On Tuesday, crude oil pushed higher as Middle East tensions escalated following reports of the killing of senior Iranian figure Ali Larijani. Experts suggested this could prompt Iran to intensify attacks on Gulf countries.
This morning, oil is sharply down on news that Iraq signed a deal to resume oil exports via Turkey, bypassing the Strait of Hormuz, while Saudi Arabia is also rerouting exports toward the Red Sea. The region is reorganizing, preparing for the possibility of a prolonged conflict. Restoring oil exports fully will take time, and we may soon see physical-market shortages — likely keeping oil prices under upward pressure. Yet, as flows adapt to alternative routes, the initial surge in oil prices seen at the start of the war could ease.
This matters for global economies already pressured by higher energy costs and rising hawkish central bank expectations.
Yesterday, the Reserve Bank of Australia (RBA) raised rates for the second consecutive month to counter inflationary pressures exacerbated by the Middle East conflict.
Today, the Federal Reserve (Fed) is expected to hold rates steady while revising growth and inflation projections. Recent data show US price pressures had been building even before the latest spike in oil prices, suggesting challenging months ahead. The Fed will need to decide whether to look through these pressures, assuming they are short-lived, or act by signaling no rate cuts in the foreseeable future.
The US Dollar is weaker this morning against major currencies, pulled down by the sharp fall in oil prices. The EURUSD consolidates gains above 1.15, while the USDJPY retreats from the problematic 160 level. On the index front, the Nikkei is up over 1%, Kospi rallies almost 5%, and US and European futures point to an encouraging start.
Oil prices remain the common denominator for global risk appetite: the lower and more sustainable, the better. Yet, the lack of a near-term resolution will keep oil markets volatile. The longer uncertainty lasts, the bigger the impact on physical availability and the harder it will be to bring prices back to pre-war levels.
Rising energy prices are not the only inflationary risk — they are the major one, affecting everything from agricultural and industrial goods to transportation and services. There are also US tariffs, and AI competing with local communities for resources such as electricity — and, in some regions, water — further threatening price pressures.
Inside tech, the memory chip shortage — aggravated by high and growing AI demand — has pushed the industry into a deep crunch since last year, a shortage that SK Hynix expects to persist over the next four years. This will likely push electronics prices higher and squeeze margins for producers, including PC, smartphone, car, appliance and TV manufacturers.
Earnings from Micron Technology are due today after the bell, and expectations are sky-high. Analysts forecast revenue of around $19 billion — more than double year-on-year — and EPS in the $8.5–$9 range, a more than fivefold increase versus last year. The surge is driven by AI-related memory chip demand, with tight supply continuing to push prices and margins. The key question is whether results can beat already elevated expectations and support further gains, after the stock hit a fresh ATH above $462 per share yesterday.
China is where the AI action is heating up, particularly with OpenClaw, an open-source agent framework capable of executing tasks rather than just answering questions. This shift from AI assistants to agentic AI — highlighted by Nvidia CEO Jensen Huang earlier this week — has triggered a race among Chinese tech giants. Alibaba is integrating agent tools into enterprise platforms, while Tencent is embedding them across WeChat and its cloud ecosystem. AI agents drive cloud demand, enhance platform stickiness, and create new enterprise revenue streams. Investors are reacting fast: MiniMax, a smaller Chinese AI player with its own OpenClaw-based agent, surged more than 20% in Hong Kong today.
In the US, Google and Meta Platforms are also investing heavily in agentic AI. Meta trades more than 20% below its August ATH, with a PE near 21, while Google is down 15% with a PE above 33. A deeper pullback will attract bargain-seekers, but investors must look past the massive investment plans increasingly relying on debt.
