WS #16299

Geopolitical escalation in the Middle East is the dominant market driver, with Brent crude surging past $112 following confirmed IRGC tanker attacks in the Strait of Hormuz and reports of US-Israeli strike planning against Iran. This escalation is actively dampening risk appetite, evidenced by broad sell-offs in Asian and European equities (Nikkei -2.7%, Kospi -3.5%) and a sharp decline in Bitcoin. The oil spike is creating a clear divergence: energy and defense sectors are benefiting from the supply shock and conflict, while airlines and consumer discretionary face margin compression and demand destruction. In corporate news, Meta delivered a strong revenue beat ($64.6B, +26% YoY) and raised guidance, offsetting a $25B regulatory fine by issuing non-voting shares to protect Zuckerberg's control. Tesla also beat earnings despite a 3% decline in auto revenue, though analyst sentiment remains mixed with JPMorgan and UBS assigning Neutral ratings. Meanwhile, the semiconductor supply chain faces structural headwinds as Taiwan's first-ever chip workers strike hit a Micron plant, and Nvidia faces a $35B delivery bottleneck due to Chinese tech giants' massive orders. The narrative is escalating from the previous cycle. The IRGC confirmation and strike planning represent a material intensification of the Middle East tensions theme. Market reaction confirms the shift from geopolitical risk to active supply disruption, forcing a rotation away from growth/tech and into energy/defense, while crypto assets are being sold off as risk proxies.