Major US stock indexes finished the week on a mixed note as weakness in large-cap technology stocks weighed on the Nasdaq and S&P 500, while smaller companies and value sectors continued to outperform. Investors also welcomed encouraging inflation data and easing geopolitical tensions, although questions remain over how durable the recent market optimism will prove.
A key development came from the Middle East, where the fragile US-Iran ceasefire helped drive oil prices sharply lower. While markets have largely priced in a resolution to the conflict, one indicator suggests the recovery remains incomplete: tanker traffic through the Strait of Hormuz.
📊 Chart of the Week
Tanker Traffic Through the Strait of Hormuz
Although tanker traffic has recovered following the ceasefire, activity remains well below pre-conflict levels at roughly 20% of peak volumes. This suggests that while markets have embraced the prospect of normalisation, shipping activity indicates global energy flows have not yet fully recovered.
Oil Markets Price in Peace
Crude oil prices continued their sharp decline, effectively completing a round trip to levels below where they traded before the US-Iran conflict began. Markets have rapidly priced in expectations that supply disruptions will ease following the reopening of the Strait of Hormuz.
However, tanker traffic tells a more cautious story. While shipping activity has improved from its lows, volumes remain significantly below normal levels, highlighting that energy markets have not yet fully returned to pre-conflict conditions.
Inflation Gives the Fed Some Relief
Federal Reserve Chair Kevin Warsh also received encouraging news on inflation. Core PCE, the Fed’s preferred inflation measure, rose 0.3% month-on-month and 3.4% year-on-year. Although inflation remains well above the Fed’s 2% target, the figures were broadly in line with expectations and avoided the upside surprise many investors had feared.
AI Remains a Market Driver
Corporate earnings continued to reinforce the strength of the AI investment theme. Memory chip manufacturer Micron Technology delivered exceptionally strong quarterly results, reporting revenue of $41.4 billion and gross margins approaching 85%, highlighting continued demand across the semiconductor sector.
At the same time, investors are becoming increasingly selective. Apple announced price increases across Mac and iPad products, citing higher AI component costs, raising fresh questions about whether AI-related spending could contribute to another wave of inflation.
Political Uncertainty Returns to the UK
In the UK, political uncertainty resurfaced as Andy Burnham emerged as a leading contender to succeed Prime Minister Sir Keir Starmer. His proposals for greater public control over key industries have received a cautious response from financial markets, adding another layer of uncertainty for investors.
Looking Ahead
Markets have moved quickly to price in improving geopolitical conditions, falling oil prices and resilient corporate earnings. Yet the recovery in tanker traffic through the Strait of Hormuz suggests the situation has not fully normalised.
As investors assess inflation, geopolitical developments and the strength of the AI-driven earnings cycle, shipping activity may prove to be one of the clearest indicators of whether confidence is supported by fundamentals or running ahead of reality.
At NEBA Private Clients, we continue to monitor developments across global markets and assess how changing economic conditions may impact investment opportunities. Maintaining diversification and a disciplined long-term approach remains central to navigating evolving market environments.
This article is based on insights and analysis provided by Craig Farley of TEAM.
