Wed., Oct. 28, 2026
[4:10 PM ET…closing prices for stocks, 3:50ish for commodities and bonds]
Tale of the Tape at the gas pump, nationwide averages, courtesy of AAA.
Fri., Feb. 27…regular $2.98…diesel $3.75
Wed., Oct. 28…regular $4.24…diesel $6.34
Crude oil was rising late last night on both the Israeli election results, which I detail below and a Wall Street Journal report that the U.S. has told several Gulf Arab countries to be prepared for a short, intense military campaign after the U.S. midterm elections.
Crude was then trading above $102 and $103 early this afternoon; Brent $115. Heating oil futures back over $4.80.
The communications through diplomatic and military channels are among a growing number of indications that the U.S. and Israel are readying to launch a new round of heavy combat operations against Iran, risking a major escalation in hopes of degrading Tehran’s strength and pushing it toward negotiations.
The U.S. military is sending an additional Patriot system to Israel to beef up its defenses in the country. And the U.S. has moved troops off bases in the Middle East where they were vulnerable in preparation for an escalation.
U.S. forces in the region have been restocking their munitions, and bomber aircraft and jet fighters are preparing for strikes, officials told the Journal. An additional aircraft carrier strike group and Marine expeditionary unit are also poised to join an armada of roughly 20 other warships operating in the Middle East next month, although some ships could rotate out.
Separately, the Houthis claimed a missile strike on Saudi Arabia’s largest oil refinery, although Saudi authorities had not confirmed the attack.
Meanwhile, Qatari mediators presented Tehran with a new draft proposal to end the war involving the U.S. and Israel. However, an Iranian official dismissed the ideas as unacceptable, leaving the prospects for a settlement uncertain. Iran’s foreign minister did post on X this afternoon that Iran is still open to negotiations.
Israeli Election
As noted above, the election results are critical to what happens in Iran and oil prices. And as the votes trickled in, Prime Minister Benjamin Netanyahu appears to have survived yet again, doing better than was widely predicted, with his Likud emerging as the largest single party.
As I go to post, Likud’s bloc was projected at around 54 seats, and the opposition bloc at 49. Arab parties were predicted to reach a combined seat total of 19, complicating efforts to form a coalition.
Final turnout came out as 77.7%, up 7% from the 2022 election.
Netanyahu’s existing bloc with ultra-nationalist and ultra-Orthodox Jewish parties appear to be just short of a 61-seat majority in the 120-seat parliament (Knesset).
In Israel’s fragmented political system, the signs are that Netanyahu’s main rival, the former army chief Gadi Eisenkot, would struggle to command a parliamentary majority without parties led by Israel’s Arab minority.
But on the campaign trail, most Jewish opposition parties pledged not to work with Arab-majority lists, citing a lack of shared values.
Nonetheless, Israel’s Arab-led parties could emerge as kingmakers if others were prepared to join forces with them. In this election, Arab Israelis – who often identify as Palestinian citizens of Israel and represent one-fifth of the population – appeared to turn out in unprecedented numbers.
The prospect of a unity government involving Netanyahu and Eisenkot has appeared unlikely, as Eisenkot has rejected serving under Netanyahu, including in a rotation government.
Remarkably, the past four turbulent years do not appear to have significantly changed voting patterns.
The leaders of the bigger parties typically try to win over smaller ones with promises of cabinet positions, budgets or specific policies.
Short of pursuing a unity government, this might be the only option for Netanyahu – but the opposition parties fought this election on a platform of “anyone but Netanyahu.”
So, what happens now? After the final results are presented to Israel’s largely ceremonial president, Isaac Herzog, next week, he will consult all the leaders of elected parties and ask the candidate who appears most likely to form a coalition to do so.
If that candidate is unable to pull together a majority within a maximum of six weeks, then others could be allowed to try.
If, after all the haggling, no one is able to form a governing coalition, a new election will be held in the following months (about six), and the entire process will be repeated.
In the meantime, Netanyahu’s government stays on in a caretaker role but without the authority to enact major policy changes.
Regarding this prospect, Eisenkot said Tuesday night, that while Netanyahu is caretaker, he had lost public support and urged him to retire from politics. He also issued a warning that Netnyahu might use security for political ends.
