The narrative switching is enough to give investors whiplash. From the start of the Iran conflict, information has been in short supply and remains so as both sides continue to offer conflicting views on negotiations. What does seem clear is that the movement of cargoes of any type through the Strait of Hormuz has not yet resumed in any meaningful size. As the days go by,this becomes increasingly difficult for the global economy to absorb.
As energy prices climb and global trade and travel are disrupted, it is hard to see how elevated energy prices and curtailment of other cargos transiting the Strait will not weigh on earnings this year. Add to that the rise inshort-term rates that has accompanied this situation, and most investors appear to be hoping for a resolution as soon as possible.
Beyond the situation in the Middle East, other clouds are gathering on the horizon, including ongoing stress in private credit markets and an ever-changing narrative around AI. The latest salvo came from Alphabet, which unveiled a method to reduce memory consumption—a development that hit the high-flying memory stocks hard.
The upshot is that markets are unlikely to settle until there is more clarity on Iran and the global energy trade, and that clarity remains elusive.That said, earnings estimates for 2026 continue to rise. There are reasons for cautious optimism on the technology front as capex continues to climb, and fiscal stimulus from legislation passed last year is beginning to filter through. Higher energy prices pose a real challenge to both earnings and the consumer and will likely intensify if the conflict remains unresolved—but potential productivity gains from AI adoption may begin to provide an offset.
Getting oil, LNG, and other through the Strait of Hormuz without further damage to infrastructure remains the key short-term variable that investors are watching. The timing of that restart is critical. It has already had a major impact on energy prices; the question is the duration of that impact.
Given the multiple compression inequity markets alongside rising earnings estimates, valuations are becoming attractive, particularly given the strong earnings growth expected in2026. We shall have to see whether April brings some relief or, like last year, is the cruelest month for the market.
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