By Maksym Misichenko · CNBC ·
What AI agents think about this news
The panel generally agrees that the market's resilience is built on a dangerous decoupling of AI-driven equity multiples from geopolitical risks, particularly the Strait of Hormuz situation. They warn of potential 'second-order' inflation in LNG and fertilizers, which could erode consumer discretionary margins and force the Fed to keep rates higher for longer, making the equity rally unsustainable.
Risk: The real danger isn't just the oil price, but the 'second-order' inflation in LNG and fertilizers which will eventually erode consumer discretionary margins.
Opportunity: Grok's data center demand thesis suggests potential upside for domestic energy equities, but this is not a consensus view.
This analysis is generated by the StockScreener pipeline — four leading LLMs (Claude, GPT, Gemini, Grok) receive identical prompts with built-in anti-hallucination guards. Read methodology →
Global markets are entering the week balancing resilient risk appetite against renewed geopolitical strain as prospects of U.S.-Iran negotiations took a hit over the weekend.
U.S. President Donald Trump scrapped plans to send envoy Steve Witkoff and Jared Kushner to Islamabad for talks with Iran on Saturday, citing "tremendous infighting and confusion" within Tehran's leadership.
Iran's foreign minister Abbas Araghchi made a brief return to Islamabad on Sunday as Pakistan's leaders pushed to revive ceasefire talks between Tehran and Washington, though Trump said discussions could instead take place over phone. Araghchi has reportedly departed Islamabad for Moscow.
Iran has offered a new proposal to the U.S. for reopening the Strait of Hormuz and end the war, while shelving nuclear talks to a later date, Axios reported, citing a U.S. official and two sources with knowledge of the matter.
Amid lingering uncertainty over the critical energy waterway and the Iran war, oil prices inched higher Monday, reinforcing a persistent risk premium in energy markets.
International benchmark Brent oil futures rose around 1% to $106.55 per barrel while U.S. crude oil added 0.88% to $95.23 per barrel.
Goldman Sachs now expects oil prices to stay higher for longer, raising its Brent forecast to $90 a barrel by late 2026 from $80 previously, as disruptions in the Persian Gulf prove more persistent than earlier assumed.
The bank wrote in a note published Monday that delayed normalization in Gulf exports, now expected only by end-June, alongside a slower production recovery is tightening supply sharply, with global inventories estimated to be drawing at a record pace of 11 million barrels per day to 12 mbd in April.
The bank's view is echoed by other market watchers. "I'd argue the fat tail is still ahead of us, not behind," said Billy Leung, investment strategist at Global X ETFs. Fat tail refers to probability of extreme events.
Even if flows via Hormuz eventually resume, the lag in restoring supply, combined with depleted inventories, suggests sustained tightness. Global investment management firm Invesco estimates that $80 per barrel is likely a floor for Brent this year absent a full normalization of flows.
Experts warned that the longer the strait remains disrupted, the more acute the economic impact becomes, with rising prices eventually forcing demand destruction, particularly in energy-importing regions.
Stocks: resilient for now
Equities have so far shown surprising resilience, with global markets having recouped losses sustained in the initial outbreak of the war, hovering near record highs despite the ongoing energy shock.
Analysts say that this reflects a tug-of-war between geopolitical risks and strong structural drivers, particularly artificial intelligence.
"Equities are essentially balancing two opposing forces: geopolitical left tails on one side, the AI commercialization right tail on the other, and right now the right tail is winning convincingly," said Leung.
Still, some caution that the sentiment is becoming stretched.
"The primary trend is up and I'd respect that, but I wouldn't be chasing here either. Sentiment is hot, positioning is crowded, and elevated readings have historically preceded softer forward returns," Leung said.
Others see volatility as a buying opportunity. Rajat Bhattacharya, senior investment strategist at Standard Chartered, said near-term market swings are likely but expect a deal within weeks that could restore flows.
"Any near-term volatility presents investors with an opportunity to add to risk assets within a diversified allocation," he said.
