Hello, this is Dylan Butts writing to you from Singapore. Welcome to the latest edition of the Daily Open newsletter.

Traders in Asia are evaluating another round of mixed signals from the Middle East, as the U.S.-Iran war continues into its fourth month.

In an interview with CNBC, Israeli Prime Minister Benjamin Netanyahu said Israel and the U.S. were ready to return to military action against Iran, if needed.

The remarks pushed oil prices higher and stock futures down, even as progress was reported on a ceasefire between Israel and Lebanon and the U.S. House of Representatives voted to block further American military involvement.

In an exclusive interview with CNBC aired Wednesday, Netanyahu said that Trump had warned Iran of “a full scale return to military action,” if necessary, emphasizing that it would ultimately be the U.S. president’s decision.

Netanyahu, however, noted that there had been tactical disagreements between the U.S. and Israel, though they were largely on the same page on their Middle East strategy. 

The comments appeared to spook oil traders, with Brent and WTI crude both moving higher on fears of renewed escalation, though crude remains below the psychologically important $100-per-barrel level. 

S&P 500 futures were pointing lower after the benchmark snapped a nine-day winning streak during the trading day. 

In a more positive development for a peace deal, Israel and Lebanon have agreed to implement a ceasefire. Asia markets, however, opened lower Thursday as Mideast worries keep investors on edge.

Signaling diminishing appetite for the conflict in Washington, the U.S. House voted in favor of a war powers measure that would direct an end to U.S. military involvement in the Iran conflict unless Congress authorizes continued action.

While the bipartisan vote underscores growing congressional pushback over the scope and duration of the Iran campaign, the measure still needs to pass the Senate, and any final legislation could face a presidential veto.

Trump on Wednesday suggested that Iran had agreed not to have nuclear weapons, while adding that “they can change their mind.” Iran’s Foreign Ministry declined to comment on Trump’s interview when contacted by CNBC. A government official, who was not authorized to speak publicly, told CNBC Trump’s words were “misleading.”

The comments came after the The Kuwait International Airport was struck by Iran, a day after the U.S. Central Command launched “self-defense strikes” on Qeshm Island in the Persian Gulf. 

Corporate America delivered its own set of headlines on Wednesday, pouring cold water on Wall Street’s recent tech-led rally. 

Broadcom shares plunged nearly 14% after-hours after the company reported weaker-than-expected software revenue and didn’t raise its full-year AI chip sales target. CrowdStrike…

Unmanned systems will present the greatest danger and structural growth opportunity over the next decade, former CIA director David Petraeus said, pointing to conflicts in Iran and Ukraine as evidence of how warfare is rapidly evolving.

Speaking at the UBS Asian Investment Conference, Petraeus said the increasing use of drones in conflict zones showed both the growing danger of unmanned weapons and the urgent need to improve defenses against them.

“Much of this is going to be all about unmanned systems and the defenses against them, which have not been adequate in this case,” Petraeus said.

“It’s never going to be perfect, but it can be much better than what it is that we have seen.”

The proliferation of drone combat in the Middle East will push the region to invest in defensive and offensive capabilities.

Iran’s cheap Shahed drones have been a regular fixture in conflicts and proxy attacks across the region, while the U.S. and allies have often relied on more expensive air defense missiles to intercept them.

Public estimates place the cost of a Shahed drone at roughly $20,000 to $50,000 each, far below the price of ballistic or cruise missiles, which can cost millions of dollars.

“There’s going to be enormous spending on defense against what we’ve seen come from Iran, which is only a hint of the future war,” he added.

Petraeus pointed out that even a “modest” amount of drones has caused real problems, including cutting Qatar’s liquefied natural gas production.

The former four-star general, who also led the United States Central Command, said the future of warfare will increasingly shift towards unmanned systems. He added that in a year or so, warfare will evolve beyond unmanned systems to include autonomous systems fighting each other.

Autonomous drones can form swarms that overwhelm defenses through numbers while adapting to changing battlefield conditions by communicating with one another, instead of being remotely piloted by a human controller.

