Amid geopolitical uncertainties, oil prices have surged and gold has declined, while Asian stock markets continue to strengthen, buoyed by the AI rally. During early trading on May 11, South Korea's Seoul Composite Index rose over 4%, with SK Hynix soaring 10%. Japan's Nikkei 225 Index also climbed nearly 1%. Asian equities are experiencing another wave of gains driven by the AI boom, with South Korean stocks leading global performance this month, attracting significant capital inflows, and the upward momentum persists. Morgan Stanley projects that Asia's fixed asset investment will increase from $11 trillion in 2025 to $16 trillion by 2030. Key drivers include AI infrastructure, energy security, and defense spending. China demonstrates notable strengths in domestic AI chip production, robotics exports, and the new energy sector.
Meanwhile, Brent crude futures rose as much as 3.5% to $104.80 per barrel, while WTI crude approached $99. Concurrently, Dow futures fell approximately 0.3%, S&P 500 futures declined about 0.2%, and Nasdaq 100 futures dipped around 0.1%. Spot gold dropped 0.6% to $4,689.29 per ounce.
According to reports, U.S. President Trump expressed dissatisfaction with Iran's response on social media, calling it "completely unacceptable." This statement has cast further doubt on the already fragile ceasefire in the Middle East. Following the news, oil prices jumped significantly, U.S. stock futures declined, and gold faced downward pressure due to heightened inflation expectations.
The core disagreement between the U.S. and Iran revolves around nuclear issues. Reports indicate Iran proposed transferring some of its high-enriched uranium stockpiles to a third country but refused to dismantle nuclear facilities. Iran's semi-official Tasnim news agency later disputed these reports. Trump stated, "I just read Iran's so-called 'response'—I don't like it, completely unacceptable!" without further elaboration.
The underlying logic of the "super cycle": Asia's capital expenditure is set to accelerate significantly. Asian stock markets continue to climb, particularly in the technology, chip, and memory sectors. South Korea's Seoul Composite Index rose over 4%, with SK Hynix surging 10%. The Nikkei 225 Index gained nearly 1%.
The most significant difference in this Asian industrial cycle is that AI has brought capital expenditure back into focus. Over the past two years, market discussions on AI have largely centered on models, applications, and the U.S. "Magnificent Seven." However, from an Asian perspective, AI's true significance lies in the comprehensive expansion of chips, memory, servers, optical modules, data centers, power systems, and cloud infrastructure.
Morgan Stanley notes that the proportion of global CIOs prioritizing AI has risen to 39%. Correspondingly, global AI data center investment is expected to reach approximately $2.8 trillion between 2026 and 2028, with an annual growth rate of about 33%.
Asia is at the center of the AI hardware supply chain: from TSMC, Samsung, and SK Hynix to semiconductor, server, optical communication, and cloud infrastructure companies in mainland China, all are poised to benefit from this investment cycle.
Oil prices: The shadow of a Strait of Hormuz blockade persists. Since the joint U.S.-Israel military operation began in late February, the Strait of Hormuz has been virtually closed, disrupting global crude oil, natural gas, and fuel supplies and keeping energy prices elevated. The International Energy Agency (IEA) has characterized the conflict as the "largest supply shock in history."
U.S.-Iran tensions have ignited the oil market. According to Bloomberg, Brent crude July contracts saw over 4,000 trades in the first five minutes of trading, compared to an average opening volume of less than 1,000 recently. The Brent near-month spread widened to a backwardation structure of about $4 per barrel, a pricing pattern typically indicating market concerns over near-term supply tightness.
Saudi Aramco CEO Amin Nasser stated on Sunday that if the Strait of Hormuz remains blocked for several more weeks, the oil market may not normalize until 2027. He also revealed that Aramco has rerouted some oil exports to Yanbu Port on Saudi Arabia's west coast to compensate for disrupted supplies.
A small number of tankers have successfully navigated the strait—the UAE and Saudi Arabia have quietly moved several tankers out, and Qatar has completed its first liquefied natural gas shipments since the conflict began—but overall traffic remains well below pre-war levels.
A Goldman Sachs survey of market participants indicates most respondents expect disruptions in Strait of Hormuz transit to persist beyond the end of June. This expectation is fueling what Wall Street calls the "NACHO trade"—a bet that "Not A Chance Hormuz Opens"—driving U.S. Treasury yields and inflation expectations higher.
Gold: Rising inflation expectations weigh on non-yielding assets. Spot gold fell 0.6% to $4,689.29 per ounce during early Singapore trading on May 11, silver dropped 0.8% to $79.67, platinum and palladium also declined, while the Bloomberg Dollar Spot Index edged up 0.1%.
Gold had gained about 2% over the previous week, but the breakdown in negotiations halted the rally. The logic is that a prolonged U.S.-Iran stalemate means energy prices will remain elevated for longer, increasing inflationary pressures and reinforcing market expectations that the Federal Reserve will maintain high interest rates. As a non-yielding asset, gold becomes less attractive in a high-interest-rate environment.
Friday's April non-farm payrolls data showed U.S. employers added jobs for the second consecutive month, with the unemployment rate holding at 4.3%, providing the Fed room to hold steady. The upcoming CPI data on Tuesday is expected to further confirm inflationary pressures, following March's CPI recording its largest monthly increase since 2022.
U.S. stocks: Tech stocks provide support, but concentration risks raise concerns. Dow futures fell about 0.3%, S&P 500 futures declined approximately 0.2%, and Nasdaq 100 futures dipped around 0.1%. Bitcoin remained relatively stable at about $81,000, having reached its highest level since January last week.
Despite ongoing geopolitical risks dampening sentiment, U.S. stocks performed strongly overall last week. The S&P 500 and Nasdaq Composite both closed at record highs on Friday, marking six consecutive weeks of gains; the Dow rose 0.8% on Friday and gained 0.2% for the week.
However, according to MarketWatch, Scott Rubner of Citadel Securities noted in a report on Friday that over the past 30 days, only 22% of S&P 500 constituents have outperformed the index, the lowest proportion in 30 years. He warned that the market's reliance on a handful of tech stocks for gains is overly concentrated, posing structural risks.
Several key events are on the market's radar this week: Cisco and Applied Materials will release quarterly earnings; April CPI data will be announced on Tuesday; expectations for Trump's statements are heating up; additionally, Fed Chair Powell's term expires on Friday, though he will remain a member of the Federal Reserve Board.
Comments