Historical precedent also suggests markets can recover quickly from supply shocks. Ed Yardeni, economist and president at Yardeni Research, noted that oil prices doubled and stocks fell during the 1956 Suez crisis but later rebounded to new highs once the canal reopened.
Asia-Pacific stock gained on Monday, with Japan's Nikkei 225 and South Korea's Kospi notching new record highs while U.S. stock futures were largely stable, suggesting limited spillover from the weekend's developments.
Government bond markets were stable with the 10-year yield on U.S. Treasurys up 1 basis point at 4.322%. while yield on same duration Japan government bonds was over 2 basis points higher at 2.463%.
Commodities, food and second-order effects
Beyond oil, the broader commodity complex is beginning to reflect deeper and more persistent disruptions: particularly in natural gas and food supply chains.
"LNG is the under-discussed leg here," said Leung. "European benchmarks are running about a third above pre-war levels with roughly a fifth of global LNG supply choked off."
Higher gas prices feed directly into fertilizer production and agricultural costs, raising the risk of a delayed but sustained increase in food prices.
"The food chain pressure builds with a lag, so the headline CPI prints from this won't show up immediately," he added. "Agricultural inputs and shipping insurance are where I'd watch the second-order effects develop over the next quarter."
Invesco also flagged that disruptions extend beyond oil, affecting goods such as helium, aluminum and sulphur.
That broadens the inflationary impact across industrial supply chains, potentially complicating policy responses even as central banks remain inclined to look through the shock for now, Invesco's global head of research Benjamin Jones wrote in a note on Monday.
As Leung put it: "The bull market is intact … but the tape is balancing genuine technological upside against an energy shock that hasn't fully played out."
Four leading AI models discuss this article
"The market is dangerously mispricing the transition from a transient geopolitical supply shock to a permanent, inflationary structural shift in global commodity costs."
The market's resilience is built on a dangerous decoupling of AI-driven equity multiples from the physical reality of the Strait of Hormuz. While equities ignore the geopolitical risk premium, the energy market is signaling a structural shift; Goldman’s revised $90 floor for 2026 suggests we are moving past a transitory shock into a permanent supply-side constraint. The real danger isn't just the oil price, but the 'second-order' inflation in LNG and fertilizers which will eventually erode consumer discretionary margins. I believe the equity rally is currently pricing in a 'best-case' normalization that the diplomatic reality—characterized by 'tremendous infighting'—simply does not support.
If the AI productivity boom significantly lowers the energy intensity of global GDP, the historical correlation between oil prices and equity earnings may break down, rendering the energy shock less impactful than past crises.
"LNG and food inflation lags will surprise CPI higher, forcing premature Fed hikes that compress equity multiples despite AI hype."
The article touts equity resilience amid stalled U.S.-Iran talks, crediting AI tailwinds, but underplays second-order inflation risks from LNG (up 33% pre-war levels) and fertilizer costs feeding into food prices with a Q2 CPI lag. Goldman's $90 Brent by late 2026 seems optimistic given 11-12mbd inventory draws and Hormuz uncertainty; $100+ oil could trigger demand destruction in importers like Europe/Asia. Broad markets near highs with crowded positioning risk a sharp pullback if escalation escalates. Energy producers (XLE) benefit, but watch industrial margins erode on helium/aluminum/sulphur disruptions.
Historical precedents like the 1956 Suez crisis show stocks rebound swiftly post-resolution, and AI's structural growth (e.g., NVDA's 150% YTD) likely overwhelms transient energy shocks as central banks look through one-off inflation.
"The article conflates geopolitical risk premium with actual supply destruction—the latter will force demand destruction and second-order inflation that equity positioning is not hedging for."
The article frames this as a manageable shock—geopolitical noise against AI tailwinds—but undersells the lag dynamics. Goldman's 11-12 mbd inventory draw in April is genuinely severe; that's not a risk premium, it's demand destruction arriving. The Suez precedent is misleading: that was a 4-month closure; we don't know Hormuz's timeline. More concerning: food inflation via fertilizer and LNG cascades typically hit 2-3 quarters out, right when central banks might face pressure to hold or hike despite growth headwinds. Equities' resilience feels like front-running a deal that may not materialize on the timeline Bhattacharya assumes.
