Monthly house view | May 2026
Context
The closure of the Strait of Hormuz has rattled global energy markets. However, China’s large strategic oil reserves, along with recent demand destruction, have prevented a significant energy shock, so far. At the same time, central banks have pulled back from their initially hawkish response to the conflict and adopted a more patient approach. This has helped to anchor markets and reduce the risk of policy errors.
Still, the scale of the energy shock and the risk of renewed escalation continue to weigh on the outlook. Our scenario analysis places a 70% probability that the blockade will be resolved by early June. If the Strait of Hormuz remains closed in June, the risk of a more severe energy shock will rise. For now, we maintain a “wait and see” posture, but the clock is ticking, and the potential for a major energy shock increases the longer the closure persists.
AI capex boom
For markets, the big difference between the energy shock of 2022 and today is the huge level of capital expenditure related to artificial intelligence (AI). Top US technology firms are investing heavily in data centres, which is supporting earnings upgrades. Later this year, we expect a wave of high-profile IPOs—including OpenAI, Anthropic, and SpaceX—to further shape investor sentiment. While AI tailwinds may be a gift for markets, the disruptive effects on labour markets are becoming more apparent.
Europe’s more restrained fiscal policy and greater energy exposure leave it more vulnerable to external shocks. On the other hand, pressure on private credit markets has been less acute in Europe than in the US, and the risk of contagion into public markets remains limited.
