WS #1834

The dominant market signal remains the escalating Iran conflict and its impact on energy markets, with new developments intensifying geopolitical tensions. The Pentagon's request for $200 billion in additional funds for the Iran war, corroborated by multiple sources, signals a deepening US military commitment, while a joint statement from the UK, France, Germany, Italy, the Netherlands, and Japan condemns Iran's attacks on commercial vessels, reinforcing diplomatic pressure. However, counter-signals emerge: UAE considers a role in securing the Strait of Hormuz, and US Treasury Secretary Scott Bessent suggests unsanctioning 140 million barrels of Iranian oil on the water in the coming days, which could dampen supply constraints and offset bullish energy pressures. An Israeli attack on Iran's South Pars gas field, coordinated with the US but unlikely to be repeated per Israeli officials, adds to near-term volatility. Central bank actions provide a stabilizing backdrop, with the ECB holding interest rates unchanged and noting the war poses upside inflation risks and downside growth risks, but that the economy has shown resilience. Traders have pared ECB rate bets, pricing 61bps of hikes by year-end, reflecting adjusted expectations amid the crisis. In corporate news, Cantor Fitzgerald maintains an Overweight on Micron Technology with a raised price target to $700, boosting semiconductor sentiment, while Goldman Sachs analysis indicates massive AI investment contributed basically zero to US economic growth last year, dampening tech exuberance. Align Technology shares jump on a large Elliott position, and ZipRecruiter launches a ChatGPT app for AI-powered job search, reflecting ongoing AI-driven activity. Meta's reported shutdown of Horizon Worlds, if confirmed, could negatively impact metaverse-related stocks.