Daily Briefing | 26 October 2026: Lula secures a comeback victory to win a second term as Brazilian President; Houthi rebels claim to have attacked a Saudi oil pipeline; Trump says the choice between ‘negotiation or war’ with Iran will be decided

Automatically translated. Read the Chinese original.

Today's main theme

This edition covers 24–25 October (approximately 48 hours over the weekend). The situation in the Middle East remains the main focus, but attention is beginning to shift from the Strait of Hormuz to Saudi Arabia’s ‘alternative routes’: the Houthi rebels claimed to have attacked Aramco facilities in Yanbu, the Rabigh refinery and the East–West oil pipeline in Saudi Arabia, though Saudi Arabia has not confirmed this; On 25 October, Trump stated that he was deciding between “reaching a deal” and “dealing with Iran once and for all”, but would not take action that day; Israeli media, meanwhile, reported that the Chief of the General Staff of the Israel Defence Forces was opposing Netanyahu’s plans to take action against Iran ahead of the 27 October general election. Brent crude closed at $116.72 last Friday, its highest level since late April. On the international political front, following an extension of voting and a suspension of vote counting in Brazil’s second round of the presidential election, Lula overturned Flávio Bolsonaro’s lead with approximately 51.75 per cent of the vote. In the technology sector, ahead of this week’s earnings reports from Microsoft, Alphabet and Amazon, Apollo’s chief economist noted that AI has yet to deliver financial returns outside the technology industry; Dark Side of the Moon launched the Kimi K3.1 Pro. On the domestic front, the central bank today renewed its Medium-term Lending Facility (MLF) at a reduced volume, resulting in a net withdrawal of 200 billion yuan, whilst the balance of margin trading and short selling fell to a new low for the year.

Key News

1. Trump says he is torn between ‘reaching a deal’ and ‘a complete resolution’; the Israeli military is reportedly resisting pre-election action against Iran

In an interview with Fox News’ ‘Sunday Morning Futures’ on 25 October, Trump said he was weighing up whether to reach a deal with Iran or to take action to ‘finish them off’, and claimed that the US had taken control of the Strait of Hormuz. Later that day, he stated that “there will be no strike today”, but did not rule out taking action at a later date; at a rally in Port Huron, Michigan, on the same day, he said the matter would soon be settled “one way or another”. On the Iranian side, Foreign Minister Araghchi stated on 25 October that Iran’s policy would remain unchanged regardless of whether war broke out again, adding that US bases in the region had become a major source of insecurity for host nations; the Iranian Foreign Ministry said that the two sides were still exchanging messages through intermediaries. Iran’s ambassador to Pakistan said on 24 October that Iran would reopen the Strait of Hormuz as long as the US lifted its naval blockade, and accused Trump of rejecting this proposal. Furthermore, according to The New York Times, citing anonymous officials, US Central Command has drawn up a list of potential targets for expanded strikes, including energy facilities.

Divisions have also emerged within Israel. According to *The Times of Israel*, citing Channel 12, ahead of the general election on 27 October, Netanyahu wished to order a military operation relating to Iran, but IDF Chief of Staff Zamir opposed this, demanding serious discussion and written authorisation signed by the Prime Minister, The military feared a ‘miscalculation’ regarding Iran in the run-up to the election. Netanyahu dismissed the reports as ‘utter nonsense’. Opposition leader Eisenkot stated that he would not allow the IDF to be used as a tool in Netanyahu’s election campaign. Opinion polls indicate that neither the ruling coalition nor the opposition is likely to secure a majority in the Knesset.

Key developments to watch: the outcome of the Israeli general election on 27 October and the process of forming a government; whether the US will take action against Iran in the run-up to and following the mid-term elections on 3 November; and whether there will be any progress in indirect contacts via channels such as Pakistan and Qatar.

Source:CBS News、Iran International、The Israel Times

2. The Houthi rebels claim to have attacked the Yanbu and Rabigh refineries and the East-West oil pipeline in Saudi Arabia; the Saudi authorities have not confirmed this.

