Global Market Risks Escalate in September: Six Key Factors Driving Stock, Bond, and Currency Markets

According to Reuters, as global investors return from summer holidays, multiple risks are intensifying in September. The Iran conflict and tensions in the Strait of Hormuz continue to disrupt energy prices, while the U.S. Federal Reserve and Bank of Japan prepare for key interest rate meetings. A potential large-scale IPO by Anthropic will test the热度 of AI investment. At the same time, fiscal policies in France and the UK, along with the heating up of the U.S. midterm elections, could amplify volatility in stock, bond, and currency markets.

Iran Conflict Continues: Energy and Inflation Pressures Persist

The Iran conflict remains one of the biggest variables affecting global markets. Investors are continuously assessing when and how critical shipping lanes such as the Strait of Hormuz will resume operations, causing sharp fluctuations in oil and gas prices.

Rising energy prices benefit energy stocks but increase costs for energy-intensive companies and weigh on government bonds through inflationary pressures. Although the global economy has so far absorbed the shock of higher energy prices, the market buffers that helped absorb these shocks are gradually weakening.

Short-term focus will be on negotiations between Iran and Oman regarding the management of the Strait of Hormuz. In the long term, investors are also beginning to assess alternative oil pipelines that bypass the strait, as well as the possibility of a new regional alliance involving Saudi Arabia, Pakistan, and Turkey.

U.S. and Japanese Central Banks Meet in the Same Week: Interest Rate Signals Shape Markets

The U.S. Federal Reserve and the Bank of Japan are set to hold meetings in the same week, potentially creating dual volatility for markets.

The Fed will announce its interest rate decision on September 16. Markets currently estimate a 40% chance of a rate hike. Beyond the policy outcome, Chair Walsh’s commentary on future direction will also be crucial. Walsh advocates that the Fed should consider market signals, but his more concise communication style has previously caused market confusion.

Additionally, recent U.S. Treasury intervention in the bond market may weaken the inherent policy signals of market prices, complicating the Fed’s assessment of financial conditions. Investors will closely watch how the Fed balances policy communication, central bank credibility, and global interest rate trends.

The Bank of Japan is expected to raise rates on September 18. Japan has recently intervened to support the yen, and markets will not only watch the rate hike but also scrutinize the policy tone released by the central bank. Japan’s 10-year government bond yield has already approached 3%, nearing levels not seen since the mid-1990s.

Anthropic’s Potential Mega IPO Tests AI Market Sentiment

Anthropic may become the next mega-tech company to go public after SpaceX. Reports suggest the company aims to raise up to $100 billion through its IPO, potentially serving as the next stress test for AI investment enthusiasm.

Anthropic was valued at $965 billion in May this year. If its IPO valuation reaches $1 trillion, it would rank among the world’s most valuable publicly traded companies. However, market participants warn that valuations for Anthropic and OpenAI at IPO could be extremely high.

Large tech companies are also continuing to issue bonds to fund AI-related capital expenditures. If investor enthusiasm for AI themes cools even temporarily, the impact could extend beyond newly listed companies to affect stocks like NVIDIA (NVDA-US), Microsoft (MSFT-US), and others that have already priced in AI infrastructure demand.

France’s Budget Battle Impacts European Bond Markets

The French government is expected to submit its budget draft to the National Assembly in the coming weeks. The government hopes to control its fiscal deficit before the 2027 presidential election, but opinion polls suggest the far-right may gain dominance, potentially triggering fierce political battles over the budget.

Market participants believe French government bond yields face further upward risks, though they are not yet at a level that would destabilize the eurozone’s debt system.

Germany’s bond market is also under pressure. Chancellor Merz is approaching a series of regional elections, and with his support declining due to multiple political missteps, the far-right Alternative for Germany (AfD) may outperform the ruling party in some elections.

UK’s New Government Faces Fiscal Challenges

The policies of the UK’s new Prime Minister, Burnham, have not yet significantly unsettled markets. However, the government’s push for economic growth under limited fiscal space could shift investor sentiment.

The Labour Party conference in September and the budget announcement in October will be critical tests for Burnham and new Finance Minister Healy. The UK’s 10-year government bond yield remains high but has retreated from its 18-year peak reached in May.

Lessons from the 2022 mini-budget crisis may limit the new government’s room to expand fiscal policy. Burnham has stated he will adhere to UK fiscal rules, but market participants warn that if the government attempts to push the boundaries of these rules, it could again trigger bond market concerns.

U.S. Midterm Elections Influence Oil Prices and Long-Term Bonds

Campaign activities for the U.S. November midterm elections typically intensify in September and could further influence government policy.

Due to the Iran conflict, the average U.S. gasoline price has risen from under $3 per gallon in January this year to over $4 per gallon. Trump stated this month that higher energy prices are worth enduring to defeat Iran; however, some analysts believe he still hopes gasoline prices will fall before voting day.

Treasury Secretary Beisent’s actions to lower government borrowing costs have also been linked by markets to the midterm elections. Since mortgage rates are closely tied to U.S. long-term government bond yields, the Trump administration cannot afford sustained rises in long-term rates ahead of the election.