths to +2.3%, so price pressures are seen staying visibly above the 2% target throughout the forecast horizon. The statement language on growth and the labour market was also more upbeat. To be fair, ECB President Lagarde’s Q&A didn’t really reinforce the hawkishness, as she said that the Governing Council was not taking a view on the direction of policy going forward and avoided endorsing market pricing. However, this did little to stem the hawkish market repricing which then extended further after a Bloomberg sources story reported that another ECB hike was possible as soon as October, even if December may prove more appropriate. This left money markets fully pricing another three hikes from the ECB over the next year. Still, our European economists’ maintain their call for only one more hike in December to 2.75%, as further hikes may be difficult to justify when there is no evidence of second round effects.  The combination of higher energy prices and a hawkish ECB put fresh pressure on sovereign bonds across the board. In Europe, that was particularly clear at the front end, with Germany’s 2yr yield (+16.6bps) up to 3.23%, marking its biggest daily jump since March 2025 when the debt brake reforms were announced. That was clear further out the curve too, with the 10yr bund yield (+5.6bps) finally exceeding its Euro crisis high in 2011 to close at 3.50%, a level last seen in 2009. And there were even bigger selloffs in other European countries, with France’s 10yr OAT yield (+9.8bps) reaching a post-2008 high of 4.44%, whilst the UK’s 10yr gilt yield (+11.2bps) hit a post-2007 high of 5.37%. For the US it was much the same story, amidst mounting speculation that the Fed would hike rates next week. Indeed, futures raised the probability of a September hike from 60% on Wednesday to 72% by last night’s close. And looking further out, 85bps of hikes are now priced in by the July 2027 meeting, so that means at least 3 hikes are fully priced in over the next year. In turn, Treasury yields surged higher, with the 2yr yield (+15.5bps) rising to 4.59%, its highest since July 2024, whilst the 10yr yield (+12.2bps) rose to 4.96%, the highest since October 2023. And notably, the 30yr yield (+7.6bps) reached its highest since 2007, at 5.36%. Later in the session, the performance of Treasuries wasn’t helped by news that the US Treasury bought back $5.19bn of long-dated debt, falling short of the $6bn maximum it had announced on Wednesday.    As all that was happening, we did get the latest US PPI inflation print for August. That showed headline PPI up +0.4% on the month, with the July print revised up a tenth to +0.1%. So that pushed the year-on-year reading up to +5.4% (vs. +5.3% expected). But significantly, the components that feed into PCE came in on the stronger side, which cemented the view that the Fed would end up hiking next week. Meanwhile today, we’re set to get the CPI print at 13:30 London time, which is the last big release ahead of the Fed’s decision. Our US economists expect higher gas prices to boost the headline number, with monthly CPI at +0.38% in August, which would keep the year-on-year rate at +3.4%. Meanwhile for core, they expect a relatively softer +0.21% monthly print, which would see the year-on-year number fall a tenth to +2.4%.   All this took a toll on equities, as fears of stagflation and more rate hikes led to fresh declines. In the US, that meant the S&P 500 (-0.58%) fell for a 4th consecutive session, taking the index to a fresh one-month low. Matters weren’t helped by a sharp slump for chip stocks, with the Philly semiconductor index (-2.66%) falling back after 5 consecutive gains. But the decline was still broad-based, with two-thirds of the S&P 500’s constituents moving lower on the day. Then in Europe, the STOXX 600 (-0.69%) fell to a two-month low, with further declines for the DAX (-0.84%) and the CAC 40 (-0.49%) as well.   Coming back to Asia, and as mentioned at the top the Nikkei (-2.24%) and the KOSPI (-1.85%) are leading the declines. Elsewhere, the Shanghai Composite (-1.82%), the CSI 300 (-1.59%), the S&P/ASX 200 (-1.00%) and the Hang Seng (-0.85%) are also sharply lower. S&P 500 futures (+0.20%) are edging back up with the Nasdaq equivalent and European futures fairly flat. Early morning data showed that Japan’s business sentiment index for large corporations across all industries has turned positive for the first time in two quarters (at 5.3). Manufacturers posted +7.6, driven by strong demand for semiconductor manufacturing equipment and other production machinery amid expanding AI and data center investment. Separately, the PPI slowed slightly in August but remained close to its highest level in over 3-½ years as high energy costs and a weak yen factored into rising business costs. The PPI grew +7.6% year-on-year in August, higher than expectations of +7.4% but cooled slightly from the +7.7% print seen in July, which was revised up from +7.2%. Looking at the day ahead, the main data highlight will be the US CPI print for August. Otherwise, we’ll get the University of Michigan’s preliminary consumer sentiment index for September, and the UK’s monthly GDP reading for July. Meanwhile, central bank speakers include ECB President Lagarde, and the ECB’s Lane. Tyler Durden Fri, 09/11/2026 - 08:28

More Than 62,000 Arrested For Speech-Related Offenses In Britain, Report Finds Via American Greatness, More than 62,000 people were arrested in Britain for communications offenses over a five-year period, according to a new civil liberties report warning that the country's increasingly broad speech restrictions are having a chilling effect on free expression. Big Brother Watch found that 62,199 people were arrested between 2021 and 2025, amounting to roughly 34 arrests per day. At least 18,500 people were charged and 12,292 were convicted, according to the organization. The findings were based on Freedom of Information requests to police forces across the United Kingdom. Big Brother Watch said the actual number of arrests could be higher because some forces did not provide complete data. The report examined enforcement of communications laws that can cover threatening or grossly offensive messages and other online content. Big Brother Watch argues that broadly written statutes have resulted in people being investigated or arrested over controversial social media posts, jokes and other forms of expression. The group also found stark geographical differences in enforcement. Cumbria Constabulary recorded about 25.7 arrests per 10,000 residents