“Now you have swarms coming at you, and we really don’t have a defense for swarms.”

Drawing on visits to Ukraine, Petraeus said Kyiv’s armed forces were “just extraordinary” at producing their own drones and defeating Russian drones through measures including using interceptor drones, electronic warfare to disrupt control networks. Ukraine has also used pickup trucks equipped with machine guns connected to targeting computers to help intercept incoming drones.

Still, Petraeus warned that current countermeasures, such as individual drone interceptors, may prove insufficient against coordinated drone swarms.

“That gets really, really, really scary, actually, because autonomous systems mean … you’re not limited by the number of pilots that you have who are remotely flying these systems,” he said.

The oil market might face a new reality after the Iran war in which exports through the Strait of Hormuz do not return to the levels once considered normal, as shipowners now have to weigh the risk that fighting could abruptly break out in the volatile Persian Gulf.

And Western commercial ships will likely hesitate to sail through Hormuz if it remains under Iran’s de facto control, especially if they have to coordinate with the Revolutionary Guard, putting them at risk of violating U.S. sanctions.

It is a scenario with consequences that are difficult to foresee given the vital role that Hormuz plays in global energy markets. Freedom of navigation through the strait was never seriously challenged until Iran basically closed the sea lane in response to the war launched by the U.S. and Israel on Feb. 28.

Iran’s blockade of Hormuz has triggered the largest oil supply disruption in history, putting pressure on the U.S. to make a deal as the threat to the global economy grows by the day. Tehran appears intent to use this leverage to consolidate control over the strait in a settlement that ends the war.

Middle East leaders believe that Iran has already taken control of Hormuz, said Amos Hochstein, who served as a senior energy and national security advisor to former President Joe Biden.

“No matter what happens, the Iranians will control the Strait of Hormuz for the foreseeable future,” Hochstein told CNBC’s “Squawk Box” on Thursday. “It doesn’t even matter what the deal says. Everybody in the region believes that.”

Oil tanker traffic through Hormuz before the war might represent the high point for transits for the foreseeable future, said Helima Croft, head of global commodity strategy at RBC Capital Markets.

“Any end to the conflict that leaves Iran exercising operational control and influence over the Strait will result in appreciably lower flows through the waterway in our view,” Croft told clients in a Thursday note.

Traffic under this scenario might return to 60% to 70% of prewar volumes with China-affiliated ships moving freely while passage for Western vessels require bilateral agreements with Iran, said Richard Meade, editor-in-chief of Lloyd’s List, in a briefing on May 21.

“This doesn’t trigger a recession in the way that some of the doomsday scenarios that we’ve talked about before might suggest, but it does not allow the prewar rebound,” Meade said. Lloyd’s List is one of the oldest shipping industry trade journals in the world.

“It produces something more insidious,” Meade continued. “A permanently bifurcated strait where access is a function of political alignment, not freedom of navigation.”

The Red Sea crisis

The crisis that throttled ship traffic through the Red Sea shows how geopolitical instability can disrupt trade chokepoints for much longer than originally expected.

Houthi militants in Yemen that are allied with Iran started attacking commercial ships in November 2023 in response to Israel’s war in Gaza. The attacks began on Nov….

Hello, this is Dylan Butts writing to you from Singapore. Welcome to today’s edition of the Daily Open newsletter.

After weeks of paused action in the U.S.-Iran conflict, the two countries are once again trading airstrikes, complicating hopes for a permanent resolution to a war that has stained global oil supplies. 

However, Wall Street hasn’t flinched. The S&P 500 and Nasdaq Composite both closed at record highs yesterday, lifted by an unrelenting surge in artificial-intelligence names that has overshadowed the latest geopolitical jitters.

The AI trade has shown few signs of cooling this earnings season. 

Shares of Snowflake surged 36% on Thursday after the cloud-data specialist delivered blockbuster results and highlighted explosive demand for its AI-powered platforms, lifting software stocks more broadly. 

