WS #9061

The dominant signal in this window is the escalating energy crisis from the Iran war, with multiple cross-corroborated developments pointing to a severe and prolonged supply shock. The IEA warns global oil stockpiles could fall to 'critical levels' by summer, and even if a peace deal were reached today, it could take 6-8 months to reopen the Strait of Hormuz. This is corroborated by the IEA's Toril Bosoni stating stock draws continue into summer, and by reports that global crude inventories were drawn down by 250 million barrels in March-April. The supply crisis is driving a cascade of effects: shipping costs have nearly doubled (Shanghai Containerised Freight Index up from 1,333 to 2,571), US gasoline prices are up 45% in the Midwest, and wholesale inflation jumped 6% annually in April. Russia has banned jet fuel exports until November and gas stations in Moscow are rationing fuel, while France seized a shadow fleet tanker. The macro narrative is clearly ESCALATING. On the monetary policy front, markets are now pricing in a Fed rate hike as the next move, with December hike probability at 51% and January at 60%. This follows hot CPI (3.8% annual, highest since May 2023) and PPI (6% annual) reports. Bessent expects 'substantial disinflation' after 1-2 more hot prints, but bond markets are signaling the Fed is behind the curve. Kevin Warsh is being sworn in as Fed Chair on Friday, facing immediate pressure to hike. The ECB's Lane acknowledged the outlook has worsened and inflation forecasts will be revised up in June. The BOJ's Ueda speech noted Japan's economy is decelerating due to Middle East oil prices. In equities, the AI trade is showing divergence: Broadcom plunged 15% on unchanged AI chip guidance, while Dell surged 39% on 88% revenue growth and Snowflake soared 36% on AI compute deal with AWS. JPMorgan ended its bearish Tesla call. Bitcoin is down 22.7% in four weeks, with $4.4B in ETF outflows over 13 days, as Saylor attributes the decline to capital rotation into AI infrastructure. SpaceX IPO at $135/share ($1.77T valuation) is a major upcoming event. The prevailing narrative is stagflationary: energy shock + inflation + potential rate hikes = bearish for growth/multiple stocks, bullish for energy, bearish for consumer discretionary.