over five years, compared with just 1.9 in neighboring Northumbria. Big Brother Watch described the disparity as a "postcode lottery" that raises concerns about whether speech laws are being enforced consistently. The report follows growing scrutiny of Britain's Online Safety Act, which imposes extensive content and child-safety requirements on internet platforms. Big Brother Watch says the law has encouraged platforms to restrict lawful material and require age verification for some online content. Silkie Carlo, director of Big Brother Watch, called for an independent review of Britain's speech laws and police practices. "Thousands of people are being arrested for controversial speech, online jokes and non-violent protest," Carlo said. "Enough is enough." The organization argues the figures demonstrate that Britain's approach to policing speech needs significant reform, particularly when arrests do not ultimately result in criminal charges. Big Brother Watch is now calling on the government to conduct a national review of laws affecting freedom of expression and to reconsider police training on speech-related offenses. Tyler Durden Fri, 09/11/2026 - 07:45

US Agencies Accuse China-Based AI Firms Of 'Malicious' Copying Of American Models Federal cybersecurity and intelligence agencies on Tuesday accused six China-based artificial intelligence companies of running industrial-scale campaigns to extract proprietary features from leading U.S. models. DeepSeek, Moonshot AI, Alibaba, MiniMax, StepFun, and Z.AI were all named in the joint advisory. Officials alleged the companies, "likely with Chinese government awareness," pulled billions of tokens across millions of requests from U.S. AI systems. The list included variants of Claude, GPT, Gemini, and Grok. The activity dates back to at least late 2024. Cybersecurity and Infrastructure Security Agency (CISA) Acting Director Nick Andersen said that CISA is committed to promoting the secure use of AI. "We strongly urge AI companies to take immediate steps to safeguard their platforms against knowledge distillation campaigns that threaten to close the gap in advancements made by American companies," Andersen said. As Kimberly Hayek reports for The Epoch Times, knowledge distillation is a standard research method where a smaller model learns from the outputs of a larger one. The three agencies - CISA, the National Security Agency, and the FBI - differentiated legitimate research from "aggressive, malicious, and targeted distillation activities at an industrial scale." The advisory said the firms routed traffic through native application programming interfaces (API), remote cloud providers, and third-party aggregators that strip user metadata. A gray market of proxies, referred to as "transfer stations," helped them dodge geographic blocks, break terms of use, and muddy the trail. Bulk premium subscriptions, shared across developer teams, kept the bills down. DeepSeek, formally Hangzhou DeepSeek Artificial Intelligence Basic Technology Research Co. Ltd., has run an organized campaign since at least late 2024, according to the agency, to feed synthetic training data into its R1 and V3 models. Targets included Claude 3.7, Claude Sonnet 4 and 4.5, Claude Opus 4.1, Gemini 2.5 Pro and Flash previews, GPT-4, GPT-4o, GPT-5, and Grok 4. Officials called DeepSeek's widely cited $5.6 million training figure misleading, saying it leaves out the cost of data taken through distillation. Moonshot AI, or Beijing Moonshot Technology Co. Ltd., was accused of a broad campaign since at least mid-2025. The advisory said the firm pulled substantial Claude Fable 5 data for its Kimi-K3 model and GPT-4o data for Kimi-K2. The new advisory recommends three steps for U.S. model providers, including hunting anomalous prompts, accounts, and usage spikes; quietly degrading answers when a distillation campaign is suspected; and sharing intelligence across companies, clouds, and API aggregators. In July, Office of Science and Technology Policy Director Michael Kratsios said his office had reason to believe Moonshot AI "distilled Anthropic's Fable for the development of its K3 model." "Large-scale, covert industrial distillation aimed at stealing proprietary U.S. technology and undermining American research is unacceptable," Kratsios said. Alibaba, the agencies contended, distilled Claude-4, Claude Opus, Claude Sonnet, and GPT-5 in late 2025 to hasten software engineering, customer-service dialogue, and image creation for its Qwen family of models. MiniMax, or Shanghai MiniMax Co. Ltd., used Claude Code, Claude Sonnet 4, Claude Opus, and several Gemini versions to improve its M2 model. Officials said MiniMax even attempted prompt injections to convince Claude Code it was actually a MiniMax product. StepFun distilled a string of Claude and GPT-5 variants between late 2025 and early 2026 for its Step 4 model. By mid-2026, Z.AI had taken billions of tokens of GPT-5.5 and Claude Opus 4.8 data for chain-of-thought reasoning, the advisory said. On April 23, a White House memo warned of "industrial-scale campaigns" employing "tens of thousands of proxy accounts" and jailbreaking tricks. "There is nothing innovative about systematically extracting and copying the innovations of American industry," Kratsios wrote at the time. "And there is nothing open about supposedly open models that are derived from acts of malicious exploitation." The memo also said the campaigns "allow those actors to deliberately strip away security protocols from the resulting models and undo mechanisms that ensure those AI models are ideologically neutral and truth-seeking." Anthropic, the maker of Claude, said in February that DeepSeek, Moonshot AI, and MiniMax created about 24,000 fraudulent accounts and sent more than 16 million prompts to Claude. MiniMax accounted for more than 13 million, Moonshot AI more than 3.4 million, and DeepSeek about 150,000, according to the company. Treasury Secretary Scott Bessent said he is open to sanctioning Chinese AI developers over alleged model theft. "This administration supports open-source models, but what we do not support is IP theft," Bessent said in July. "If we see, especially, that overseas models are stealing from our great companies, we have the ability to sanction them because of this theft." "There's a very technical AI word for it called distillation, but you and I would call it theft." CISA, the National Security Agency, and the FBI said the effort sits at the center of those firms' development plans. Tyler Durden Fri, 09/11/2026 - 06:55