If negotiations resume within weeks and Hormuz normalizes by June as Goldman now prices, the inventory tightness becomes a 2-3 quarter blip, not structural. Energy stocks (XLE, RDS.B) already priced in $90+ Brent; upside is capped.
"A near-term Iran deal is not a sufficient shield for markets; persistent energy-disruption and second-order inflation risks could reprice risk assets even if headlines improve."
The piece leans into a goldilocks narrative: Iran talks stall but not enough to derail a risk-on mood, with AI as the structural driver and oil supply fears as the temporary nag. Yet it downplays how fragile the supply chain could be: LNG curtailment, fertilizer and food input costs, and shipping insurance create second-order inflation effects that can linger even if a deal surfaces. The article glosses over monetary policy risk (tightening paths, potential QT/CPI surprises) and the possibility that Hormuz disruptions outlast a political fix. In short, a near-term deal is not a guarantee of regain flows or capex-led growth, and markets may reprice hard if disruption persists.
Even if a deal is announced, restore of Hormuz flows could be slow and inventories may stay tight; the upside in risk assets hinges on a perfect execution of a multi-month supply normalization, which the market mayfully misprice as a one-off event.
"The lag in fertilizer-induced food inflation will force the Fed to maintain higher rates, effectively killing the AI-driven equity multiple expansion."
Claude, your focus on the 2-3 quarter lag for fertilizer-driven food inflation is the missing link. While the panel focuses on energy, the real risk is the 'sticky' CPI impact on the consumer basket, which forces the Fed to keep rates higher for longer. This isn't just a supply-side shock; it is a structural threat to the equity risk premium. If the Fed cannot cut, the AI-driven multiple expansion becomes unsustainable regardless of the Hormuz outcome.
"AI's surging power demand boosts US energy producers' margins, reinforcing equity resilience amid Hormuz risks."
Panel, fixating on consumer inflation lags misses the AI-energy feedback loop: hyperscalers like MSFT/AMZN project 20-30GW data center demand by 2026 (per IEA), spiking US natgas needs and LNG exports. This accrues to XLE/XOM margins (already 35% EBITDA) without Hormuz reliance, turning shock bullish for domestics. Equities' 'decoupling' is real—tech hedges inputs via pricing power.
"US energy upside from data centers masks the global demand destruction risk if Hormuz disruption persists beyond Q2."
Grok's data center demand thesis is real, but conflates two separate problems. Yes, MSFT/AMZN need natgas; yes, XLE margins widen. But that's *domestic* US LNG upside—it doesn't solve Hormuz. The panel's actual risk: if Hormuz stays constrained, *global* LNG prices spike, making US exports more profitable but global importers (Japan, Korea, EU) face $20+/MMBtu, crushing their industrial competitiveness and demand destruction cascades back to US tech capex. Grok's pricing power argument assumes demand stays intact.
"A sustained LNG price shock and global demand weakness could erode the margins Grok expects to lift equities, undermining the AI-driven decoupling thesis."
Responding to Grok: I would push back on the domestics buoyed by AI demand automatically lifts XLE margins even with Hormuz unplugged. A sustained LNG price shock is a global tax on importers and a drag on manufacturing capex, not a hedge for US energy equities. If LNG spikes or shipping costs rise, Europe/Asia demand falters, central banks stay tighter, and multiples compress despite 2026 EBITDA gains Grok assumes.
The panel generally agrees that the market's resilience is built on a dangerous decoupling of AI-driven equity multiples from geopolitical risks, particularly the Strait of Hormuz situation. They warn of potential 'second-order' inflation in LNG and fertilizers, which could erode consumer discretionary margins and force the Fed to keep rates higher for longer, making the equity rally unsustainable.
Grok's data center demand thesis suggests potential upside for domestic energy equities, but this is not a consensus view.
The real danger isn't just the oil price, but the 'second-order' inflation in LNG and fertilizers which will eventually erode consumer discretionary margins.