Markets are on edge as diplomatic nuances between Iran and the U.S. regarding the Strait of Hormuz fail to quell investor jitters. While both Washington and Tehran signal a de-escalation, direct negotiations remain unconfirmed, with messages passed through intermediaries. Investors are closely watching upcoming inflation data and geopolitical developments for market direction.
In other news, Israeli Prime Minister Netanyahu has rejected Trump’s Gaza plan, Berkshire Hathaway is set to deploy its cash reserves, and Meta faces a deadline for an apology in India over a post restriction.
Hello, this is Anniek Bao writing to you from Singapore. Welcome to another edition of CNBC's Daily Open.
Markets ended last week convinced that a Strait of Hormuz deal was nearing, while Iran spent the weekend insisting that it is not in the room negotiating with the U.S.
Trump told Axios that Washington is "low keying it" and "only semi-negotiating" with Tehran. Iran's foreign minister says there are no direct talks, aside from messages passed through intermediaries. Oman is closing in on an agreement around transit routes, but Tehran has been careful to make it clear that a shipping arrangement is not the same thing as reopening the waterway.
Traders now price a roughly 44% chance the Fed raises rates in September, down from 67% a week earlier, per CME's FedWatch tool. But the CPI print due this week, or a collapse of a Hormuz deal, could push those odds right back up.
What you need to know today
Iranian foreign minister Abbas Araghchi said Tehran is not in direct negotiations with the U.S. to end the war and reopen the Strait of Hormuz, saying that "messages are being exchanged through intermediaries."
In a Sunday interview with Axios, U.S. President Donald Trump said that Washington is "low keying it" in negotiations with Iran.
"We are only semi-negotiating with them. We are just watching Iran with its huge inflation and the fact that they have no money," the president said. "It will work out. It always works out. It's like a chess game."
U.S. stock futures moved to price in the growing doubts over progress to reach a deal that reopens the Hormuz, with S&P 500 futures slipping about 0.2%, Nasdaq-100 futures holding flat, and Dow Jones Industrial Average futures losing 0.3%.
Investors will look for the consumer and producer price index readings due out this week for the latest insights on inflation.
Netanyahu rejects Gaza plan
Meanwhile, Israeli Prime Minister Benjamin Netanyahu restated his rejection of Trump's latest Gaza plan in televised remarks to his right-wing government on Sunday, even as Israel's military has effectively halted attacks in the territory under pressure from Trump.
Trump announced last month that there had been a breakthrough in his plan to end the war, with Israeli forces withdrawing as Hamas disarms and an International Stabilization Force working with a new Palestinian police force to secure the enclave.
"Israel does not accept the 15-point document," Netanyahu said at the start of a meeting with cabinet ministers, saying the Israeli military will not withdraw until Hamas is disarmed.
Axios' Barak Ravid said a senior US official told him the White House is not bothered by Netanyahu's statement and sees it as part of the election season in Israel.
Abel opens the wallet
Berkshire Hathaway's CEO Greg Abel, who took over from Buffett at the start of the year, appears determined to put the record cash hoard amassed by Warren Buffett to work on buybacks and stock purchases.
The conglomerate's operating earnings climbed 16% to $12.98 billion in the second quarter, and it became a net buyer of equities with nearly $20 billion in net purchases.
Buybacks accelerated to roughly $4.5 billion in the second quarter, compared to just $235 million in the previous quarter, while the cash pile fell to $365.5 billion from a record $397.4 billion.
Meta's India headache
A parliamentary panel last Wednesday demanded an apology from Mark Zuckerberg within three days over the brief restriction of a post by Prime Minister Narendra Modi on Meta Platforms' Facebook.
Failure to do so could result in revoking Meta's safe harbor immunity, which would make Meta liable for the user-generated content on its platform.
Legal experts told CNBC it would be almost impossible for Meta to operate in India without that protection, though withdrawing it would require amending existing law.
China's cooling inflation and another typhoon
China's consumer inflation rose 0.5% year on year in July, decelerating from June's 1.0% and missing the forecast of 0.8% — the slowest reading since January, while factory-gate producer prices jumped 3.5%, below the 3.8% economists expected.
Typhoon Dolphin, the most powerful cyclone to hit China this year, made landfall in the eastern coastal province of Zhejiang on Sunday, with more than one million people evacuated.
Authorities had moved offshore workers to safety, ordered vessels back to port and increased checks at reservoirs, mountain streams, landslide-prone areas, construction sites and tourist locations.
And finally...
How a small Israeli startup was linked to rogue AI hacks at OpenAI, Anthropic and Meta
Over the past two weeks, OpenAI, Anthropic and Meta all revealed that their AI models went rogue during routine security testing. In explaining what happened, the companies each mentioned the same small Israeli startup: Irregular.
Founded three years ago and based in Tel Aviv, Irregular is a niche player in artificial intelligence, backed with $80 million from Sequoia and Redpoint Ventures and valued last year at $450 million. Its technology serves as a sort of cybersecurity test bed for AI models.
With the leading models becoming ever more powerful, their ability to act in malicious ways is turning into a major threat for corporations and governments, especially as the risk involves hacking into critical computer systems and infrastructure. The recent exploits at OpenAI, Anthropic and Meta all involved their AI models accessing websites that should have been off-limits as part of the cybersecurity testing.
— Jonathan Vanian
