A key oil facility in Saudi Arabia was hit by a sophisticated attack involving drones and missiles last Saturday. Yemen’s Houthi rebels took credit for the destruction to the facility which produces 5% of the world’s daily global oil supply. However, given the scale and complexity of the strike, it is likely that this group received outside help and the U.S. is stating that Iran is the culprit. While social media and statements flared, the U.S. has been measured in its response of financial sanctions and sending defensive support to Saudi Arabia. On Wednesday, in a widely anticipated move, the Fed lowered the key fed funds rate by 25 basis points as well as lowered the rate it pays on excess bank reserves by 30 basis points. The committee continues to show a split in whether further cuts are needed.

Weaker global growth projections and soft economic data from China cast a gloom over the equity markets this week despite the additional support from the Fed. The added geopolitical pressure and tensions with Iran also shifted net investment toward safer assets. U.S. stocks lost one-half of one percent and emerging market stocks took the brunt of the drop – down approximately 1.5% for the week. Bonds, on the other side of the risk spectrum, rose in price and yields fell. The 10-Year Treasury ended the week at 1.74%. This is well above the 1.4% range at its trough but significantly down from the start of the year. Oil prices shot up at the beginning of the week, after Saturday’s attack, but settled back a bit after oil production was brought back online faster than anticipated.

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