WS #6135

The dominant theme remains the Iran conflict, which is ESCALATING. Trump is unhappy with Iran's latest proposal to reopen the Strait of Hormuz, as it postpones nuclear talks, and the White House is unlikely to accept it. This has dampened hopes for a resolution, keeping oil prices elevated and geopolitical risk high. ECB data released this morning shows a sharp rise in consumer inflation expectations (1-year ahead to 4.0% from 2.5%) and the most pronounced bank credit tightening since 2023, driven by the Iran war. This reinforces stagflation fears and complicates ECB policy. Separately, Google has signed a classified AI deal with the Pentagon, allowing use of its AI for military purposes, which is a significant strategic shift. Over 500 Google employees protested the move. Nvidia hit a record market cap of $5.26 trillion, becoming the most valuable company ever, as AI demand remains robust. BP reported a massive Q1 profit beat ($3.2B vs $1.38B YoY), confirming the bullish energy thesis. The BOJ held rates at 0.75% but raised inflation forecasts sharply, signaling a hawkish tilt. China blocked Meta's acquisition of Manus, a $2B AI startup, citing national security. CATL shares sank 8% in Hong Kong after announcing a $5B equity offering. The attempted assassination of Trump adds political uncertainty but is unlikely to materially shift markets near-term. Overall, the narrative is ESCALATING on geopolitical risk, with energy stocks benefiting and growth/multiple stocks under pressure from higher rates and inflation.