What to watch in the week ahead

• Brent crude returned to around pre-conflict levels last week as shipping through the Strait of Hormuz remained open despite intensifying exchanges of fire between the US and Iran. Investors will assess whether renewed talks can support continued transit. We favor broad commodity exposure as protection against supply shocks and inflation spillovers.
• Softer May PCE inflation helped reduce fears of further Fed tightening. This week’s jobs report is expected to show another solid gain, with some moderation after an exceptionally strong prior month. We think the Fed is likely to stay on hold this year and recommend locking in attractive yields in quality bonds.
• Technology shares came under pressure last week as investors questioned AI capex durability. Product price increases, reports of a delayed AI-related IPO, and semiconductor volatility weighed on sentiment despite strong memory-chip results. We recommend diversified and active exposure across the AI value chain.

How will commodities react to the latest US-Iran developments?

Commodity markets passed several significant milestones last week. Brent crude returned to around pre-conflict levels, trading just above USD 70 a barrel for the first time since the US and Israel launched attacks on Iran at the end of February. Prices remained around these levels at the start of this week, despite further reminders that the ceasefire remains fragile. The US and Iran exchanged attacks late last week and through the weekend, following strikes on commercial shipping in the Strait of Hormuz. Tensions appeared to cool by Monday, with both sides reportedly agreeing to further discussions and shipping flows continuing. A second milestone last week was the decline in gold below USD 4,000 an ounce for the first time since November. While hopes for a diplomatic solution in the Middle East have eased worries over energy prices, inflation, and central bank tightening, markets are still not expecting a swift dovish pivot from central banks. This hawkish tilt—though exaggerated by markets, in our view—creates a headwind for gold, since higher rates raise the opportunity cost of holding the zero-yielding precious metal.

This week, investors will assess whether diplomacy can make progress while commercial transit through the Strait remains open. The key issue is whether recent de-escalation can translate into safer and more predictable shipping conditions. Markets will also evaluate whether disputes over transit routes, security control, and costs can be managed, and whether Israel-Hezbollah tensions remain contained. A sustained reopening of the Strait would further reduce energy-driven inflation risks, while renewed attacks on shipping would keep oil markets sensitive to the risk of renewed supply disruptions.

Our base case remains that a diplomatic solution will prevail. Although it will take time for energy markets to recover from the effects of the conflict—on both shipping and production—we have lowered our forecast for the price of oil, which we now expect to trade at USD 85 a barrel by September, down from our prior forecast of USD 105/bbl. On gold, the more hawkish posture of central banks at a time of economic resilience has reduced the potential for a renewed rally at present, and we expect the precious metal to trade around current levels. We therefore believe investors should broaden commodity exposure beyond gold. Broad commodities can help diversify portfolios and protect against geopolitical stress, supply shocks, and inflation spillovers, while active strategies can adjust exposure as conditions shift.

Will US jobs data ease Fed hiking fears?

US inflation data helped moderate fears of further Federal Reserve tightening last week. May headline PCE inflation came in slightly softer than expected, while core PCE was contained enough to push back against the recent buildup in rate-hike concerns. Front-end Treasury yields declined over the week as markets scaled back the implied level of Fed hiking by the end of the year by 7 basis points to 32 basis points. This was despite further reminders from top Fed officials that the focus of the central bank remains on subduing inflation. The data supported a more benign economic backdrop, with personal spending in May adjusted for inflation rising 0.3%, suggesting that American consumers are coping with the drag from higher energy prices.

This week’s labor market data will be the next important test. Consensus expectations point to another solid jobs report for June, with some pullback after an exceptionally strong prior month. Investors will focus on payroll growth, the unemployment rate, and average hourly earnings for signs that labor demand and wage growth are cooling without weakening too sharply. The JOLTS report will also be scrutinized for hiring, quits, and layoffs, while ISM manufacturing and consumer confidence will help shape views on activity and spending. Central-bank communication at the ECB’s Sintra forum, including remarks from Fed Chair Kevin Warsh and ECB officials, will shape the policy debate.

Our view is that the probability of near-term Fed hikes remains low. Inflation should moderate as tariff effects fade, while softer growth conditions are likely to re-emerge in the second half as fiscal support diminishes and real income growth remains moderate. This should enable the Fed to resume easing in 2027. In Europe, we think the ECB has limited scope for further tightening, even if policymakers remain concerned by inflationary pressures. With investors exaggerating the likely extent of tightening in the US, Eurozone, and UK, in our view, we recommend investors lock in attractive yields in quality short- and medium-duration bonds.

Can technology regain its poise?

Technology shares came under renewed pressure last week as investors questioned the durability of AI-related capital spending after a strong rally. The Philadelphia Semiconductor Index fell 7.9% over the week, underperforming the MSCI All Country World's 2% loss. Asian markets that have heavy tech exposure, such as South Korea's Kospi, experienced daily swings of over 5%. Several negative headlines added to the pressure. Apple shares fell after the company said it would be raising prices to reflect concerns about memory and storage shortages. Weakness in the shares of top US hyperscalers, which are down an average of 20% this month, added to concern that these companies might come under pressure to moderate capital spending on AI. These developments overshadowed further evidence of robust demand for chips. Chipmaker Micron reported a 15-fold rise in profits and signaled strong ongoing demand for its memory chips, which are used in servers that train and host AI models.

This week, investors will look for further evidence that hyperscalers remain committed to capital expenditure plans, that supply bottlenecks in memory and advanced components remain supportive for pricing, and that cloud revenue growth and enterprise AI adoption can continue to justify heavy capital outlays.

Our view is that AI remains a powerful structural opportunity. We expect AI-related capital expenditure to keep rising, with annual spending approaching USD 1 trillion next year, and we believe demand across the hardware and infrastructure buildout remains strong. Despite this positive medium-term outlook, recent volatility should continue to remind investors that shareholder pressure, stretched positioning, and narrow market leadership can create further swings. We recommend diversified and active exposure across the AI value chain and geographies, including infrastructure, enabling technologies, platforms, and application beneficiaries. We also believe investors should complement technology exposure with other secular themes and broader equity opportunities. We view global equities as Attractive and recommend staying invested while reviewing concentration risk.