Meanwhile, Dell Technologies was right behind, jumping 31% after reporting its strongest sales growth since 2018. The company also secured a massive Pentagon contract on Wednesday, adding to investor excitement for Dell’s growing AI server business. 

In private markets, Anthropic leapfrogged OpenAI to become the most valuable AI startup in Silicon Valley, closing in on a $1 trillion valuation in its latest funding round as more LLM companies look to go public this year. 

Boosted by the rally in the technology sector, all three major averages finished at new closing records on Thursday. That was despite retailers like Gap and American Eagle posting disappointing results in the face of growing inflation concerns. 

Stocks had risen to their session highs after Axios reported that U.S. and Iranian negotiators agreed on a 60-day memorandum of understanding to extend the ceasefire, with a White House official later confirming to CNBC that the U.S. and Iran had “mostly agreed” to the terms.

But just a few hours later, Iranian state media outlet Fars reported that the country’s armed forces had fired missiles at unidentified targets late Thursday local time.

The overnight headlines from the Middle East come amid traders’ fading optimism for a full U.S.-Iran nuclear deal this year despite earlier reports of progress. U.S. officials have said that if Iran fails to meet nuclear demands during negotiations, President Donald Trump will have economic or military options on the table. 

The conflict and uncertainty surrounding it have continued to ripple through energy markets, with Exxon delivering a warning Thursday that oil inventories are on track to reach dangerously low levels in the coming weeks, forcing prices to spike and curbing demand.

That comes as broader inflation continues to hit consumer wallets, with recent data showing that the U.S. personal consumption expenditures price index jumped 3.8% in the 12 months through April. 

While that data…

Supply constraints sparked by the Iran war will drive household energy costs in the U.K. to their highest level in two years over the summer, the country’s energy regulator said on Wednesday.

Government watchdog Ofgem announced its energy price cap would rise by 13% in July, with electricity prices increasing by around 5% and gas bills soaring 24%.

Ofgem’s price cap limits how much households in the U.K. can be charged for energy utilities, and is reviewed every three months.

“Today’s price change reflects continued volatility in global energy markets. This means higher wholesale gas prices, driven by ongoing conflict in the Middle East, is impacting the price we pay for energy,” Ofgem CEO Tim Jarvis said in a statement on Wednesday.

The current price cap puts a typical household’s gas and electricity bill at £1,641 ($2,206.94) a year. From July, that figure will rise by around 13.5% to £1,862 — its highest level since early 2024.

Households have reduced their energy usage in Britain, with Britons broadly using 7% less electricity and 17% less gas since Ofgem’s last review, when it lowered the price cap by 7%. From July, the organization said, it will factor the drop in usage into its price cap figures.

Currently, it said, 40% of energy accounts across Britain are fixed-term contracts, meaning they will be shielded from July’s price rises.

But Ofgem is expected to hike its price cap again in October.

Energy analysis agency Cornwall Insight forecasts that the price cap will rise to £1,899.44 in October under the existing framework. That would represent another 2% increase from the July price cap.

The U.K. is reliant on imported energy, making it vulnerable to global supply bottlenecks of oil and gas, and the resulting spikes in energy prices.

Since the outbreak of the Iran war and the effective closure of the Strait of Hormuz, a critical shipping route, Brent crude oil prices have surged by around 33.5%, while June gas futures sold on the Dutch TTF have jumped almost 50%. Although prices have cooled from their wartime highs, they remain elevated and volatile.

Ofgem noted on Wednesday that even after July’s price increase, bills will remain well below their level at the height of the 2022 energy crisis that saw the government cap bills at £2,500 a year.

That move came after wholesale prices surged in the wake of European sanctions on Russia, a major supplier of energy to the region, following its full-scale invasion of Ukraine.

However, U.K. Energy Security Secretary Ed Miliband said in a post on X that the update from Ofgem was adding to the cost pressures faced by British households.

“The rise in the price cap because of a war we did not choose is deeply unwelcome news for households across the country,” he said.

