The early spike in oil prices faded throughout yesterday’s trading session, pulling both US and Brent crude below the $100pb mark on news that a few tankers could transit through the Strait of Hormuz. There were also reports that flows could resume beyond the US, Israel and their allies. Scott Bessent told CNBC that the US is “letting Iran” ship its oil to ease pressure on global oil prices.
But of course, continued tensions are keeping oil bulls well awake. WTI crude is slightly higher above $95pb in Asia this Tuesday morning, while Brent crude is attempting to return above the $100pb psychological mark. The geopolitical outlook remains fragile, making oil prices more prone to further upside than a sustained decline.
On the geopolitical front, Donald Trump’s call for international help received a chilly response from once-reliable allies. And what to say? It’s been more than a year that allies have been threatened with softer military support. Earlier this year, Europeans had tensions around Greenland, and the Trump administration imposed massive trade tariffs on partners around the world — shaking economies to such a degree that sending warships to the Strait of Hormuz alongside the US has become a monstrously complicated political decision.
Make no mistake: Europeans also want a resolution and are exploring options, but they want a solution outside the context of NATO, some of which include rerouting trade through the Red Sea. But nothing is clear yet.
What’s clear is that global uncertainty persists, opinions diverge, oil infrastructure is being targeted in the Middle East, and Russia continues to benefit from strong oil revenues thanks to easing sanctions. There are now rising calls in Europe to normalize relations with Russia — as the gas refill season approaches and Qatar’s LNG supply remains uncertain. No wonder European defence stocks gained 1.79% on Monday.
Could it get worse? Add to this private credit stress weighing on big banks, AI-related concerns, the SaaS-pocalypse, the hawkish shift in global central bank expectations and weakening international trade and military trust — it doesn’t set the stage for euphoria.
There will be a trigger to bring dip buyers back in — remember the post-tariff rebound. All parties were worse off after the tariffs, yet markets rallied to fresh records. Easing Middle East tensions could trigger similar optimism, but headlines will decide when and how.
Today, the news remains far from ideal. The Reserve Bank of Australia (RBA) raised its cash rate by 25bp, as expected, to counter renewed inflationary pressures that could worsen with rising energy prices. The AUDUSD rebounded from the 50-DMA yesterday on the back of a broad-based USD retreat and approached the 0.71 mark today.
Elsewhere, the US dollar’s retreat yesterday supported major currencies: the EURUSD rebounded from 1.1414, while the USDJPY met resistance near the 160 level. But ongoing Middle East tensions, higher energy prices and the hawkish shift in Federal Reserve (Fed) expectations remain supportive of the US dollar in the short term. Expensive energy, combined with a stronger US dollar, will also force other major central banks to maintain a hawkish stance — which is not supportive for risk appetite.
The Fed starts its two-day policy meeting today, and investors can’t wait to see how policymakers assess the latest developments. Fed members have been leaned toward supporting a softening labour market despite inflation remaining above target. But now, inflation is not only expected to stay above target, it could also pick up again, while labour market softness remains a concern. Activity in Fed funds futures stopped pricing in a full 25bp cut this year, meaning the hawkish shift is largely priced in. That leaves us wondering whether the Fed’s decision will be more or less hawkish than expected. The answer: tomorrow evening.
Across equities, European and US markets had a positive Monday session, helped by a pullback in oil prices and gains in technology stocks.
Jensen Huang opened Nvidia’s GTC conference by saying he expects the company to reap “at least” $1 trillion in revenue from its newest AI chips through 2027, adding that he is certain ‘computing demand will be much higher than that’.
The next big thing in AI will be the shift to agentic work — models that don’t just answer questions but actually perform tasks. This will drive even more demand for powerful chips, Huang says. But it also increases competition among chipmakers aiming to make inference cheaper — think Google’s TPUs. That may explain why Nvidia consolidated earlier gains and closed the session 1.65% higher, still within its 50- and 200-DMA range. Nvidia has been trading relatively range-bound since November, hovering between $170 and $200, as investors remain confident in long-term demand but more cautious about the scale of Big Tech’s AI spending.
As for the SaaS-pocalypse — where AI models threaten traditional software businesses — Huang predicts a shift toward what he calls “Aas” – agentic AI as a service. In this model, companies would sell AI agents to clients so they can build their own software. The iShares Expanded Tech-Software ETF gained 0.90% yesterday on hopes that companies can adapt — though some will, and some will not.
 raised its cash rate by 25bp, as expected, to counter renewed inflationary pressures that could worsen with rising energy prices. The AUDUSD rebounded from the 50-DMA yesterday on the back of a broad-based USD retreat and approached the 0.71 mark today.){kind=link}