Not out of the woods

Financial markets react to the fact that the Iran conflict is unresolved as hostilities continue. Brent futures for year-end are moving back toward $95 this morning, and the whole curve has shifted higher.

What stands out is the lack of reaction in equities. Despite higher oil and rising inflation expectations, US stocks remain near highs. The reason is simple: AI capex is dominating everything. Earnings are holding up because investment is flowing aggressively into infrastructure, even if free cash flow is being squeezed. But that leaves very little margin for error.

For now, the global economy is absorbing the energy shock — which in turn keeps oil prices elevated. That same resilience is what keeps equities supported.

Two forces are at work: a negative supply shock from energy, and a powerful investment cycle in AI. As long as the latter dominates, markets hold. But the balance is increasingly tight.