Week of October 19 to October 23, 2026
Oil took over as the market's biggest worry this week. Houthi attacks inside Saudi Arabia pushed Brent to its highest close since April, AI stocks suffered another sharp sell-off, and investors ran for safety. But the safe havens did not all behave the same way: Treasuries and the yen rallied, while gold fell to a three-month low. Here is why, and what it means heading into the busiest central bank week of the year.
The Big Picture
The Middle East conflict moved closer to the heart of global oil supply this week. The Houthis claimed a series of attacks across Saudi Arabia, including on energy sites, and Saudi Aramco ordered the evacuation of its headquarters in Dhahran on Thursday. The US State Department ordered non-essential staff and their families to leave the country, and President Trump said the US was not negotiating with Iran and that something would happen "fairly soon." Brent rose 6.2% for the week to settle at $116.72, its highest since April 29 and its third straight weekly gain. October has now been the worst month for attacks on commercial shipping in and around the Strait of Hormuz since tracking began in 2017.
At the same time, the AI trade cracked again. Meta raised its capital spending plans to as much as $145 billion and reported negative free cash flow, and its stock fell more than 9% on the week. Chip stocks dropped 6.7% on Thursday alone. Investors are no longer rewarding AI spending on faith; they want to see revenue and cash returns. Combined with higher oil prices, that pushed money into the safety of US government bonds, and the 10-year Treasury yield fell to around 4.95%, a one-month low.
The most useful lesson this week is that safe havens protect against different kinds of fear. Treasuries and the yen rallied because investors feared slower growth. Gold fell because the specific fear was higher oil prices, which means higher inflation, which keeps central banks hiking. Some of gold's drop also looked like liquidity-driven selling, where investors sell what they can to cover losses elsewhere. Knowing which fear is driving the market explains why assets that usually move together can split apart.
Inflation pressure outside the US kept building too. UK inflation rose to 3.5% in September, above forecasts, with motor fuel prices up almost 30% from a year ago. Canada's headline inflation rose to 3.1% on gasoline, although its core measures cooled. In the US, flash manufacturing activity hit its strongest level in 53 months, but the survey also showed rising input and output prices. All of this feeds into next week, when the Fed, the Bank of Canada, the ECB and the Bank of Japan all decide within three days.
What Changed This Week
Oil: Brent settled at $116.72, its highest since April 29, after Houthi attacks inside Saudi Arabia. WTI closed at $103.27.
Gold: fell about 4.1% to $4,008 and briefly dipped below $4,000 for the first time since mid-July.
US 10-year yield: slipped to around 4.95%, a one-month low, on safe-haven demand.
AI stocks: chip stocks fell 6.7% on Thursday, and Meta fell more than 9% for the week on spending concerns.
UK inflation: 3.5% in September, above the 3.4% forecast, with markets pricing more than a 90% chance of a November Bank of England hike.
Canada: markets now lean toward a Bank of Canada hike on October 28, after Governor Tiff Macklem warned about lasting energy-price pressures.
Market by Market
US30 · 52,215 (up 0.4% on the week)
The Dow posted its third straight weekly gain, but it gave back a lot on Friday. Through Thursday, the index held up well, even finishing slightly higher on the day the Nasdaq dropped 2.6%, because its mix of traditional companies kept attracting money rotating out of AI names. On Friday, the selling changed target. Chip stocks stabilized, while oil-sensitive consumer, financial and industrial shares took the hit, and the Dow fell 1.23%, or 652 points. American Express fell more than 3% after announcing it will cut about 5% of its workforce to prepare for AI. Nearly three out of every four S&P 500 stocks fell on Friday, which shows the pressure had spread well beyond technology.
Price action suggests: The index tested its highs near 52,900 midweek but could not hold them, and Friday's broad decline shows buyers stepping back when oil rises. Holding above 52,000 keeps the recent structure intact, but conviction appears to be fading into a heavy event week.
