All Eyes on Iran and the Strait of Hormuz

Investors’ attention remains squarely focused on Iran, as it should be. West Texas Intermediate (WTI) crude is trading near $100 per barrel, more than $40 above the recent mid-December low as tanker ships are still not sailing freely through the Strait of Hormuz. Iran is allowing its own tankers to get through, not surprisingly, sending important oil to China (China imports about 90% of Iranian oil exports). Reportedly Iran has allowed tankers bound for several other Asian countries including India and Pakistan to traverse the vital and dangerous waterway, easing some pressure on

Lower oil “intensity” — less oil used per dollar of economic output — means energy shocks have a smaller impact on growth than in past decades. And from the supply side, the U.S. is now a net exporter of petroleum products. Because we produce more than we import, the economy is less affected by volatile oil prices than during the 1970s and ‘80s, for example.

Despite less reliance on oil, higher oil prices will add pressure to inflation. If energy costs stay elevated, inflation could rise again, potentially delaying interest rate cuts from the Federal Reserve (Fed). Geopolitical uncertainty remains a

The market has shifted quickly from concerns about artificial intelligence (AI) disruption to rising geopolitical risks tied to the conflict in Iran. Headlines continue to drive market movements as investors wait for greater clarity on the timing of a U.S. exit strategy. For now, oil remains the primary market driver, with developments around the reopening of the Strait of Hormuz acting as either an accelerator or a brake on risk appetite. In our view, easing Iran tensions and the restoration of global oil supply will be essential catalysts for equity markets to advance.

Despite the building uncertainty, equity markets are holdin

As the capital expenditure (capex) race for compute continues, we thought that it would be worthwhile to briefly outline the current state of play facing the well-publicized data center buildout. To understand why so much capex is needed to support artificial intelligence (AI), we must first understand how data centers are built and operated.

Let’s start with the basics. What are data centers and why has the AI race sparked such demand for them? A data center is essentially a warehouse-sized computer. Just like your home computer, data centers need chips to carry out the computations that power our lives. These chips requir