Daily Briefing | 2026-09-01: Oil prices climb above $90 again, the gap between growth and computing power widens.

Machine-translated with NiuTrans. Read the Chinese original.

Today's main theme

The most noteworthy event of the past 24 hours was not an isolated piece of news, but rather the fact that global markets are once again facing a situation where "supply shocks and growth divergence are emerging simultaneously". The resumption of military conflict between the United States and Iran has brought Brent crude oil back to around $90 a barrel, putting renewed pressure on inflation expectations and the interest rate path of major economies. China's manufacturing sector improved in August compared to July, but overall it remained in contraction territory, and the service sector also showed no significant improvement, indicating that the recovery of domestic demand remains uneven. At the same time, Europe continues to use public investment to make up for the shortcomings in AI computing power, indicating that technology capital spending is still expanding. The war also began to change food transport routes more directly. The core issue the market needs to judge next is whether the price pressures brought about by energy and geopolitical risks will overwhelm the growth support released by manufacturing and AI investments.

Five key news items

1. The US-Iran conflict reignited, with Brent crude oil breaking through $90, further putting pressure on interest rate cut trading.

Global asset pricing was first brought back to reality by energy risks. On August 31, the United States and Iran resumed direct military conflict for the first time since the end of July: Iran launched missiles at two U.S. military bases in Jordan in response to the previous U.S. attack on Iran's Larak Island. Following the escalation of the conflict, Brent crude rose 2.71% to close at $90.49 a barrel. WTI rose 2.83% to $85.76. Rising oil prices will not only affect energy companies' profits, but more importantly, they will push up inflation expectations again through the transportation, chemical, and consumer sectors. Meanwhile, U.S. Treasury yields continued to rise, while major U.S. stock indexes fell, indicating that investors are reducing their bets on loose monetary policy. Previously, Federal Reserve Chairman Kevin Warsh's speech in Jackson Hole had raised market expectations for a September rate hike, with federal funds futures pricing once indicating that the probability of a rate hike had risen to about 65%. If oil prices remain high, the central bank will face a policy dilemma of "slowing growth but making it harder to reduce inflation," and technology stocks and overvalued assets will also face higher discount rate pressure as a result. The most crucial variables next are whether the US-Iran conflict will further affect shipping in the Strait of Hormuz, and whether oil prices can remain above $90.Reuters

2. China's manufacturing PMI rebounded to 49.8, but the service sector remained below the expansion/contraction threshold.

China's economy showed some improvement in August, but the recovery remains clearly uneven. Data released by the National Bureau of Statistics shows that the manufacturing PMI rose to 49.8 from 49.2 in July. Although it is still below the expansion/contraction threshold of 50, the production index rose to 50.4 and the new orders index rose to 50.6, indicating that both production and demand have improved compared to the previous month. High-tech manufacturing and equipment manufacturing performed even stronger, with PMIs reaching 52.9 and 51.4 respectively, while the production and demand indices for industries such as computer, communication and electronic equipment exceeded 53. The PMI for large enterprises also returned to 50.6. The problem is that the non-manufacturing business activity index is still only 49.0, the service sector is 49.3, the construction sector has dropped even further to 46.9, and the non-manufacturing new orders index is only 44.1. This means that manufacturing, especially high-tech and export-related sectors, is providing support, but demand for consumption, real estate, and services remains insufficient. For policy, this structure is more tricky than simple aggregate weakness: if demand recovery continues to lag behind production, improvements in corporate profits and employment may be limited. Going forward, it remains to be seen whether the implementation of fiscal projects, consumption subsidies, and financing support can truly translate into service sector orders, rather than just supporting the industrial sector.National Bureau of Statistics

3. The EU invests €387.8 million in LUMI-AI, further expanding its computing infrastructure.

AI investment has not stopped because of the high-interest-rate environment. On August 31, EuroHPC, the EU's high-performance computing consortium, officially signed a procurement contract with Bull of France to build a new LUMI-AI supercomputer in Kajani, Finland, with a total budget of 387.8 million euros, scheduled to be put into use in 2027. The system will use an AMD Instinct MI430X GPU and a sixth-generation EPYC processor, and will be primarily open to European startups, SMEs, and research institutions. The importance of this project lies in the fact that Europe is using public funds to make up for the lack of domestic AI training computing power. EuroHPC had previously built an AI Factory network around existing supercomputers, and officials have made it clear that the current demand for AI computing power exceeds the available capacity. For the industry chain, this means that global AI competition has extended beyond models and applications to capital-intensive infrastructure such as power, data centers, GPUs, networks, and storage. Europe still lags behind the United States and China in terms of scale and commercialization, but public procurement is generating new long-term orders. It remains to be seen whether LUMI-AI can be delivered on schedule and whether European model companies can truly transform public computing power into commercial competitiveness.EuroHPC

4. The Russian-Ukrainian attacks are beginning to change food export routes, with Russia turning more towards the Baltic Sea.

