Global risk assets ticked higher on Monday as crude prices eased and investors recalibrated the immediate threat from the Middle East. West Texas Intermediate plunged more than 3% to around $95 a barrel in early trading while Brent slipped to roughly $102, reversing part of the recent run-up that had been driven by tensions around Iran and the Strait of Hormuz.
Traders pointed to two developments as the proximate cause of the pullback: U.S. Treasury signals that Iranian tankers will be permitted to transit the Strait of Hormuz and media reports that Washington is preparing a multinational escort force to safeguard shipping. The combination — greater transparency around movements and a potential collective security response — appears to have taken some of the “closure of the world’s oil valve” premium out of prices.
Equity markets responded with relief rather than euphoria. The three major U.S. indices rose and European benchmarks were broadly higher, leaving the S&P 500 still only about 5% below its record high; analysts and strategists attributed the resilience to persistent earnings upgrades for 2026–27 and a market narrative that authorities can contain the conflict’s economic fallout.
That narrative is fragile. Commentators from academia and the sell‑side flagged remaining tail risks: a wider conflict, a prolonged closure of Hormuz, or major supply disruptions — such as the reported large‑scale stoppages at ADNOC that have cut Abu Dhabi’s output by more than half — would rapidly reverse sentiment and lift energy prices. Policymakers are watching closely because several major central banks — the Fed, ECB, BoJ and BoE — are due to announce rate decisions this week, and a volatile oil market complicates the inflation outlook.
Beyond geopolitics, investors are fixated on the tech sector’s next catalyst. Nvidia’s CEO Jensen Huang is scheduled to give a keynote at GTC in the early hours of Tuesday Beijing time, and the company’s shares rose ahead of the event. Corporate news also underscored how AI and energy intersect with market flows: Meta agreed to buy up to $27 billion of AI compute capacity from Nebius over five years, large bitcoin holders continued accumulation, and Chinese firms from Alibaba to JD and Volkswagen China signalled aggressive moves into AI, data capture and electric-vehicle collaboration.
The immediate market picture is one of cautious optimism: a geopolitical shock that partly receded, strong monetary policy calendar risk, and a tech‑driven narrative that continues to underpin equity valuations. But the balance between an earnings‑driven equity rally and a supply‑driven commodity shock remains delicate, making the coming days — dominated by central‑bank decisions and Nvidia’s GTC address — likely to set the tone for risk appetite in the near term.