“We will continue to monitor the situation ahead of the winter and plan for all contingencies. In the immediate term it is essential to de-escalate this…

Republicans have said for months that inflation is former President Joe Biden‘s problem. Now, they’re staring down the barrel of an inflation crisis of their own making just in time for the midterm election, and the blame game is just getting started.

Inflation ticked up to 3.8% year-over-year in April, the highest mark since 2023. Much of that spike is coming on the back of soaring energy prices, which have persisted since President Donald Trump launched a war in Iran.

Trump and congressional Republicans swept into power in 2024 by promising to defeat the inflation that dogged Biden’s presidency. But they now risk getting trounced in the 2026 midterm election due to their own inflation crisis, and they are struggling to find a clear message to battle high prices as the president pushes for a $400 million White House ballroom and a $1.8 billion taxpayer-funded legal relief fund for victims of government “weaponization.”

Members of the congressional GOP are now left wondering whether their priorities are in the right place.

“When half of America is living paycheck-to-paycheck, the word ‘ballroom’ should not be in anyone’s vocabulary,” Rep. Brian Fitzpatrick, R-Pa., a moderate who represents a swing district, told reporters at the Capitol. “We should always be focused on affordability, always. Both parties have gotten it wrong. That’s why we’re in the crisis we’re in now.”

Fitzpatrick’s comments were a rare rebuke of Trump’s priorities from within his own party, which has largely remained in lockstep with the president through months of economic tumult brought on by an on-again, off-again tariff regime and now the war with Iran.

And asked about what Republicans could tell voters in their districts, Fitzpatrick didn’t exactly make the case for the GOP.

“How about both parties are broken, which is why we need to do away with the two-party system?” he said.

He’s not alone among Republicans who are warning that the pinch of inflation is going to hurt the party in November, especially after years of elevated costs have ground on Americans.

“It’s not as bad as the worst it was under Biden,” said Rep. Don Bacon, R-Neb., a frequent critic of the president who will retire at the end of his term. “But I think most Americans have not recovered from all that, and that’s why it’s still an issue.”

Bacon trained his fire on Trump’s tariffs for inflation.

“I think tariffs are bad policy. Milton Friedman, Adam Smith, they’re the bibles of conservatism, and we have violated those,” he said, referring to free-market economists. “We should not have rolled over on that here in Congress.”

Asked what Republicans can say to show Americans that life is better under GOP rule, Bacon said that “the president can surely show that we secured the border.”

It’s been four years since the…

BEIJING — China’s industrial profits surged by 24.7% in April from a year earlier, according to official data released Wednesday, despite broader signs of slowing economic momentum.

The increase marked the fastest growth since November 2023, according to financial data provider Wind Information, and accelerated from a 15.8% rise in March.

For the first four months of the year, industrial profits rose 18.2%, up from 15.5% growth in the first quarter. Computing and electronics equipment manufacturing, the largest sector by profit amount, saw earnings more than double from a year ago, although the pace slowed slightly in April from March on a year-to-date basis.

Among the ten largest sectors by profit, the oil and gas extraction industry posted an 8.1% rise in profits in the first four months of the year, reversing a 1.4% decline in the first quarter.

Higher crude prices helped lift profits in the petroleum processing industry to 40.42 billion yuan ($5.96 billion) in the January-April period, nearly double the 22.94 billion yuan recorded as of March.

Profits for automobile manufacturers fell 16.8% in the same period from a year earlier, improving from a 17.7% decline in the first quarter.

Beijing’s efforts to address excessive competition in the automobile and other sectors are starting to bear fruit, EU Chamber of Commerce of China President Jens Eskelund told reporters on Tuesday, citing a survey of members earlier in the year. But he cautioned it would take another year or two to confirm the trend.

A fivefold increase in profits in the mining and related sectors also boosted overall industrial profit growth, while iron smelting and rolling swung to a profit for the year as of April, compared with a loss in the first quarter.

