The Direction of Stocks and Crypto After Chuseok: "Watch Oil Prices" [Weekend Money]

WTI Falls Below $100 for the First Time Since September 9
Anticipation of Trump-Iran Summit and Increased Saudi Output
Trump's Record-Low Approval Ratings Add Volatility to Oil Price Trend

As oil prices shifted into a sharp decline, a warming trend has emerged in both the stock and bond markets. On September 22 (local time), the price of West Texas Intermediate (WTI) closed at $95.78 per barrel on the New York Mercantile Exchange, down $4.52, or 4.51%, from the previous trading day. This is the first time since September 9 that the WTI closing price has fallen below $100 per barrel.

In a report released on September 22, Sanghyun Park, a researcher at iM Securities, stated, "Despite instability in the Middle East, the significant drop in oil prices brought a positive breeze to the stock and bond markets," cautioning, however, that "it is still too early to feel at ease."

The Background of the Sharp Oil Price Drop: Two Key Factors—Trump-Iran Summit Talks and Saudi Production Increase

The report pointed to two main reasons behind the sharp decline in oil prices. First is the anticipation of a possible summit between the United States and Iran. Expectations for a meeting between Iranian President Pezeshkian and U.S. President Donald Trump, who are both attending the UN General Assembly, played a role in stabilizing oil prices.

The second reason is the expectation of increased crude oil exports from Saudi Arabia. News that Saudi Arabia, which had previously been unable to export through the Red Sea due to clashes with Houthi rebels (an Iran-backed armed group in Yemen), is now increasing exports via the Strait of Hormuz (a key chokepoint for Persian Gulf oil shipments) has helped ease concerns over supply disruptions. On the previous day, Saudi state-owned oil company Aramco loaded 14 million barrels of crude onto seven very large crude carriers (VLCCs) in the Gulf. In recent six days, Saudi oil passing through the Strait of Hormuz is estimated to have averaged 2.9 million barrels per day.

The stock and bond markets reacted immediately to the oil price drop. The yield on the U.S. 10-year Treasury note declined in tandem with oil prices. Bitcoin prices soared. The Philadelphia Semiconductor Index also climbed, bolstered by both the continuing AI optimism and the decrease in oil prices.

Researcher Park commented, "As the uncertainty over further Federal Reserve rate hikes was largely resolved following the September FOMC (Federal Open Market Committee) meeting, the visible stabilization of oil prices could greatly reduce the risk of a further increase in long-term Treasury yields." Regarding the sharp rise in Bitcoin prices, he added, "The surge reflects the 'debasement trade' phenomenon, where capital flows into assets to hedge currency depreciation, and this aligns with investor expectations for stable Treasury yields."

However, it remains uncertain whether oil prices will continue to fall in the future. There is a latent risk that Saudi Arabia's Red Sea shipping route could once again be disrupted by attacks from the Iranian side.

Trump's Approval Ratings Hit Historic Low..."Potential for TACO Pattern to Reemerge"

The political calculus of President Trump is also being cited as a variable. As the midterm elections approach, there is still the possibility that President Trump’s characteristic "TACO (Trump Always Chickens Out—a pattern where he steps back after tough talk)" could resurface.

With the cost of living rising, President Trump’s approval ratings have dropped to their lowest levels across both his first and second terms. According to a poll released on September 21 by Reuters and polling firm Ipsos, just 32% of respondents approved of Trump’s job performance—down 3 percentage points compared to a week earlier (35%).

On average, Democrats are leading Republicans by about 8 percentage points in various polling aggregates, and the Senate race is showing a close battle, with a tally of 45 to 46. If the current conditions of high oil prices and high interest rates persist through the midterms, the probability that not only the House but also the Senate could flip to the Democrats rises significantly.

If President Trump resumes large-scale attacks on Iran, oil prices are likely to remain well above $100 per barrel through the midterms, which is likely to lead to a landslide defeat for the Republican Party. At the same time, sustained oil prices above $100 would significantly increase the likelihood of the Federal Reserve raising rates again in October.

Researcher Park noted, "There is potential for negotiations between the U.S. and Iran, but if a summit does not materialize as hoped, there remains a possibility that the U.S. may launch a large-scale attack against Iran." He went on to say, "The TACO pattern of President Trump could reemerge at any time in the run-up to the midterm elections. For the time being, the oil price trend alone will continue to drive the market for major asset prices."

This content was produced with the assistance of AI translation services.