Yesterday, the US announced it would escort ships through the Strait of Hormuz — calling it a humanitarian operation (!) Iran warned it would retaliate, and reports suggest the US went ahead regardless. Iran then struck ships and key oil infrastructure in Fujairah, UAE — notably a terminal that allows exports bypassing the Strait. Unsurprisingly, oil prices spiked, with US crude nearing $110pb and Brent $115pb. This morning, uncertainty remains high, though prices have eased slightly.
The pattern is familiar: the $115–120pb range is acting as strong resistance — above this level, the market shifts from pricing supply constraints to pricing demand destruction. That brings rising inflation expectations, more hawkish central bank expectations and higher yields — all of which were triggered yesterday.
The US 2-year yield jumped near 4%, while the 30-year yield breached 5%. European 10-year benchmark yields also moved higher.
As a result, the dominant market narrative flipped from AI optimism to Middle East tensions. The US dollar index rebounded past its 200-DMA, while gold eased toward $4’500, pressured by the stronger dollar and rising yields, which increase the opportunity cost of holding non-yielding assets. I believe gold’s muted reaction also reflects the speculative positioning built up ahead of the crisis. That said, gold remains well supported in the current geopolitical backdrop, with central banks reportedly continuing to accumulate on dips.
Elsewhere, the Reserve Bank of Australia (RBA) delivered its third straight rate hike — in line with expectations — to rein in inflation. The AUDUSD nevertheless eased, pressured by a broadly stronger US dollar driven by geopolitical tensions and higher oil prices. The EURUSD is testing its 200-DMA to the downside, while USDJPY is consolidating just below its 100-DMA.
FX moves will likely remain driven by the US dollar in the near term. The higher the tensions, the higher oil prices, and the stronger the dollar. A stronger dollar raises imported inflation globally, reinforcing expectations for tighter monetary policy. That, in turn, weighs on risk appetite.
As such, major US and European indices retreated. The Stoxx 600 was also hit by a notable selloff in European carmakers on reports that Trump would impose a 25% tariff, arguing Europeans are not complying with trade agreements. Europeans deny. The situation remains legally and politically unclear, anyway.
But forget about the tariffs for a second. The broader issue is structural: European carmakers will struggle to replace US demand, as the US continues to restrict Chinese EV penetration. Outside these regions, markets are increasingly open to Chinese EVs, which are cheaper and often more advanced. Meanwhile, higher fuel prices accelerate the global EV transition.
To me, European carmakers will remain under pressure with or without US market access — without it, the unravelling would simply be faster.
On oil, renewed tensions and damage to infrastructure should keep upward pressure in place. A spike above $120pb is possible, but unlikely to be sustained — at those levels, demand destruction typically kicks in and caps further gains.
Voilà, that’s it for the big picture.
The recent spike in oil prices is weighing on European futures this morning, while Nasdaq futures are in positive territory.
After the bell yesterday, Palantir Technologies reported an 85% jump in Q1 sales year-on-year, driven by strong US military demand. Alas, solid results and guidance were not enough — the stock fell in after-hours trading.
Today, AMD heads into earnings with expectations for ~30%+ year-on-year growth, driven by AI and data centre demand. But the bar is high: after a rally of more than 85% since late March, the key question is whether AMD can deliver a convincing beat, particularly against Nvidia’s dominance and ongoing supply constraints.
Nvidia, for its part, is starting to face growing competition — from AMD, as well as custom chips developed by hyperscalers like Amazon and Google.
So far, none have matched Nvidia’s full-stack ecosystem — especially its CUDA software moat — which keeps it firmly in the driver’s seat. But a shift is underway between training and inference. Training large models remains compute-heavy and tightly tied to Nvidia’s ecosystem. Inference, however, is about cost, efficiency and scale — and that’s where competition intensifies, with solutions like Google’s TPUs and Amazon’s Inferentia chips.
Anyway, let’s see how AMD’s earnings resonate — and whether they can help offset the geopolitical noise.
 Iran warned it would retaliate, and reports suggest the US went ahead regardless. Iran then struck ships and key oil infrastructure in Fujairah, UAE — notably a terminal that allows exports bypassing the Strait. Unsurprisingly, oil prices spiked, with US crude nearing $110pb and Brent $115pb. This morning, uncertainty remains high, though prices have eased slightly.){kind=link}