WS #14717

Geopolitical tensions in the Middle East are escalating, with the Saudi-led coalition reporting the interception of six Houthi ballistic missiles. This development reinforces the ongoing supply risk premium, keeping oil prices elevated above $105 and pressuring sectors sensitive to energy costs, particularly airlines and consumer discretionary. The escalation narrative is now firmly entrenched, moving beyond the initial shock of the previous window's strikes to a sustained threat posture. In corporate news, Oracle's declaration of force majeure on an $18B AI data center contract with Blue Owl Capital has triggered a sharp sell-off in the latter, highlighting the severe credit and execution risks in the AI infrastructure build-out. Conversely, the semiconductor sector shows divergent strength; Google's plan to test custom AI chips in space signals continued innovation, while Alibaba's launch of the Zhenwu V900 chip provides a bullish catalyst for the broader AI hardware narrative, countering some of the execution fears. Macro sentiment remains mixed with the Fed's hawkish stance (Williams' hike signals) and the BoE's Breeden echoing similar tightening rhetoric, keeping yields high. However, JP Morgan's aggressive price target raise for Meta to $920 suggests institutional confidence in big tech's ability to navigate the high-rate environment, creating a bifurcation between rate-sensitive small caps and mega-cap tech resilience.