Gulf conflict escalates, oil prices rise, supply chains under pressure

On Tuesday (2026-10-13) U.S. stocks were almost flat: SPY fell 0.01%, QQQ fell 0.33%, QQQ has fallen 2.12% over the past 5 trading days. Today's new development occurred in the Gulf: an Aramco office building was attacked, while the Saudi-led coalition struck a fuel depot in Yemen, and the conflict spread from airports to energy facilities.

The Gulf conflict shifted from "being hit" to "fighting back"

Beijing time early on 14, a senior official at the Saudi Energy Ministry said that an administrative office building belonging to Aramco in al-Zahran in the Eastern Province was attacked; no one was injured, a small fire broke out, and the relevant departments have handled the situation. After the news, WTI crude futures rose 1.18%, to 95.25 USD/barrel; Brent crude futures rose 1.20%, to 106.96 USD/barrel. The target hit was only an office building and reports did not mention any capacity damage, yet prices still rose. The market is pricing in "where the next target will be."

At the same time, the Saudi-led coalition struck a fuel depot near Sanaa, the capital controlled by the Houthis, and missiles and drones were subsequently intercepted over Riyadh. On 13 Trump said on social media that the Houthis attacked Saudi Arabia using "very nasty" methods. A Saudi minister also vowed on 13 to "respond harshly" to the Houthi attack on the airport. Riyadh airport has been under attack since Saturday, and Saudi authorities reported 12 people killed and more than 300 injured. The new change here is that Saudi Arabia has moved from passively absorbing attacks to actively striking back; with each side responding, the situation is more prone to escalation. There have been 16 Houthi-related new incidents in the most recent 7 days, compared with only 5 in the prior 7 days.

The Bab el-Mandeb Strait for Red Sea exports also deserves attention. As of October 4, the seven-day average daily tanker transits was 9.0 vessels, compared with the pre-war normal of 11.8 vessels, about 76% of normal. The Houthis can both threaten Red Sea shipping lanes and strike into Saudi territory, putting risk on both routes and producing regions. On Tuesday the energy sector responded by strengthening: XOP rose 2.85%, energy-sector ETF VDE rose 1.83%, UNG rose 4.49%, while SPY was basically unchanged. Money is currently rotating within the energy sector only; the broader market has not yet treated this as a factor dragging the whole market down.

Another thread is Russia. On Sunday Trump announced a Russia-Ukraine energy ceasefire and warned "do not break it," and within hours a drone struck a power plant in Kyiv; Putin ignored it. The U.S. side then turned to pressuring Kyiv: Zelenskiy said in an interview that the Trump administration warned it might cut off intelligence support to Ukraine.

Meanwhile, U.S. diesel hit a record high in September, and Trump urged Russia to release more diesel to the market. As of October 5, the U.S. retail average diesel price was 6.199 USD/gallon, which is 0.232 USD higher than 5.967 USD four weeks earlier. The context of this diesel flow is the ceasefire, which is already effectively dead. With both Gulf and Russian supply lines unstable, the 10-year U.S. Treasury yield remained at 5.21% on October 13, and the high-cost environment has not eased.

Other things worth knowing

The market maker group at the Beijing Stock Exchange is expanding faster. The China Securities Regulatory Commission recently approved Shanxi Securities' qualification as a BSE stock market maker; five securities firms have obtained the qualification this year, bringing the total to 28, and several more are in the queue. Market makers continuously quote prices and stand ready to take orders; with them, illiquid stocks are easier to trade, and public funds and other institutions can allocate with more confidence.

The International Monetary Fund said that the economies of the U.K. and India will surpass Japan. The same institution also warned this week of three risks: an AI-driven market correction, war, and debt. The global economic ranking is changing, and many risks loom overhead.

Tracking the oil shock

This round of supply shock is still ongoing. The amount by which Brent spot is more expensive than futures has averaged 21.6 USD/barrel over the past 5 days, compared with only 4.5 USD/barrel about a month ago—a clear widening. Tanker transits through the Strait of Hormuz as of October 4 remain only 1.9% of the pre-war normal. The futures curve spread from the near month to the sixth month narrowed from 14.9 USD/barrel to 10.8 USD/barrel.