However, profit declines in furniture manufacturing steepened to 54.4% for the first four months of the year, worse than the 44.9% recorded as of March.

“China’s industrial profit growth accelerated sharply in April, driven primarily by rising producer prices amid the global energy shock,” Hao Zhou, head of research and chief economist at Guotai Junan International.

“However, the improvement in profitability appears uneven and potentially fragile. Profit gains are concentrated in upstream and high-tech sectors, while many other industries continue to struggle,” he said in a note.

China reported slower economic growth in April, with a 4.1% increase in industrial output and a 0.2% rise in retail sales from a year ago. Fixed asset investment fell for the first four months of the year as the real estate drag steepened.

Exports remained strong, climbing 14.1% in April from a year ago in U.S. dollar terms. Imports surged by 25.3%, data released earlier in May showed.

The producer price index in April jumped 2.8% from a year ago, the most since July 2022.

A few months ago David Navazio, founder and CEO of medical supply company Gentell, had never heard of the Strait of Hormuz. But now, the narrow waterway thousands of miles away from the company’s headquarters in Yardley, Pennsylvania, is impacting the company’s operations in more ways than one.

Chief among them is price, with Gentell under pressure from multiple angles. The company relies on derivatives from oil and gas production to manufacture its products, which includes medical dressings. Some raw material costs have surged by as much as 30%.

And, with a global footprint that spans five continents, moving those products around has become a lot more expensive. Navazio said the cost to ship a container from New Zealand to California is now about $4,500 — up from about $2,000 prior to the war.

For Americans, the most visible sign of the war in Iran is prices at the pump, where the national average has shot to a nearly four-year high above $4.50 a gallon. But petrochemicals derived from oil and gas production are found in more than 6,000 products consumers use daily – including aspirin, keyboards, perfumes, contact lenses and vitamin capsules.

As those raw material costs rise, companies have to decide whether to pass the increase along to consumers and potentially face reduced demand, or else keep prices lower at the expense of company margins.

While Gentell’s costs are rising, for the time being they can’t pass along all of the higher expenses in part because their largest customer is the U.S. government through the Medicare program. Gentell supplies products for nearly 5,000 nursing homes across the U.S., and those contracts are typically set on an annual basis. Ultimately, Navazio said, “the government is going to be really impacted by all of this.”

At the moment Kevin Quilty, Gentell’s chief operating officer, said the higher prices are “a little bit of margin crunch” for the company. While he said the company hopes the raw material price volatility is short-term, there’s going to be “some trickle-down effect in terms of what our pricing will be.”

The oil price shock from the Strait of Hormuz’s closure is just the latest headwind the company has had to contend with, after also navigating through tariff uncertainties and supply chain disruptions from the Covid-19 pandemic.

Quilty said the pandemic in some ways prepared the company for the current price shock, since the it critically highlighted the need to lock in schedules and commitments from suppliers. At this point, Quilty said the pandemic was a greater challenge for the company than the current environment.

But everything will depend on how long traffic through the Strait of Hormuz remains largely stalled. President Donald Trump said Sunday that talks to end the war with Iran and reopen the strait are proceeding, but he urged his negotiating team not to rush into a deal.

Experts have also said once the waterway is open it will take months for traffic to return to pre-war levels.

“We’re…

Hello, this is Hui Jie writing to you from Singapore. Welcome to another edition of CNBC’s Daily Open.

Over the weekend, U.S. President Donald Trump sent mixed signals about a potential deal with Iran, calling the talks “constructive,” while also posting images of U.S. military striking Iranian ships.

Trump said that Washington will not rush into a deal at a time when energy stockpiles risk hitting the “red zone” this summer, and Gulf nations’ AI ambitions stall as the conflict drags on.

U.S. President Donald Trump has lashed out at critics on social media, calling them “losers,” over their assessment of his potential deal with Iran.

According to MS Now, the deal being negotiated could open the Strait of Hormuz, end the hostilities, unfreeze certain Iranian assets and guarantee further negotiations aimed at curbing Tehran’s nuclear program.