“I call on the heads of the security establishment and the civil service: Netanyahu is a caretaker prime minister, without a mandate or the people’s trust,” he said.
“Remember that you serve only the state and the interests of Israel’s citizens. Stand firm in the face of any attempt to challenge you. You have my unequivocal backing. Netanyahu, do not dare use Israel’s security for your political needs.”
For his part, in his ‘victory’ speech, Netanyahu said:
“Israel faces a singular historical opportunity, together with our partner President Trump, to remove the existential threat of Iran once and for all. But ulterior motives must not divert us from this sacred mission,” he said.
Trump, who had called on Israeli voters to keep Netanyahu in power so they could “finish the job” in Iran, said Netanyahu had done “very well” thanks to his own endorsement.
—
As for the Federal Reserve’s decision on interest rates today…the FOMC left rates unchanged, as expected. It was always about not moving a week before the midterm elections. I said that months ago and never wavered. The vote was 10-2, as in two dissenters.
From the Fed:
“The Committee decided to maintain the target range for the federal funds rate at 3-3/4 to 4 percent, in support of the Federal Reserve’s dual mandate. The Committee is continuing its policy of maintaining ample reserves in the banking system.
“Economic activity is expanding at a strong pace. While uncertainty remains elevated owing, in part, to geopolitical developments, domestic spending has been resilient. Productivity growth is strong, and capital investment is robust. Job gains have kept pace with the workforce, and the unemployment rate has changed little.
“Inflation remains elevated. The accumulation of more information will help the Committee determine the policy stance appropriate to ensure a timely return of inflation to the Committee’s 2 percent goal. The Committee will deliver price stability.”
As for Chair Warsh’s press conference, I will have a lot of say in my next “Week in Review.” I need time to distill my own message, which I think will be a bit out-of-the-box.
But here’s a preview. For the purposes of this column, given the time constraints (it’s already 3:10 PM ET), the statement I focused on was “The period ahead of us is information rich.”
This is all about a potential re-escalation in Iran, with consequences we cannot know, today, and the midterm elections. IF the Democrats do as well as most pollsters say they will, Kevin Warsh sure knows that the man in the White House is rather volatile. Donald Trump has said he might contest the election. He’s been clear about that. He’s already doing it. And he has a track record, see also Jan. 6.
HOWEVER, what just happened in Israel teaches us something. Pollsters got it wrong in that election. And as was shown in 2024, and in other past U.S. elections, the pollsters can get it very wrong here!
Let’s see how things play out, Tuesday, and in the days and weeks after. Chair Warsh and the FOMC made the right decision in waiting.
Yes, Warsh said in his presser that the election was never discussed. I’m guessing the word went out to the Fed governors ahead of the meeting, “We are not discussing the election,” [wink wink]. But this group of very bright men and women knows there is a slim chance, maybe a good one, that all hell could break loose either in the Middle East, Washington, or both, with profound policy implications.
In the here and now, the market is waiting for the earnings reports from Microsoft and Alphabet after the close to examine their comments on future AI spend.
Stocks ended up little changed today. And bonds end little changed from where they were prior to the Fed announcement, the 10-year yield moving up earlier in the day from yesterday’s close on the renewed rise in oil.
Tomorrow, aside from the personal consumption expenditures index (PCE), the Fed’s preferred inflation barometer, we also get our first look at third-quarter GDP. The Atlanta Fed’s GDPNow final estimate, today, was 3.3%.
—
Game 5 of the World Series tonight, after Tampa Bay dramatically survived a sweep by Milwaukee in the bottom of the 12th inning last night.
Dow Jones +97…+0.2% [52475]
S&P 500 +21…+0.3% [7744]
Nasdaq +72…+0.3% [26549]
Oil (WTI) $102.60…Brent $115.10…at 4:00 PM both of these plummeted, not reflected in the price I note…..
Gold $4060
Silver $54.10
Bitcoin: $81,506 [4:00 PM ET]
U.S. 2-yr. 4.72%
U.S. 10-yr. 5.04%
Japanese 10-yr. 2.81%
Back Thurs.
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Brian Trumbore
