The Middle East situation is compelling markets to reassess global growth prospects. Rosenberg Research has outlined three scenarios, with the sole variable being the timing of the Strait of Hormuz reopening. Under the most optimistic outlook, where the strait reopens within three weeks, global growth is still projected to slow to 2.9% from a pre-conflict expectation of 3.4%, representing a significant drag. In the most pessimistic scenario, with the blockade extending beyond July, growth could fall as low as 2.0%, nearing the threshold for a global recession. With the prolonged disruption, the core risk to the global economy is no longer confined to an oil price shock but has evolved into a triple threat of supply chain fractures, corporate profit pressures, and weak demand, leading to rapid downward revisions in growth forecasts. The current market pricing logic is clear: the longer the blockade lasts, the greater the downward revision to growth and the stronger the valuation pressure on risk assets. While Samsung Electronics' stock has doubled this year, entering the trillion-dollar market cap club and indicating that AI remains a dominant theme, this trade cannot be entirely detached from the macroeconomic cycle. Until the situation in the Strait of Hormuz becomes clear, the direction of asset prices will be determined not by daily oil price fluctuations but by how much further global growth expectations are revised downward.
Even the Most Optimistic Outlook is Downgraded, While the Worst Nears Recession In response to the highly uncertain situation, Rosenberg Research's Nwal Anwar and Robert Embree presented three global growth scenarios this week. The first, and most moderate scenario, assumes the strait reopens within three weeks. Even under these conditions, global economic growth for the year would still decline to 2.9% from a pre-war projection of 3.4%, indicating the shock is already substantial enough to significantly hinder growth. The second scenario envisions the strait reopening between mid-May and July. Under this assumption, global economic growth would slow further to 2.6%, with the slowdown spreading from the energy sector to broader demand and trade networks. The third scenario assumes the blockade persists into July or beyond. According to estimates, global growth could drop to 2.5%, or even as low as 2.0%.
Risks Extend Beyond Oil Prices to Global Supply Chain Pressures For the United States, the most immediate impact remains gasoline prices, which is the most easily identifiable risk signal for markets. However, the spillover effects of this shock extend far beyond energy. Compared to the first Gulf War, the Iranian Revolution, or the Arab oil embargo, the current disruption affects a wider range of commodities. Supplies of raw materials crucial for agriculture, automotive manufacturing, and the semiconductor industry are tightening, indicating that risks are spreading from energy prices to more complex industrial supply chains. Even under relatively optimistic scenarios, certain countries, and even parts of the United States, could face shortages of critical supplies like jet fuel. For corporations, this means simultaneous increases in transportation, manufacturing, and inventory management costs; for markets, it implies dual pressure on profit margins and demand expectations. This explains why, even though AI remains a market driver, related trades are not entirely safe. If global corporations and households simultaneously cut back on spending, even the strongest growth narratives would struggle to remain insulated from a broader macroeconomic slowdown.
AI Trade Remains Strong but is Tied to the Global Macro Cycle Samsung's stock doubling this year and joining the trillion-dollar market capitalization club demonstrates that AI continues to dominate risk appetite in global equity markets. This trading logic has not reversed. However, the Hormuz disruption serves as a reminder that AI is not a "vacuum trade" isolated from the macroeconomic cycle. Even if technology capital expenditure remains robust, should global growth forecasts continue to be revised down, pressuring multinational corporate profits and softening end-demand, AI-related trades would also face valuation reassessment pressure. For investors, the most critical judgment currently is not whether the AI narrative is over, but whether macroeconomic risks are beginning to erode its valuation premium. Until the situation in the Strait of Hormuz clarifies, markets will continue to rapidly reprice every piece of news from the Middle East. What truly determines the direction of asset prices now is not the daily fluctuation in oil prices, but the extent of further downward revisions to global growth expectations.
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