Today's logic: existing home sales beat expectations—why isn't that good news?

Existing home sales count houses that have completed closing; buyers typically signed contracts one or two months earlier, so the data reflects decisions made under older interest rates. To give an analogy, it's like a dish ordered last month only being served today.

Today's example is the existing home sales released on Tuesday: the number beat expectations, but analysis can argue that this report may already be out of date and does not reflect current mortgage rates. Freddie Mac's report shows the 30-year mortgage rate has risen to 7.03%, breaking above 7%; buyers signing new contracts face heavier monthly payments. Some reports say existing single-family home sales are still sitting near the late-2023 bottom, and inventory is at an 11-year high. Other data show that usage of adjustable-rate loans is expanding, and buyers are taking more aggressive loan structures to absorb rates. When monthly payment pressure accumulates to a certain point, it transmits into delinquency risk, and then into high-yield debt.

How the ETF Radar model sees it

First look at BNO, a fund that tracks Brent crude. BNO actually rose 5.12% over the past 5 trading days (about one week). The ETF Radar model's directional view for the next 1–3 months is mildly positive.

The model's direct basis lies on the Russia thread: the Russian central bank on September 11 kept the benchmark rate at 14% and mentioned that capacity in some industries has temporarily declined, which is evidence of constrained supply. The Gulf attacks are only background in the same direction, not the model's basis. On positions, CFTC data show speculative net long positions of 53,598 contracts, with longs still dominant, but reduced by 25,994 contracts in the most recent week—sentiment is cooling. The uncertainty is that BNO has already risen 39.91% in this move while SPY rose only 2.85% in the same period; the gain is already substantial. The maximum drawdown within the window is 15.21%, and there were 61 related reports in the past 5 days versus only 17 in the prior 5 days—crowding risk is present.

Next look at HYG, a high-yield bond fund. HYG actually fell 0.23% over the past 5 trading days (about one week). The ETF Radar model's directional view for the next 1–3 months is mildly negative. This logic connects directly to today's mortgage story: mortgage rates rising to 7.03% tighten household monthly payments, and the credit risk of issuers that depend on consumption rises accordingly. The high-yield credit spread, i.e., the extra interest these companies pay over Treasuries, was 3.11% as of October 12, widening by 0.40 percentage points over the past 20 trading days. On flows, there were net redemptions of about 572 million USD beginning October 7, accounting for 3.23% of assets. Offsetting factors are that bond market volatility index MOVE is 101, not extreme, and heavy short positions leave room for a rebound; the upcoming CPI could still rewrite rate expectations.

Finally, SIL, a silver miners equity fund. SIL actually fell 2.91% over the past 5 trading days (about one week), and fell another 2.27% on Tuesday alone. The model's 1–3 month directional view is mildly negative. This is not directly related to today's main thread; it's the model's independent medium-term judgment. The 10-year real yield, i.e., the yield after inflation, was 2.91% as of October 9, up 31 basis points over the past 20 trading days. The higher the rate, the less attractive it is to hold non-yielding silver and mining stocks. Flows were net outflows of 2.76% over the past 5 days and cumulative outflows of 5.41% over 30 days. Option implied volatility is at the 2nd percentile of its own history and option prices are very cheap, indicating the market is not pricing much for a large drop. Note that if the Gulf situation heats up and triggers safe-haven demand, or if CPI comes in lower than expected and real yields fall, this judgment must be re-tested.

Summary

Today's new development is that the Gulf conflict has shifted from one-way strikes to mutual strikes between the Saudi-led coalition and the Houthis, and crude prices rose accordingly, while the Russia-Ukraine energy ceasefire has been broken. U.S. CPI is about to be released and rate expectations could be revised again. A reminder again: the above are system quantitative model directional forecasts for general markets and do not constitute personalized investment advice; consult a licensed investment advisor before investing.