WS #8706

The dominant signal in this window is a significant escalation in the Middle East conflict, with multiple sources reporting U.S. CENTCOM strikes on Iranian radar and command sites, Kuwaiti air defenses intercepting missiles/drones, and the Strait of Hormuz remaining closed. This escalation counters the prevailing ceasefire narrative and is driving oil prices higher, with Goldman Sachs noting two-sided risks. Separately, the U.S. Commerce Department clarified that AI chip export restrictions apply to Chinese firms' subsidiaries outside China, which is a negative for NVDA and other chipmakers. The ECB's Schnabel warned of unanchored inflation expectations due to the Iran war, reinforcing a hawkish ECB stance. China's manufacturing PMI beat expectations but slowed from April, a mixed signal for global growth. Intel announced new AI chips to compete with NVDA and AMD, and a new pancreatic cancer pill (daraxonrasib) showed breakthrough results, though market impact is limited. The UAW strike threat at a GM supplier is a negative for GM. Overall, the Middle East escalation is the highest-signal development, with oil prices likely to rise further, benefiting energy stocks and hurting airlines and consumer sectors.