WS #15163

Markets are navigating a complex divergence between cooling US inflation data and intensifying geopolitical risks in the Middle East. While the broader market rally is supported by revised PCE figures showing inflation at 3.4%, skepticism remains among fixed-income and commodity markets, with gold and bond yields signaling distrust in the data's methodology. This macro backdrop is being overshadowed by escalating tensions in the Strait of Hormuz and the Red Sea, where Houthi attacks and Iraqi oil discounts are disrupting supply chains and pushing energy prices higher despite OPEC+ production discipline. Simultaneously, the technology sector is facing structural headwinds as the Senate blocks a bipartisan bill aimed at capping data center electricity costs, threatening the profitability of AI infrastructure builds. This regulatory setback coincides with aggressive moves by major players like Reddit to restrict API access, signaling a tightening of the data ecosystem that could impact AI model training costs. In defense, Boeing secured a $20 billion Navy fighter contract, directly displacing Northrop Grumman, while a new Saudi-Turkish defense alliance signals a realignment of regional security architectures.