On 24 October, Houthi spokesperson Saria stated that the group had carried out attacks on King Khalid International Airport in Riyadh, King Fahd International Airport in Dammam, Najran Airport and the Hamis Mushait Air Base, and claimed to have struck Saudi Aramco facilities in Yanbu, the Rabigh refinery, crude oil pumping stations and the East-West oil pipeline. The Saudi authorities have not confirmed these claims; the Saudi-led coalition merely stated that its forces had dealt with fallen debris near the oil facilities; there are currently no confirmed reports of actual damage or casualties. On the morning of 25 October, the Saudi Civil Defence issued security alerts for Riyadh, Hamis Mushait and Abha, which were subsequently lifted. In Yemen, the pro-Saudi Yemeni government claimed that Houthi militants had fired three ballistic missiles at coastguard facilities in Aden; Houthi-controlled Al-Masirah TV, however, accused Saudi air strikes of causing more than ten deaths, a claim not acknowledged by Saudi Arabia. The UN-brokered ceasefire of 2022 has effectively collapsed.

These claims are significant because the East–West Oil Pipeline is Saudi Arabia’s main route for bypassing the Strait of Hormuz and transporting crude oil to the port of Yanbu on the Red Sea for export; Saudi Aramco had previously stated that its throughput had increased to approximately 7 million barrels per day. If reports of damage to the pipeline or the Port of Yanbu prove to be true, the ‘alternative route’ used to divert Gulf crude would also be threatened. As for oil prices, Brent crude closed at US$116.72 on Friday 23 October, up 3.14 per cent, marking its highest closing price since 29 April; according to Reuters, it rose by approximately 6 per cent over the week as a whole, whilst WTI closed at US$103.27. Furthermore, General Cooper, Commander of US Central Command, stated on 25 October that over the past six months, more than 3,000 merchant vessels had passed through the Strait of Hormuz under US military escort.

Key points to watch: whether Saudi Arabia will disclose the actual extent of damage to the Yanbu and Rabigh facilities; whether Brent crude will break through the $120 mark during Monday’s Asian trading session; and whether the Houthi rebels will continue to target Saudi civil aviation and energy facilities.

Source:ABC News (Australia)、ABC News (USA)、FinanceFeeds、CBS News

3. Second round of the Brazilian general election: Lula defeats Flávio Bolsonaro with approximately 51.75 per cent of the vote

The second round of the Brazilian presidential election took place on 25 October. According to data from the Brazilian Superior Electoral Court (TSE), as of 9.12 pm local time, with 99.75 per cent of the votes counted, incumbent President Lula had secured 51.75 per cent of the vote, whilst right-wing Senator Flávio Bolsonaro had 48.25 per cent; According to TSE data cited by the Rio Times, with 99.32 per cent of votes counted, the two candidates had received approximately 63.77 million and 59.46 million votes respectively, a difference of around 4.31 million votes, with a turnout of 80.80 per cent. Media outlets including France 24 have already reported Lula’s victory. At the time of writing, Flávio had not made any public statement. Lula is set to begin his fourth presidential term.

It was a turnaround. In the first round of voting on 4 October, Flávio led with 47.03 per cent, ahead of Lula’s 45.16 per cent; the final Datafolha and Genial/Quaest polls conducted before the vote also showed Flávio at 51 per cent and Lula at 49 per cent. The vote-counting process was equally eventful: Supreme Court Justice Zanin, acting on a request from Lula’s camp (citing reduced bus services and long travel distances in some areas), ordered a two-hour extension to the nationwide polling hours shortly before the original closing time, bringing the polls to a close at 7.00 pm; Flávio’s camp had also requested an extension, citing adverse weather conditions in some states; The Superior Electoral Court subsequently suspended the count, resuming it only after the extended voting period had ended. Following the resumption of the count, Flávio briefly held the lead, but Lula overtook him once approximately half of the votes had been counted. Flavio is the son of former President Jair Bolsonaro and is regarded as an ally of Donald Trump; this election has also been seen as a barometer of whether Latin America will continue its shift to the right or retain a left-wing government.

Key points to watch: whether Flavio’s camp will accept the result and whether they will mount a legal challenge to extend the voting period; the reaction of the Brazilian real and the São Paulo stock market on Monday; and the direction of fiscal policy and relations with the US during Lula’s new term.

