Oil sheds 7% on Iran deal talk

Window: 12:00 AM to 5:41 PM ET. All times ET.

December WTI settled at $96.46 on Monday, down 7.4% and back under $100, its biggest one-day drop since July 27. January Brent lost 7.6% to $104.77. The Dow rose 0.41% to 51,983.98 while the Nasdaq fell 1.07%, so cheap oil and nervous AI money spent the day pulling the indexes in opposite directions.

A war premium gets marked down

The first push came from Tehran. Iranian state media quoted President Masoud Pezeshkian as saying the Supreme Leader had given the government powers to pursue talks. The English translations don't agree on the exact wording, so he isn't on the ranked list, but Brent fell about 6% on the report anyway.

Donald Trump took the victory lap at 3:46 PM on Truth Social. "Oil Prices are DROPPING LIKE A ROCK, down almost $10 a Barrel, A RECORD, because people feel that there will not be a War with Iran. Iran wants a settlement, as soon as possible. It could happen!" Earlier he told Axios, "One way or the other, we will do something, but there is no rush." At his Lincoln Memorial Reflecting Pool event, a reporter asked whether he was considering strikes on Iran after the midterms. He said "No."

JD Vance supplied the fine print. "Look, the president and I both feel pretty good about the prospects for potentially coming to a negotiated settlement. We’re going to keep on working at it." He also said, "No, we haven’t set deadlines," and that a deal "really does require a firm commitment and a verifiable commitment that they don’t rebuild that nuclear program."

The trade showed up where you'd expect. By midday the JETS airline ETF was up 5.6% and Delta was up 4.7%, while XLE was down 3% and Exxon 3.2%. The 10-year Treasury yield was down to 4.89%, since cheaper oil softens the inflation outlook.

The concept: the pump lags the barrel. Retail gasoline tends to rise fast when crude jumps and drift down slowly when it falls, which traders call "rockets and feathers." A station's tanks hold fuel it bought at older wholesale prices, and it has little reason to cut the number on the sign before it has to. So a 7% drop in crude on election eve takes a while to reach a sign like the one in the photo. My read is that futures priced in a settlement today that has no deadline and no announced terms. Vance's nuclear condition is the part that could make it slow.

What to watch: CL and BZ, HO for diesel, XLE and XOM, airlines (JETS, DAL), the 10-year yield, gold (GC), defense (LMT, NOC, RTX) and tankers (FRO, STNG).

The AI trade asks for a receipt

Alex Karp's shareholder letter after the close did not aim for subtle. "It is our firm and unwavering intent to take the entire market, the whole thing." Palantir's revenue grew 96% to $2.3 billion, and U.S. commercial revenue passed U.S. government revenue for the first time. He told CNBC, "I don't believe anyone's had consistent results like this in the history of software AI, ever."

That was the mood all day. The Nasdaq was up as much as 1.4% early and closed down 1.07%. Oracle fell 8% after saying it plans to sell $10 billion in stock and $10 billion in bonds to pay for its AI buildout.

Marvell chose the same Monday to announce it's buying Lumentum in an all-stock deal with an implied enterprise value of $115 billion. Matt Murphy's pitch: "AI infrastructure is undergoing a fundamental architectural shift toward optical connectivity, creating an opportunity that comes along once in a generation." Marvell closed down 12.7%. Lumentum, the company being bought at a premium, closed down 18.6%.

The concept: the fixed exchange ratio. Lumentum holders get 4.5 Marvell shares for each share they own, with no cash. The roughly 24% premium was measured on Oct 28 prices, before deal talk started. Because the payment is Marvell stock, the dollar value of the deal moves with Marvell's share price every day until closing, and closing isn't expected until the first half of 2028. When the buyer's stock drops 12.7%, the price being paid drops with it, and the target trades down alongside. In a stock deal the acquirer's share price is the scoreboard. My guess is that Lumentum fell harder because some of the premium was already priced in during the days of deal talk.

Sam Altman told the ADIPEC crowd in Abu Dhabi that there "should not be a handoff to AI" and that the technology "needs to be a tool built for people and needs to serve people, not the other way around." The more tradable answer was his biggest challenge, which he named as energy. OpenAI signed deals with ADNOC and G42 at the event. He also said OpenAI solved a Millennium Prize math problem, a claim The National said it couldn't independently verify.

What to watch: PLTR, MRVL and LITE, the optical names (COHR, AVGO, CIEN), ORCL, SMH, IGV and the power producers (VST, CEG).

Apple's margin math

John Ternus's first earnings report as Apple CEO showed $114.5 billion in revenue, up 12%. He told Reuters, "Duo is constrained as of today... at this point, we're not able to predict when supply and demand will be in balance." His CFO, Kevan Parekh, put a number on the memory problem on the call. "We expect gross margin to be between 45 percent and 46 percent. This includes primarily the impact of higher memory costs, as well as some costs related to the ramp of Siri AI." The September quarter came in at 47.9%, and about a point of that was tariff refunds.

The concept: gross margin is what's left of each sales dollar after the cost of making the product. When a part like memory gets more expensive, a company can raise prices, absorb the cost, or do some of each. Apple raised iPhone 17 prices by $100 and lifted some MacBook prices, and Ternus said those increases "provided some offset." The guide says the offset isn't complete. Apple also guided December-quarter revenue growth of 7% to 10%, and shares rose 0.8% after hours. A foldable you can't make fast enough is a nice problem to have. It still only counts as revenue once it ships.

What to watch: AAPL, memory (MU, SNDK) and TSM.

Notable moves

Michael O'Leary told CNBC before dawn that Ryanair's cheap fuel runs out next year. "Jet oil today is $170 a barrel. I mean, this is a very significant cost cliff we're all facing next year. I believe you're going to see airfares rise next year across Europe by 10%, maybe even 20%." Ryanair hedged 80% of this year's fuel at $67 a barrel, and those hedges roll off in 2027. A hedge locks in a price for a set period, and when it expires the airline buys at whatever the market charges. First-half profit fell 15% to €2.15 billion, and the company expects its fuel bill to rise by about €2 billion next year. Days like today decide what the next round of hedges costs. RYA.I, IAG.L, LHA.DE, AF.PA and EZJ.L are the tickers.

Volodymyr Zelensky posted at 2:55 PM, "We have intel that Russia is preparing a new massive attack on our country," aimed mainly at energy and logistics. His reasoning on timing: "The assumption is basically that tomorrow the world will be watching the American midterms." He also wrote, "We must not play games with Russia’s oil or gas revenues." European gas (TTF), RTX, LMT and RHM.DE carry that one.

Scott Bessent posted that "There has never been a better time to invest in the USA," citing 16.6% annualized growth in equipment investment so far this year. The ISM manufacturing index rose to 55.5 from 54.5, and its prices-paid gauge cooled to 75.2 from 77.9.

No Fed official spoke on the record today. Austan Goolsbee's Chicago Fed fireside chat ran under the Chatham House Rule.

What to watch

• Tuesday: U.S. midterm elections, the RBA decision and JOLTS. AMD and Pfizer report.
• Wednesday: ADP, ISM Services and the Treasury's quarterly refunding announcement. Qualcomm and Novo Nordisk report.
• Thursday: the BoE, Norges Bank and Banxico decide, and Canada releases its federal budget.
• Friday: the October jobs report.
• A check on "A RECORD": WTI fell $7.66 and Brent $8.66, and CNBC called the WTI drop the biggest one-day loss since July 27. That makes it a record for about three months.