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Top Overnight News
Saudi Arabia has increasingly found itself caught in the middle of the war between the United States and Iran. Now, the kingdom’s leadership is assessing dwindling options on how to respond. NYT
The Defense Department’s inspector general released its first report on the war with Iran on Monday, saying the conflict has resulted in a shortfall of U.S. munitions and “bottlenecks” in supply chains as the Trump administration works to replenish weaponry. NBC
Offering a grim assessment of Russia’s relations with the West, President Vladimir Putin pointedly warned European governments not to deploy any troops, including peacekeeping forces, to Ukraine, saying it would mean “war.” WaPo
Ukraine on Mon said it would end energy attacks if Russia did the same, but Kyiv is skeptical Moscow will agree to a halt. CNBC
Ukraine Strikes Russian Refinery, Drone Plant and Ozon Facility in Massive Overnight Attack: Kyiv Post
Japan is considering a new mid-term defense spending target of 3.5% of GDP in line with NATO and other US allies, a move that could send a shockwave through financial markets concerned about Prime Minister Sanae Takaichi’s spending plans. BBG
Japan Prime Minister Sanae Takaichi’s cabinet approved a plan to temporarily reduce the consumption tax on food, moving closer to delivering on a key election pledge to ease the burden on households from the soaring cost of living. BBG
The Bank of England is poised to announce this week that it will stop selling long-dated government bonds which have been hit by a global selloff in debt markets, potentially freeing up some cash for finance minister John Healey: Telegraph
China’s domestic economic indicators weakened further last month, piling pressure on policymakers to take more forceful measures to reinvigorate growth in the world’s second-largest economy. Retail sales grew 0.4% year-on-year in August, data from the National Bureau of Statistics showed on Tuesday, down from 0.6% growth in July and falling short of a median forecast of 0.8% growth. FT
Industrial America is contending with a fresh wave of supply chain inflation as Donald Trump’s Iran war pushes up energy costs, tariffs raise import prices and the AI boom strains supplies of crucial electronics. FT
There is another factor that could add Treasury bonds volatility into the mix: hedge funds, a growing force in this market. Hedge funds held about $2 trillion of Treasurys at the start of this year, more than double their holdings five years earlier, according to the Treasury Department’s Office of Financial Research, which said hedge funds controlled a record 7% of the market. Data released by the Federal Reserve on Friday suggests that funds’ Treasury holdings remain elevated. WSJ
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