Source:Next.io (citing TSE data)、Rio Times Live Vote Count、Rio Times (Voting Extended)、France 24

4. Ahead of this week’s earnings reports from tech giants, the question of ‘AI returns’ has resurfaced

Apollo’s chief economist, Slock, wrote in a post on 24 October that, to date, AI has “yielded no financial returns” outside the technology sector. His data shows that per-capita revenue and profit margins are rising among the “Big Seven”, whilst the remaining 493 companies in the S&P 500 have remained largely flat; there are no signs that total factor productivity is being accelerated by AI, whilst AI expenditure is highly concentrated amongst a small number of companies. He concluded that the success or failure of AI will ultimately depend on whether these 493 companies are able to utilise it and generate profits. Previously, in a report dated 16 October, Gartner estimated that by 2030, owners of AI data centres would need cumulative revenue of US$8.5 trillion to cover announced capital expenditure and financing costs whilst achieving a 12 per cent return on invested capital; however, related AI revenue is projected to reach no more than US$3.6 trillion; Gartner also forecasts that by 2030, over 80 per cent of emerging cloud service providers will cease to operate independently.

These views have emerged at a sensitive juncture. Last week, Meta’s quarterly free cash flow turned negative, triggering a sharp fall across the AI sector, whilst this week Microsoft, Alphabet (after-hours on 28 October) and Amazon (after-hours on 29 October) are set to release their financial results in turn. The market’s focus has shifted beyond simply how much capital expenditure will increase; it now centres on whether the growth rates of cloud and AI revenues can justify these investments, and whether companies will rely on free cash flow or debt to fund their expansion. Key points to watch: the three companies’ preliminary guidance on capital expenditure for 2027, the growth rates of their cloud businesses, and the reporting criteria for AI-related revenues.

Source:Apollo、CRN Asia (Gartner Report)、Babypips’ Schedule for This Week

5. The central bank today renewed its Medium-term Lending Facility (MLF) at a reduced volume, resulting in a net withdrawal of 200 billion yuan; the balance of margin trading and short selling fell to a new low for the year.

The People’s Bank of China previously announced that it would conduct a 700 billion yuan one-year Medium-term Lending Facility (MLF) operation on 26 October, using a fixed-quantity, fixed-rate tender with multiple winning bid rates. This month, 900 billion yuan of MLF matures, equivalent to a net withdrawal of 200 billion yuan, whereas in September there was a net injection of 200 billion yuan. Wang Qing, Chief Macro Analyst at Orient Gold Credit, pointed out that this month’s rollovers of outright reverse repos across both tenors totalled 400 billion yuan; overall, medium-term liquidity still saw a net injection of 200 billion yuan, marking the fourth consecutive month of net injection; Since 10 October, the overnight rate DR001 has remained below 1.30 per cent, significantly lower than the policy rate benchmark; a moderate reduction in the MLF volume will help guide short-term interest rates back up. He also mentioned that on 19 October, the central bank indicated it would explore changing the maturity of its main open market operations to overnight. Given that the fourth quarter marks the peak period for government bond issuance, coupled with the ongoing deployment of 800 billion yuan in new policy-based financial instruments, he expects the central bank to continue injecting liquidity on a substantial scale, though the likelihood of interest rate cuts or reserve requirement ratio reductions in the near term has diminished.

Leveraged funds in the stock market are also on the wane. According to a report by Cailian Press on 25 October, on 22 October, the balance of margin trading and short selling on the Shanghai, Shenzhen and Beijing stock exchanges stood at 2.46 trillion yuan, hitting a new low for the year. This represents a decrease of approximately 577 billion yuan from the peak of 3.03 trillion yuan recorded on 25 June, with capital outflows primarily concentrated in previously popular technology sectors such as hardware equipment and semiconductors. Last week, US chip stocks plummeted, causing stock markets in South Korea and Japan to fall in tandem, whilst margin positions in the A-share technology sector were also undergoing simultaneous deleveraging.

Viewed in conjunction, these two developments suggest that monetary policy remains ‘stable’, though it is no longer indiscriminately accommodative, with liquidity conditions now relying more heavily on structural tools; meanwhile, risk appetite in the capital markets is waning. Key points to watch: today’s MLF winning bid rate; whether the central bank will press ahead with reforms to overnight operations; the forthcoming September industrial enterprise profit figures; and whether the margin trading and short selling balance has stabilised.