Gold · Weekly close $4,008
Gold had a heavy week, falling about 4.1% and closing at $4,008, after briefly trading below $4,000 for the first time since mid-July. The biggest drop came on Thursday, when spot gold fell about 2.4% even as stocks sold off and Treasuries rallied. That is unusual, and it matters. The trigger was oil: Brent's jump revived fears that energy prices will keep inflation high and push the Fed toward more hikes, which raises the cost of holding a metal that pays no interest. Analysts also pointed to liquidity-driven selling as investors raised cash during the market turmoil. Gold is now down about 3% in October, and its gain over the past year has shrunk to less than 1%.
Price action suggests: The $4,100 area that buyers defended for two weeks has now failed, which shows sellers in control. The market is testing whether $4,000 can act as support, and how gold reacts to the Fed and PCE data next week will show whether this level holds.
WTI Crude · $103.27 (up about 2% on the week)
Brent did most of the work this week, rising 6.2%, while WTI gained about 2%. The difference comes down to geography: the attacks were inside Saudi Arabia and around Gulf shipping routes, so international barrels carry far more risk than US supply. The gap between Brent and WTI widened back to about $13.45, after narrowing last week on tight US inventories. The pressure built through the week, with Houthi claims of strikes on an Aramco site and the Shaybah oilfield on Monday, the Dhahran evacuation on Thursday, and an oil spill off the UAE coast on Friday. Reports that the US and Israel have plans for fresh strikes on Iran after the November 3 midterm elections added to the risk premium.
Price action suggests: WTI is holding above $100 after last week's breakout, showing the market accepting higher prices rather than fading the rally. The widening Brent premium indicates the risk is concentrated in Middle East supply, which keeps prices very sensitive to weekend headlines.
EUR/USD · 1.1203 (down 0.3% on the week)
The euro slipped modestly, and its weakness showed up most clearly against the yen, where it fell as much as 1.2% on Thursday. Europe is highly exposed to higher energy prices, and this week's business surveys showed the impact starting to bite. The eurozone flash composite PMI fell to 51.9 from 53.1, below the 52.7 forecast, and France slipped into contraction at 48.4. Combined with France's ongoing fiscal concerns, that leaves the euro with few domestic reasons to rally. The ECB decides on Thursday and is expected to keep its deposit rate at 2.50%.
Price action suggests: The pair continues to hold above the 1.1155 area that has acted as a floor for three weeks, but rallies remain shallow. That pattern shows hesitation rather than recovery, with the ECB's guidance likely to decide whether the floor survives.
GBP/USD · 1.3371 (up 0.4% on the week)
Sterling extended last week's recovery and briefly traded near 1.34. UK inflation rose to 3.5% in September, above the 3.4% forecast, with core inflation at 2.8% and services inflation at 3.7%, both higher than expected. Motor fuel prices were up 29.8% from a year ago. The data cemented expectations for a Bank of England hike on November 5, with markets pricing more than a 90% chance. The pound barely moved on the release itself, a sign that the hike was already largely expected. The bigger test now is Chancellor John Healey's Budget on Wednesday, which lands on the same day as the Fed decision.
Price action suggests: The pair is holding above 1.33 after rejecting its 11-month low near 1.3150 last week, which shows buyers in control in the short term. Wednesday's Budget is the main risk to that structure, since gilt market reactions have driven the pound for most of the past month.
USD/JPY · 156.81 (down 0.7% on the week)
The yen finally broke out of the range it had held since early October. On Thursday, it rose as much as 0.9% against the dollar, its strongest daily gain in nearly a month, touching about 156.69 as investors sought safety during the AI and oil sell-off. Falling US Treasury yields added to the move, since they narrow the interest rate gap that has supported the dollar. Japan's national inflation rose to 2.1% in September, back above the Bank of Japan's target, which strengthens the case for a December hike. The BoJ is expected to hold at 1.25% on Friday, but its new forecasts and Governor Kazuo Ueda's tone will matter.
