WS #14957

Geopolitical tensions in the Middle East have escalated sharply following the US rejection of a ceasefire proposal and Saudi strikes on Houthi targets, driving oil prices above $93 and triggering a broad risk-off sentiment across global equities. Asian markets opened lower with the Sensex down 1.4% and Nikkei down 0.3%, while European futures dipped ahead of inflation data. The Iran-US diplomatic impasse has intensified, with Tehran threatening to close the Strait of Hormuz and the US weighing post-midterm strikes, creating a high-volatility environment for energy and shipping sectors. In the technology sector, Nvidia faces renewed scrutiny in China, with reports indicating that ByteDance may purchase up to one million chips if authorized, but regulatory hurdles remain a significant drag on sentiment. Meanwhile, solid developments continue to emerge in the AI infrastructure space, with Microsoft expanding its data center footprint in Denmark and Meta unveiling new AI hardware, though these are currently overshadowed by macro headwinds. The UK has issued a warning regarding tight power supplies for the coming week, adding to the energy supply concerns already exacerbated by the geopolitical crisis. Corporate developments are mixed, with TotalEnergies approaching €81 and announcing a dividend, while Nike prepares for earnings with a depressed stock price. In the defense sector, the ongoing Ukraine-Russia conflict sees Ukrainian advances and Russian drone strikes on oil infrastructure, reinforcing the defense sector's relevance. The narrative is dominated by the oil supply shock and its second-order effects on inflation, consumer spending, and central bank policy expectations.