Global Markets Brace for Fed Rate Hike Amid Oil Surge and AI Fears

Global markets opened with a mixed sentiment, influenced by rising oil prices, elevated US bond yields, and ongoing concerns surrounding AI safety. Oil prices continued their ascent, driven by reports of new attacks by Houthi rebels on Saudi Arabia and Iranian strikes on ships in the Gulf. Brent crude traded around $107 a barrel, with West Texas Intermediate at approximately $102.

Asian markets showed a mixed performance, with Tokyo's Nikkei rising about 0.4% while Hong Kong, Shanghai, and Seoul experienced slight declines. This followed disappointing Chinese retail sales data for August, which grew 0.4%, falling short of expectations.

Wall Street closed lower overnight, with the Nasdaq down 0.6%, the S&P 500 off 0.5%, and the Dow Jones down 0.3%. Key factors contributing to the negative sentiment included the debate over AI safety and calls to slow its development, alongside rising oil prices and high bond yields. The ten-year Treasury yield briefly surpassed 5%, a level not seen since 2023.

Semiconductor stocks led the decline on Wall Street, with the SOXX ETF falling over 5%. Conversely, cybersecurity stocks surged, with the CIBR ETF gaining about 6%, as investors perceived increased relevance for the sector amid AI risks. Investors are now keenly awaiting the Federal Reserve's interest rate decision, widely expected to be a quarter-point hike, bringing the rate to 4%. The focus is on whether Fed Chair Jerome Powell will signal further increases.

In Israel, the shekel weakened by about 0.3% against the dollar, trading around 3.03. The Tel Aviv Stock Exchange closed with minor changes, though technology and cleantech indices fell. Conversely, banking and insurance indices saw gains. Local chip stocks like Tower and Nova mirrored the global trend, declining due to negative sentiment in the sector. Arad Industries saw a significant jump of over 12% following business developments for its subsidiary.