Brent crude prices have surged back above $100 a barrel this week, propelled by the ongoing blockade of the Strait of Hormuz and tit-for-tat tanker seizures between the United States and Iran. This escalation, following a stalled ceasefire, briefly paused a global equity rally that had seen many major stock markets reach new highs. President Donald Trump extended his ceasefire deadline for negotiations with Tehran but maintained the U.S. naval blockade on ships via Iranian ports, prompting Iran to retaliate with ship seizures. The situation highlights Hormuz as a critical economic vulnerability for Tehran, with normal energy flows potentially taking months or even years to resume.
Beyond oil, the conflict is causing turmoil in global aluminium, copper, and nickel supply chains. While the artificial intelligence boom and a mostly robust earnings season promise to sustain the equity rally, rising energy prices pose a significant concern for U.S. tech giants, particularly hyperscalers, as these costs could erode anticipated profits. Tesla, an electric vehicle and clean energy company, reported positive free cash flow but saw investor apprehension following news of its increased 2026 capital expenditure budget to over $25 billion. Upcoming reports from other “Mag 7” firms will face scrutiny regarding their ability to maintain strong returns amidst potentially higher energy prices and interest rates.
Attention now turns to the Federal Reserve’s meeting next week. The Senate confirmation hearing for Kevin Warsh, President Trump’s nominee for Fed chair, offered few surprises, with Warsh reiterating his desire to gradually shrink the Fed’s balance sheet. However, Trump publicly expressed disappointment if Warsh did not immediately lower rates. With inflation running above the Fed’s 2% target and expected to rise further due to Middle East supply disruptions, Warsh could face a challenging task balancing price stability with presidential expectations. Consumers have shown resilience, with US retail sales in March rising more than expected, partly due to higher petrol prices and bumper tax refunds. However, this buffer may not last indefinitely, leaving global markets dependent on a de-escalation that currently seems distant.