Source:China News Network、Jiemian News、Sina Finance (Compilation of reports from Cailian Press)

6. Dark Side of the Moon has released Kimi K3.1 Pro and announced that weighting will be available from 4 November

Dark Side of the Moon released Kimi K3.1 Pro on 23 October; this is a post-training version of Kimi K3, which was released in July, with a parameter size of approximately 3 trillion. According to VentureBeat, the model scored 55 on the Artificial Analysis Intelligence Index, higher than the K3’s 44, placing it fourth; the greatest improvement was seen in agent tasks, with the Terminal-Bench 4.0 score rising from 13 per cent to 67 per cent. However, it still trails leading US models in some tests. The API is priced at US$2 per million input tokens and US$10 per million output tokens, which is approximately half the standard price of Claude Opus 5.5, but higher than DeepSeek and Xiaomi. Dark Side of the Moon has stated that it will release the model weights under an open licence on 4 November. Additionally, a user posted a screenshot on X claiming that Kimi’s paid promotion requirements stipulate that bloggers must not label posts as ‘sponsored content’. The authenticity of this document has not yet been independently verified, and the company has not yet responded.

Chinese models are catching up with cutting-edge closed-source US models by adopting a strategy of ‘open weights combined with low pricing’, which is putting pressure on the pricing power of overseas AI companies. Key points to watch: whether the weights will be released as scheduled on 4 November, whether third-party evaluations can replicate the official results, and the latest developments regarding the controversy surrounding the model’s promotion.

Source:VentureBeat

Market Correlation and Today's Observation

24 and 25 October fall on the weekend; the following primarily discusses the impact of these news stories on the markets this week. Oil prices remain the key variable, and the risks are mounting: Whilst the market had previously been focused on the Strait of Hormuz, the Houthi rebels have now set their sights on Saudi Arabia’s east-west oil pipelines and the Red Sea coastal cities of Yanbu and Rabigh. Should reports of damage to these facilities prove true, Saudi Arabia’s ability to export crude oil by bypassing the Strait would be compromised, lending further credence to the view that Brent crude could rise to $120; If Saudi Arabia confirms that no actual damage has occurred, the weekend’s reports may only trigger a brief spike in prices. Trump’s ‘talk or fight’ stance and the Israeli general election mean that the geopolitical premium is unlikely to subside in the short term.

This week is also a ‘super central bank week’: the Federal Reserve is due to hold its monetary policy meeting on 28 October, with the market widely expecting interest rates to remain unchanged; however, as oil prices have pushed up inflation expectations, the market is paying closer attention to Chair Wash’s remarks and the possibility of a rate rise in December; The Bank of Canada and the Reserve Bank of New Zealand are expected to raise rates, whilst the European Central Bank on 29 October and the Bank of Japan on 30 October are expected to hold rates steady. In the technology sector, views from Apollo and Gartner are likely to prompt investors to scrutinise the capital expenditure and cloud business growth rates of Microsoft, Alphabet and Amazon more closely. In Brazil, following Lula’s narrow victory, the real and Brazilian assets will digest the election results and potential legal disputes on Monday. Domestically, the rollover of the Medium-term Lending Facility (MLF) at a reduced volume and the decline in margin trading balances indicate that liquidity conditions remain ‘stable but not loose’; the technology sector in the A-share market continues to deleverage, whilst Hong Kong and A-shares are largely tracking fluctuations in overseas technology stocks and oil prices.

Checklist:

• Will Saudi Arabia disclose the extent of the damage to the Yanbu, Rabigh and East-West oil pipelines? Will Brent crude break the $120 mark on Monday?
• The results of the Israeli general election on 27 October, and whether the US will take action against Iran before the mid-term elections
• The Federal Reserve’s statement on 28 October and Mr Wash’s press conference, the European Central Bank’s decision on 29 October and the Bank of Japan’s decision on 30 October
• Capital expenditure and cloud business growth in the financial reports of Microsoft, Alphabet (28 October) and Amazon (29 October)
• Whether the results of the Brazilian general election have been officially confirmed, whether Flávio’s camp has lodged a challenge, and the trend of the real
• Today’s MLF winning bid rate, September industrial enterprise profit figures and changes in margin trading balances

Source:Babypips’ Schedule for This Week、FinanceFeeds

Cover image:Fernando Dantas / Unsplash