Amid conflicting signals over a possible deal, traders seem hopeful of a positive outcome, with oil prices falling in Asia trading Monday. U.S. West Texas Intermediate futures dipped almost 5% to $91.79, while international benchmark Brent fell below the $100 mark in over a month to $98.33.

Peace talks face a key hurdle in Tehran’s insistence on keeping enriched uranium stockpile within the country and levying tolls for passage via the strategically vital Strait of Hormuz. Trump has said that Washington will not rush into a deal.

The Middle East war has jeopardized Gulf nations economic plans aimed at riding the global AI boom, as an extended conflict tests investor confidence, raising questions over energy security and infrastructure resilience.

Investment decisions into some data center projects in the region have been paused or are taking longer as the conflict continues.

Speaking of AI, South Korea’s deputy prime minister said on Friday that AI-derived wealth must benefit the public, while also telling CNBC’s Lisa Kim that the AI era has raised concerns over whether the technology could worsen inequality and lead to job losses.

— Lim Hui Jie

‘The Mandalorian and Grogu’ is Disney’s lowest-ever Star Wars film opening

Walt Disney’s “The Mandalorian and Grogu” opened on Friday, marking the first time in seven years that a new Star Wars film has launched on the big screen.

Sunday estimates indicated that the film, based on the hit Disney+ show “The Mandalorian,” surpassed initial box office projections, tallying $82 million in domestic ticket sales through its first three days in theaters. Official numbers will be released on Monday.

While “The Mandalorian and Grogu” outpaced the $80 million that most box office analysts predicted, it has so far tallied less than 2018′s “Solo: A Star Wars Story,” which at $84 million was the previous lowest-opening Star Wars project in the era of Disney Star Wars releases, according to data from Comscore.

The Gulf’s ambition to become a global hub for artificial intelligence is being tested, as the potential for a prolonged conflict in the Middle East raises questions over energy security, infrastructure resilience and investor confidence.

Before the war began in February, the United Arab Emirates, Saudi Arabia and Qatar were racing to position themselves at the center of the AI boom, leveraging abundant, low-cost energy and strategic geography to encourage hyperscalers to build out vast data center networks there.

But two Amazon data centers in the UAE were targeted early in the war and, nearly three months later, oil prices remain around $100 a barrel and the Strait of Hormuz remains closed.

While investors and companies involved in AI infrastructure in the Middle East told CNBC they were bullish about the region’s future in the sector, rising geopolitical risk in the region could impact AI projects, analysts said. Investment decisions into some data center projects in the region have been paused or are taking longer as the conflict continues.

“The ongoing conflict in the Middle East is putting AI infrastructure on the literal front lines in ways that even a year ago, two years ago, would have seemed out of the realm of possibility,” Trisha Ray, associate director and resident fellow at the Atlantic Council’s Geotech Center, told CNBC’s Dan Murphy on May 15.

The war has “marked a shift,” she added. Risk management used to focus “on cyber threats, digital disruptions, not kinetic threats. And this has changed with the drone strikes,” said Ray.

The AI bet

In the years before the war, Gulf nations made advanced technology a core pillar of their plans for economic diversification, from sovereign-backed investment vehicles to national AI strategies. At the core of this pitch is energy. The Gulf’s access to abundant hydrocarbons, large-scale generation capacity and relatively low-cost electricity made it an attractive destination for power-intensive data centers that form the backbone of AI and cloud computing.

The UAE backed major initiatives through its AI investment platform MGX and local AI “champion” G42, both founded by the $385 billion Abu Dhabi investor Mubadala. Saudi Arabia plans to deploy tens of billions of dollars into AI and data infrastructure as part of Vision 2030 through HUMAIN, backed by the Kingdom’s nearly $1 trillion Public Investment Fund. Qatar is also investing heavily in AI and established a national firm called Qai, a subsidiary alongside the nearly $600 billion Qatar Investment Authority, in partnership with Brookfield.

Against this…