Price action suggests: The break below 157 shows the yen behaving like a safe haven again, with sellers pressing the pair lower when risk appetite fades. This shift indicates the yield gap is no longer the only force in charge, and a renewed rise in US yields would be needed to rebuild the old range.
USD/CAD · 1.4001 (down 1.0% on the week)
The Canadian dollar had a strong week, pushing the pair down to about 1.40. Two forces worked together. Oil stayed above $100, and the commodity link held for a second straight week. More importantly, Bank of Canada Governor Tiff Macklem warned that energy-price pressures may last and said the Bank's new forecasts will show higher inflation, which revived expectations of a hike. Markets now lean toward a quarter-point increase to 2.50% on Wednesday, a big shift from two weeks ago, when weak jobs data had almost ruled it out. Canada's September inflation rose to 3.1% on gasoline, though the Bank's core measures cooled to around 1.8% to 1.9%.
Price action suggests: The pair has moved from the top of its range near 1.43 to the 1.40 area in two weeks, which shows sellers firmly in control. Wednesday's decision will test whether the market's renewed hike expectations are justified.
Cross-Market Check
Gold and Treasuries: diverging. Both are seen as safe havens, but Treasuries rallied on growth fears while gold fell on inflation and rate-hike fears.
Stocks and the yen: aligned in risk-off mode. Sharp stock declines on Thursday drove the yen's biggest daily gain in nearly a month.
Oil and USD/CAD: aligned for a second week. Oil above $100 and renewed Bank of Canada hike bets lifted the loonie.
Yields and US30: less aligned than before. Yields fell, yet the Dow dropped on Friday, because oil and growth worries mattered more than borrowing costs.
Looking Ahead
Tue, Oct 27: The Fed's two-day meeting begins. US consumer confidence is released.
Wed, Oct 28: The busiest day of the month. The Bank of Canada decides in the morning, with markets leaning toward a hike to 2.50%. The UK Budget follows, and the Fed announces its decision at 2:00 pm ET, with Chair Kevin Warsh's press conference at 2:30 pm. A hold is widely expected, so his comments on December may matter more than the decision itself.
Thu, Oct 29: US third-quarter GDP, expected around 3% annualized growth, and September PCE inflation, the Fed's preferred measure. The ECB also decides and is expected to hold.
Fri, Oct 30: Bank of Japan decision and new outlook report, eurozone and German GDP, German inflation and the US Employment Cost Index. The Fed's quiet period ends after the meeting.
On the radar: Big tech earnings from Alphabet, Microsoft and Amazon throughout the week, the US midterm elections on November 3 and the Bank of England decision on November 5. Middle East headlines remain the biggest swing factor for oil.
Go Deeper
FOMC Calendar and Statements: where Wednesday's decision and statement will be published.
CME FedWatch Tool: track how December hike odds shift after Warsh's press conference.
Bank of Canada Policy Rate: Wednesday's decision and the new Monetary Policy Report.
ECB Press Releases: Thursday's ECB decision and statement.
Bank of Japan Policy Decisions: Friday's decision and outlook report.
BEA PCE Price Index: the Fed's preferred inflation measure, released on Thursday.
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Final Thought
This week showed that even safe havens can disagree. Bonds and the yen rallied while gold fell, because each one protects against a different kind of fear. Next week brings four central bank decisions, a UK Budget, major US data and big tech earnings in just four days, and the temptation will be to react to every headline. A calmer approach is to know in advance which events matter most for the markets you follow, keep position sizes small while volatility is high, and give price time to settle before drawing conclusions.
Fed'n Markets
Sources: Reuters, CNBC, Bloomberg, Yahoo Finance, FXStreet, UK Office for National Statistics, Statistics Canada, S&P Global, CME FedWatch, Federal Reserve, Financial Modeling Prep (closing price data).
FedAndMarkets provides educational market context only. Nothing in this newsletter is financial advice or a recommendation to buy or sell any asset.
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