Markets are treading carefully this week, caught between progress and paralysis. On one side, a long-sought U.S.-brokered ceasefire in Gaza offers a glimmer of stability after two years of unrest. Oil prices tumbled below $60 as traders priced out the geopolitical risk premium that’s hovered since 2023. For a moment, the diplomatic triumph felt like a true reset.
But that optimism quickly collided with fresh uncertainty at home and abroad. In Washington, a government shutdown has silenced the flow of crucial economic data, leaving the Federal Reserve and investors alike flying blind. Overseas, U.S.-China trade tensions have reignited, with Trump threatening new tariffs and the cancellation of his planned APEC meeting after Beijing tightened rare-earth export controls.
The result is a market in a suspenseful balancing act, as the world continues to test how calm can coexist with confrontation. For now, peace and effective policy both seem fragile, fleeting, and capable of shifting sentiment in a heartbeat.
Peace in the Middle East?
The first phase of a U.S.-brokered ceasefire in Gaza, spearheaded by President Donald Trump, took effect at 12 p.m. local time, on Friday October 10th. This agreement between Israel and Hamas includes hostage releases, partial Israeli military withdrawal, unrestricted humanitarian aid entry, and the destruction of Hamas’s military infrastructure, with aims for a permanent peace. While hailed as a potential turning point after two years of conflict, its financial repercussions are unfolding amid broader global uncertainties.
The deal is poised to alleviate geopolitical risks that have plagued markets since October 2023. Reduced tensions in the Middle East could stabilize energy supplies, easing inflationary pressures and bolstering investor confidence. Regional markets, particularly in the Gulf, may see rallies. Globally, however, impacts appear modest and transitory. U.S. equities, driven by AI advancements, are largely insulated, with analysts predicting negligible direct effects. Bond yields may ease slightly as safe-haven demand wanes, supporting emerging market debt.
Oil prices are already reacting decisively. Brent crude plunged over 3% to below $60 per barrel on October 10, erasing a multi-month risk premium built on fears of supply disruptions. The ceasefire signals de-escalation, shifting focus to oversupply from U.S. shale and OPEC+ output. Weekly losses exceed 2%, with WTI following suit at a 1.6% drop. This benefits consumers and airlines but pressures energy producers’ earnings. If the deal expands to Lebanon or Iran, further declines to $55 are possible; conversely, any fragility could reverse gains swiftly.
Shutdown and Shut Out
The US federal government shutdown, now in its second week, has triggered a critical blackout in economic data releases, exacerbating uncertainty at a pivotal moment for policymakers and investors. Sparked by partisan gridlock over spending bills, the closure has furloughed thousands at agencies like the Bureau of Labor Statistics (BLS) and Bureau of Economic Analysis (BEA), halting key reports such as the October jobs survey, consumer price index (CPI), and producer price index (PPI). This “data drought” comes amid the Federal Reserve’s rate deliberations, potentially delaying insights into labor market health and inflation
trends that could influence further cuts. Economists warn of ripple effects without timely data, as businesses may hoard cash, consumers could curb spending, and GDP estimates might skew for Q4. The shutdown’s fiscal drag—estimated at $6 billion daily—could amplify if prolonged beyond mid-October.
Fortunately, indicators from late September offer a pre-shutdown snapshot of a resilient yet decelerating economy. The FOMC’s September projections pegged 2025 GDP growth at 1.6%, down from 2.1% earlier forecasts, signaling below-trend expansion amid softening demand. Q2 current-account deficit narrowed sharply to $251.3 billion, a 42.9% drop, buoyed by export rebounds and service surpluses. Retail inventories held steady at $809.4 billion in August, hinting at balanced supply chains despite tariff jitters. Consumer sentiment, per the latest University of Michigan survey, ticked up slightly to 70.5, reflecting optimism from Fed’s 25-basis-point cut in September and cooling inflation to 2.4% core PCE. Yet, leading indicators from The Conference Board point to manufacturing slowdowns amid high interest rates lingering. Overall, these metrics paint a “soft landing” in
progress with unemployment stead, wage growth moderating, but also with signs of heavy consumer debt at a record $17.8 trillion.
While the market seems to be shrugging off the US Government shutdown, it took a blindsided 2X4 to the head Friday morning as trade rhetoric between the US and China ratcheted up. The flashpoint is President Trump’s abrupt cancellation threat of his planned APEC summit meeting with Xi Jinping, citing China’s new restrictions on rare earth exports essential for U.S. tech and defense sectors. Trump also threatened to impose additional tariffs on Chinese goods, escalating from the existing 10% baseline, potentially disrupting $500 billion in bilateral trade. This posturing, ahead of November’s APEC in South Korea, could spike safe-haven demand for Glod, the USD and Treasuries, continue pressure on tech stocks, and inflate commodity prices if supply chains snag.
The Dow plunged more than 800 points on the session, with the S&P 500 and Nasdaq down 2.7% and 3.56%, respectively, and the VIX spiking above 22 during the session, its highest since July.
Market Movers
Geopolitically, the renewed breakdown in U.S.-China trade negotiations looms large, overshadowing economic data and risking broader risk-off sentiment. Overall, inflation data will test the Fed’s 2% target amid shutdown fog, while U.S.-China friction risks derailing the risk-on rally. Expect VIX spikes above 20, with diversified portfolios favoring gold and yen hedges. Resolution on trade or shutdown could unlock the bulls and put risk back on the table. Nothing is more important to a risk on market than progress between the US and China.
This Week’s Major US Economic Reports & Speakers
Monday, October 13
12:55 pm Philadelphia Fed President Anna Paulson speaks
Tuesday, October 14
6:00 AM NFIB optimism index
8:45 AM Fed governor Michelle Bowman speaks
12:20 PM Fed Chair Jerome Powell speaks
3:25 PM Fed governor Christopher Waller speaks
3:30 PM Boston Fed President Susan Collins speaks
Wednesday, October 15
8:30 AM Empire State manufacturing survey
12:10 PM Atlanta Fed President Raphael Bostic speaks
12:30 PM Fed governor Stephen Miran speaks
1:00 PM Fed governor Chirstopher Waller speaks
2:00 PM Fed Beige Book
Thursday, October 16
8:00 AM Richmond Fed President Tom Barin speaks
8:30 AM U.S. Retail sales*
8:30 AM Retail sales minus autos*
8:30 AM Producer price index*
8:30 AM Core PPI*
8:30 AM PPI year over year*
8:30 AM Core PPI year over year*
8:30 AM Initial jobless claims*
8:30 AM Philadelphia Fed manufacturing survey
9:00 AM Fed governor Stephen Miran speaks
9:00 AM Fed governor Christopher Waller speaks
10:00 AM Business inventories*
10:00 AM Home builder confidence index
10:00 AM Fed governor Michelle Bowman speaks
12:45 PM Richmond Fed President Tom Barkin speaks
4:15 PM Fed governor Stephen Miran speaks
4:30 PM Richmond Fed President Tom Barkin speaks
Friday, October 17
8:30 AM Housing starts*
8:30 AM Building permits*
8:30 AM Import price index*
8:30 AM Import price index minus fuel*
9:15 AM Industrial production*
9:15 AM Capacity utilization*
* Data subject to delay if government shutdown continues
Disclosures:
All data sourced from Bloomberg as of October 10, 2025, unless otherwise cited.
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