AI Remains the Market’s Driving Force as Middle East Tensions Ease

Market OverviewEasing Middle East Tensions Weigh on Oil Prices

Geopolitical concerns in the Middle East continued to fade as the United States and Iran moved closer to extending their ceasefire agreement. The improvement in regional stability has reduced risk premiums in the energy market, putting additional pressure on crude oil prices. As a result, oil is on track to post its weakest monthly performance since 2020.

AI Boom Continues to Fuel Corporate Earnings and Valuations

The artificial intelligence investment theme remains a key driver of market sentiment. Dell Technologies benefited significantly from surging demand for AI servers, delivering one of its strongest revenue performances in recent years and sending its shares sharply higher. Meanwhile, AI startup Anthropic is reportedly approaching a valuation of nearly $1 trillion, surpassing OpenAI and highlighting investors continued enthusiasm for the sector.

Although a recent Wall Street Journal report suggested that Chinese AI company DeepSeek contributed to weakness in certain AI-related stocks, the development is not expected to challenge the dominant positions of major U.S. technology leaders.

Inflation Expectations Influence Consumer Behavior

Costco reported record gasoline sales volumes as consumers rushed to fill their tanks ahead of anticipated fuel price increases. The trend reflects growing concerns over future inflationary pressures and demonstrates how consumers are proactively managing rising living costs.

Market OutlookU.S. and Iran Reach Ceasefire Extension Agreement

The United States and Iran have reportedly reached an agreement to extend their ceasefire, pending final approval and signature by President Trump. The easing of geopolitical tensions is expected to support broader market sentiment and reduce uncertainty across global financial markets.

Crude oil prices are on pace for their worst monthly performance since 2020 as the anticipated ceasefire extension reduces concerns over potential supply disruptions in the Middle East. The decline in geopolitical risk has become a direct bearish catalyst for the energy market.

At the same time, the U.S. dollar's strong performance this month has led strategists to adopt a more cautious outlook. While the greenback has benefited from recent momentum, analysts are increasingly questioning how much additional upside remains in the near term.

Record U.S. Gasoline Demand Reflects Stockpiling Behavior

Costco reported that gasoline sales reached record levels as consumers sought to lock in current prices before potential future increases. The surge in demand suggests that inflation expectations are beginning to influence purchasing decisions more directly.

The company noted that shoppers are increasingly filling up ahead of anticipated price hikes, translating concerns about future fuel costs into tangible consumer behavior.

Meanwhile, Chevron CEO warned that gasoline prices could spike during the summer months if fuel supplies tighten. While easing geopolitical tensions may pressure oil prices in the short term, strong seasonal demand and potential supply constraints could still drive fuel prices higher later this year.

Key Events to Watch (GMT+8)

14:00

Speech by Neel Kashkari, President of the Federal Reserve Bank of Minneapolis

21:10

Remarks by Michelle W. Bowman, Member of the Federal Open Market Committee (FOMC)

21:45

Chicago PMI (May)