WS #16360

Geopolitical tensions in the Middle East have escalated sharply, with Iran claiming responsibility for tanker attacks in the Strait of Hormuz. This has triggered a violent repricing in energy markets, with Brent crude surging past $114 per barrel. The supply shock is driving a broad risk-off sentiment, dragging down European and US equity indices while pushing safe-haven assets higher. The narrative has shifted from a fragile ceasefire to an active supply disruption, fundamentally altering the macro outlook for inflation and growth. Simultaneously, the technology sector is experiencing a severe selloff, with the Nasdaq down 2.6% and major players like Meta dropping 7%. This decline is being driven by a combination of rate-hike fears—evidenced by the Reserve Bank of India's hawkish move—and a broader unwinding of the AI trade, as investors reassess the capital expenditure burden of data center construction. The tech weakness is further compounded by regulatory and environmental scrutiny, notably regarding Google's data center expansion in Finland and Meta's AI chatbot vulnerabilities. On the macro front, global growth remains bifurcated. The UK economy is showing robust resilience with a flash PMI of 53.1, while China's GDP growth holds at 4.6%. However, the oil shock is creating significant headwinds for emerging markets, with the India-US bond spread widening by 250 basis points. Corporate M&A activity is slowing, with the collapse of the Smith & Nephew-J&J talks signaling a cooling in healthcare consolidation, while energy majors like Rio Tinto and TotalEnergies continue to invest heavily in long-term resource security and carbon storage.