Monthly house view | June 2026
Context
Global markets continue to show remarkable resilience as the Iran conflict enters its fourth month. What explains this resilience? The use of strategic oil reserves and fiscal support among G-7 nations have helped soften the impact of the energy shock. But the most important factor is the artificial intelligence (AI) revolution.
Demand for agentic AI systems, which operate autonomously and continuously, has helped outweigh the drag of the global energy shock. These platforms require significantly more computing power and energy than chatbot models. This growing demand is supporting earnings growth, especially among large technology firms.
The AI revolution is a double-edged sword that is driving hardware shortages, higher energy demand and infrastructure challenges. These forces are compounding inflationary pressures from the Middle East energy shock. If the Strait of Hormuz remains closed beyond the summer, additional price spikes are likely.
Economic resilience
All of this should hurt global growth. However, the US economy remains resilient, supported by fiscal measures and AI capital expenditures. In contrast, Europe faces the risk of stagnation due to rising energy prices. Japan and the UK are also under pressure from fiscal and political challenges. In Japan, authorities have intervened to defend the yen, but structural energy headwinds persist.
Central banks are shifting towards a tighter monetary policy bias. The Federal Reserve, now led by Chairman Kevin Warsh, is expected to keep rates unchanged through the end of 2026. The European Central Bank and the Bank of England are each expected to deliver one insurance rate hike before pausing.
The risk of policy missteps remains high. If the energy crisis worsens or inflation expectations rise, a more aggressive rate trajectory could emerge.
