WS #15507

The geopolitical risk premium is accelerating, with Brent crude surging past $104 on confirmed Middle East escalation and the US deployment of a third aircraft carrier. This escalation is directly impacting supply chains, evidenced by a Ukrainian drone strike on the Russian Salavat Nefteorgsintez oil refinery and the IEA's decision to accelerate strategic stock releases to counter the tightening market. While the IEA action dampens the immediate supply-crisis thesis, the physical attacks on energy infrastructure suggest a prolonged risk premium rather than a transient spike. In the technology sector, a distinct divergence is emerging. Microsoft is reinforcing its AI hardware dominance with new Surface devices powered by Nvidia chips, while Nvidia itself is releasing software tools to secure its ecosystem against competitors like Hugging Face. However, this bullish AI narrative is being countered by a sharp selloff in the South Korean chip sector (KOSPI down 5%), indicating that the rally is not broad-based and that investors are rotating out of high-multiple semiconductor names despite the strong underlying demand signaled by TSMC's recent performance. Macro signals are turning mixed, with the Reserve Bank of India delivering a hawkish shock by raising rates to 5.50%, the highest since 2023, while US inflation expectations hit their highest level since May 2023. This suggests that central banks globally are still fighting inflation, which pressures growth assets. Meanwhile, geopolitical spillovers are visible in France, where the government is releasing diesel reserves to combat pump prices driven by the same Middle East tensions affecting global oil markets.