WS #15735

Geopolitical tensions in the Middle East continue to escalate, with the UK Prime Minister attributing the RAF Fairford incident to Iran's IRGC and Ukraine threatening to disrupt Russian diesel supplies. This environment is driving oil prices above $105, creating a bifurcated market where energy stocks benefit while airlines and shipping face headwinds. Concurrently, the Federal Reserve's hawkish undertones are strengthening, with Cleveland Fed President Beth Hammack advocating for higher rates and smaller, more frequent adjustments, which is pressuring risk assets including Bitcoin, which has fallen below $83,000. In the technology sector, a distinct divergence is emerging. While Meta is attempting to assert AI parity with its new Muse Wonder models, the semiconductor supply chain is facing renewed competitive pressure from China's CXMT, which is targeting Micron with a new server memory launch. This competitive threat is causing Micron to fall, contrasting with UBS's bullish outlook on other chipmakers like Lam Research and Texas Instruments. Meanwhile, the energy transition narrative is being challenged by physical constraints, as India faces blackouts due to coal shortages and Trump's grid security orders risk hindering the AI boom.