The impact of war on global supply chains continues to extend from energy to food transportation. Due to the recent ongoing attacks on ports, export terminals, and transport vessels in the Black Sea and Sea of Azov by both Russia and Ukraine, Russian grain exporters have begun to divert more goods to Baltic ports. Russia exported approximately 46.3 million tons of grain through Black Sea and Sea of Azov ports last export season, accounting for about 90% of its seaborne grain exports, while only about 1 million tons were transported through Baltic Sea ports during the same period. By August 18 this year, Russian companies had applied for approximately 5 million tons of grain to be transported by rail to Baltic ports, close to the approximately 6 million tons applied for at major Black Sea ports during the same period. The problem is that the capacity of alternative routes is limited, and even ports in Baltic countries such as Latvia will find it difficult to fully fill the gap left by the disruption of Black Sea transportation. If this disruption continues, freight costs, insurance premiums, and food prices could rise, putting greater pressure on small, import-dependent economies. The market should focus on whether port attacks escalate and whether Russia can rapidly increase rail and Baltic port capacity.Reuters

5. Russian drones attacked Kyiv for the fifth consecutive day, deepening the war's strain on the city and its logistics systems.

Another change on the Ukrainian battlefield is that drone attacks are shifting from single, high-intensity strikes to continuous attrition. Russian drone attacks on Kyiv and surrounding areas have been ongoing for the fifth consecutive day, with the August 31 attack injuring multiple people and damaging warehouses, apartments, and retail facilities. Ukrainian President Zelensky said that Russia launched nearly 1,500 drones into Ukraine in four days, more than half of which were jet-powered. The ongoing airstrikes not only depleted air defense missiles and interception resources, but also began to more directly disrupt urban transportation, commerce, and residents' lives: the Kyiv Metro was forced to suspend operations across the Dnieper River during air raid sirens, and the Nova Poshta logistics terminal in Odessa in the south was also attacked. Compared to traditional frontline warfare, this low-cost, high-frequency drone tactic is more likely to spread the costs of war to economic infrastructure. For Europe, this further intensifies pressure to increase air defense, drone, and ammunition production capacity. The key questions going forward are whether Ukraine can replenish its air defense stockpiles and whether both sides will continue to expand their attacks on logistics, warehousing, and industrial facilities.Reuters

Market Correlation and Today's Observation

Looking at today's news items together, the most important change is that the market has shifted from "whether growth can be sustained" to "whether the quality of growth can offset supply-side inflation." The US-Iran conflict pushing up oil prices will directly affect inflation, bond yields, and dollar pricing, and compress the central bank's room for easing. If high oil prices persist, commodity currencies such as the Australian dollar may receive some support due to improved terms of trade, but rising risk aversion may strengthen demand for the US dollar. Therefore, the exchange rate reaction may not be one-way. China's PMI shows that the industrial sector is more resilient than the service sector, with high-tech manufacturing continuing to expand. However, domestic demand and employment-related components remain weak, which means that the recovery of RMB assets depends more on whether policies can transmit industrial growth to residents' income and consumption.

AI remains one of the few areas of large-scale capital expenditure that can withstand high capital costs. The EU's €387.8 million LUMI-AI project demonstrates that economies are now viewing computing power as strategic infrastructure, rather than simply spending on technology companies. However, if bond yields continue to rise, the market will further distinguish between "AI infrastructure supported by cash flow and orders" and overvalued companies that simply rely on long-term growth narratives. At the same time, the damage to grain ports and logistics systems caused by the Russia-Ukraine conflict means that geopolitical risks are affecting more physical goods. If both energy and food prices experience price pressures, the final stretch of global inflation decline will be more difficult. The three most worthwhile variables to watch today are therefore: whether Brent crude can hold above $90, whether US interest rate expectations will continue to be revised upwards, and whether China's service sector and consumer sector will show a clearer improvement in September.

---

Cover image:Jamie / Unsplash