Hey guys I made a post a couple of days ago talking about the market in a different subreddit. Thought id share my thoughts here too offer some insight. Let me know what u think. Here's is a summary, but there is a more lengthy report with numbers/reasoning i made.
So the Strait moves 20 million barrels per day. Combined bypass capacity peaks at 5.5 million optimistically furthermore the Saudi pipeline terminates at Yanbu on the Red Sea, directly into the secondary chokepoint Houthi forces already control.
Furthermore there is possibility that Iran and their allies would look to disrupt other routes.
Trump cant back out of this war easily and accept Iran's terms because thay would mean he would have to answer which one if his "objectives" this war accomplished. So hes literally stuck in this scenario where he has to bleed out slowly rather than all at once. There's even more progression towards a ground deployment now. All of this leads to further delaying the repopening of the strait.
This is super messy for investors because most of their base case is that the straight opens quickly, but the issue is the US has not stated an exit condition for the war, so markets literally have no idea how long this will last. So throughout the next weeks we will see gradual repricing upwards.
secondly, GCC sovereign wealth funds are actively propping up the AI industry, and these guys are actively getting bombed by Iran. If iran targets their desalination plants they will be forced to mass evacuation and the US can say bye bye to any near term potential investments into AI, when said potential investments were priced in already.
AI valuations are also at ATH's so this doesnt help. Investment into AI infrastructure and software was 92% of US GDP growth.
The fed is doing absolutely nothing to help fight inflation and still projected to cut rates in 2026.
This and the oil shock will crank inflation up.
Liquidity and leverage is still high, Dollar/Yen is nearing 160, a level that usually represents a threshold where there would be some fiscal action taken by the Japanese. If they do take significant action we will see liquidity tightening and basically a short term equity sell-off. This could be the basis for a rotation out of tech into energy.
All of these factors and more point if not to a popping of the AI bubble, a deflation and period of underperfomance where energy and commodities dominate.
If you care about why and actual numbers i went into more detail in a different post but this is the tldr.
Anyways this is not financial advice.