- The June contract for Brent crude oil rose by 2.5% to around $108 per barrel in early trading today, influenced by geopolitical tensions in the Strait of Hormuz. Goldman Sachs has raised its year-end target price for Brent crude to $90 and highlighted the nonlinear upside risk posed by extremely low inventory levels.
- The Senate Banking Committee is set to vote on Wednesday on the nomination of Waller as the Chairman of the Federal Reserve. With Republican senators abandoning their obstruction, the market expects him to smoothly succeed Powell, who will step down on May 15. The monetary market has adjusted the probability of an interest rate cut in 2026 accordingly.
- Four super cloud service providers and Apple, which together account for about 25% of the total market value of the S&P 500 index, will release their earnings reports this week. Against the backdrop of nearly a 10% gain in the S&P 500 index this month, the guidance from these reports will directly determine whether AI-driven valuation expansion can continue.
Blockade of the Strait of Hormuz and Reassessment of Energy Premium
The global energy supply chain is undergoing a prolonged stress test. The scheduled U.S.-Iran peace talks over the weekend did not yield substantial progress, and the Iranian Revolutionary Guard boarded two container ships near the Strait of Hormuz, leaving this critical waterway still paralyzed after being closed for two months. Currently, the daily shortfall of approximately 13 million barrels of crude oil supply is difficult to compensate through other channels. Although reports suggest that Iran has submitted a new proposal to the U.S. aimed at reopening the strait, geopolitical premiums are firmly embedded in the forward curve. If Gulf region exports do not return to normal by the end of June, structural shortages of crude and refined oils will force downstream manufacturing to reprice at higher levels, posing the risk of upside surprises to energy inflation indicators in South Asia and Europe.
Leadership Transition at the Fed and Hawkish Pricing
This week's macro focus is not only on Wednesday's Federal Reserve rate decision but also on the impending personnel changes. The Senate's confirmation vote for Waller marks potential institutional changes in policy formulation at the Fed. Waller's previous testimony calling for adjustments to the current monetary policy framework has been interpreted by the fixed-income market as a potential hawkish signal. The overnight index swap market has almost completely ruled out the possibility of rate cuts within 2026. For the upcoming rate decision, the market broadly expects the federal funds rate to remain at its current level, but if the statement wording suggests that risks to price stability and employment are more balanced, it may be viewed as confirmation of marginal tightening, thus pushing up the short-term rate corridor.
Tech Giants’ Earnings Determine Index Sustainability
Against the backdrop of high macro uncertainty, the strong performance of U.S. stocks this month has been driven largely by unprecedented rises in semiconductor and AI concept stocks. As we enter a period dense with earnings releases this week, the performance data from Alphabet, Microsoft, Amazon, and Meta Platforms will serve as key tests of whether AI-related capital expenditures can effectively translate into revenue. The forward price-earnings ratio of the current S&P 500 index is already at a historically high range, and investors will be extremely scrutinous of profit margin guidance from five of these seven giants. If the growth rate of capital expenditure significantly surpasses that of revenue from cloud or core advertising businesses, the market's tolerance for tech stocks will be greatly reduced, thereby exerting valuation correction pressure on the overall index.
Rising Global Bond Yields and Spread Restructuring
Inflation concerns triggered by rising energy prices have directly transmitted to the sovereign bond market. According to Tradeweb data, the yield on 2-year U.S. Treasury notes climbed 2.3 basis points to 3.798%, and the 10-year yield increased 1.4 basis points to 4.323%. A similar trend was observed in the European market, where the yield on 10-year German bonds rose 1.1 basis points to 3.016%. In the backdrop of overall yield ascension, the forex market remains relatively restrained, with the U.S. dollar index dipping 0.3%, consolidating near a three-week high. If the forward guidance from the European Central Bank and the Bank of England this week shows a compromise on inflation, the temporary narrowing of the U.S.-Europe interest rate spread may exert short-term pressure on the dollar.
