What to watch in the week ahead

• Fears that the Iran conflict could last longer than markets had hoped resurfaced on Friday, lifting the price of oil, boosting yields, and dragging equities lower. This week, investors will look for evidence that diplomacy can get back on track.
• Stronger US inflation data and higher oil prices pushed investors to reassess the rate outlook, with markets pricing a nearly 39% probability of a Fed hike this year as of Friday, up from less than 14% a week earlier. Fed speakers, meeting minutes, business surveys, and consumer sentiment data will guide the market debate on whether central banks look through oil-driven inflation or adopt a more hawkish stance.
• Supportive corporate results and AI optimism helped equities reach record highs earlier in the week, while developments in agentic AI pointed to a broadening opportunity beyond chips and data centers. NVIDIA’s results this week will be watched as a test of demand, pricing power, and monetization across the broader AI cycle.

What comes next for the Middle East conflict?

Fears that the Iran conflict could be more prolonged than markets had hoped resurfaced last week, after the Trump-Xi summit produced no clear route to reopening the Strait of Hormuz. Brent crude rose more than 3% to USD 109 a barrel, as investors reassessed the risk that energy prices remain elevated for longer. The renewed inflation concern pushed government bond yields higher on Friday, with the 10-year US Treasury yield rising 14 basis points to 4.6%. This weighed on equities, pulling the S&P 500 down from a record high. While the index managed a seventh straight weekly advance, its longest rising streak since late 2023, a 1.2% fall on Friday cut this gain to just 0.1%.

This week, investors will look for evidence of renewed diplomatic progress after several weeks of stalemate. The Chinese foreign ministry said shipping routes should be reopened “as soon as possible,” and that it wanted a diplomatic solution for Iran. Trump said the US wants “the straits open,” while also saying he was considering whether to lift US sanctions on Chinese oil companies buying Iranian crude. Iran has proposed a mechanism to manage traffic through the Strait along a designated route. The key question is whether these diplomatic signals can translate into a more durable normalization of shipping routes.

Until there is clearer progress toward reopening the Strait of Hormuz, energy prices are likely to remain a source of inflation concern, and our end-June Brent forecast remains USD 100/bbl, with risks skewed to higher prices if disruptions persist. However, our base case remains that diplomacy will eventually allow markets to focus back on fundamentals. We view global equities as Attractive and recommend investors stay invested, while using the recent rally to rebalance concentrated positions—especially in the Magnificent 7—from a position of strength. A well-diversified portfolio remains the most effective way to manage near-term uncertainty while capturing long-term gains, our view.

Will the renewed rise in yields derail stocks?

The concern over a longer Iran conflict has moved from oil markets into government bonds, adding to pressure from stronger US inflation data earlier in the week. The US April consumer price index (CPI) rose 3.8% from a year ago, the highest since May 2023, while core inflation topped expectations at 0.4% month over month. Producer prices pointed to more pressure in the pipeline, rising 1.4% month over month, which was nearly triple expectations and the fastest monthly increase in more than four years. Against that backdrop, the 10-year US Treasury yield rose 14 basis points on Friday to 4.60%, and markets lifted the implied probability of a 25-basis-point Federal Reserve hike by year-end to 38.8%, from less than 14% a week earlier, according to CME Group’s FedWatch tool. On Monday, yields around the world continued to push higher. Japan’s 30-year yield hit a record high near 4.2% on Monday, after the 30-year Treasury yield on Friday settled at the highest level since 2007, near 5.13%. The 30- year Bund yield is at its highest in 15 years, while the 30-year gilt yield has risen to its highest level in 28 years.

This week, investors will look for signs of whether central bankers treat the latest rise in oil prices as a one-off supply-driven influence on inflation, or as a reason to maintain a more hawkish policy stance. Markets will be carefully parsing comments from leading central banks, including from the Fed. The minutes of the US central bank’s April policy meeting will also be released and investors will be on the alert for any guidance from Kevin Warsh in his first full week as Fed chair. The global debate on rates will also be shaped by speakers from the European Central Bank and the Riksbank, along with the release of business survey readings for the Eurozone and US.

Our view remains that the bar for a Fed rate hike is high, particularly as Kevin Warsh along with other policymakers appear inclined to look through one-off supply-driven inflation such as tariffs or oil. Wage dynamics do not point to a renewed labor-cost-driven inflation problem, and the Fed’s preferred inflation expectations measures remain well anchored despite recent supply pressures. We still expect the Fed’s next move to be a cut, now in December, followed by another cut in March 2027. We think markets are currently overpricing the risk that central banks will hike interest rates, creating an opportunity to add exposure to quality short- and medium-duration bonds for durable income.

Can AI earnings keep equities focused on fundamentals?

The tension between higher yields and supportive corporate results is likely to frame the end of the earnings season. Strong profits and continued AI optimism helped equities reach record highs earlier in the week, before Friday’s renewed concern over a prolonged Iran conflict pushed oil prices and yields higher. The AI narrative also continued to broaden beyond chips and data centers. Without taking a view on single stocks, investors responded positively to Google’s announcement of upcoming Android features designed to act as an AI agent, anticipating needs and executing multi-step tasks such as booking rides. The move points to growing momentum in consumer agentic AI, following Chinese internet platforms’ integration of OpenClaw into their services, and sits alongside robust enterprise demand.

This week, attention turns to NVIDIA’s results near the end of the firstquarter earnings season. The results from America’s largest company will shed light on the broader AI investment cycle. Investors will look for evidence that demand across the supply chain remains strong, pricing power is holding, and monetization is keeping pace with spending. Growth across the four major cloud providers accelerated to an estimated 40% year over year in the first quarter, up from 34% in the fourth quarter of 2025. Aggregate order backlogs of around USD 2tr point to continued demand for AI infrastructure.

Our view is that AI remains a key long-term opportunity. We recommend a diversified and active approach to AI exposure across the value chain and geographies, favoring platform and application beneficiaries as well as infrastructure names with strong pricing power and competitive positioning. We view global equities as Attractive, while avoiding excessive reliance on a narrow group of megacap technology stocks. For AI exposure, we prefer our AI TRIO, while complementing technology exposure with other secular themes such as Power and resources and Longevity. This approach helps investors stay exposed to innovation while reducing reliance on a narrow group of megacap stocks.