The dark hand of inflation starts to exercise its grip within the United States as it once again accelerates; the May CPI climbed 4.2 percent year-on-year, the most since early 2023. Although the Core CPI, that which excludes food and energy, came in below expectation by increasing 0.2 percent over April, it is likely that energy costs are starting to haunt the wider economy of the US and the lower-than-expected monthly increase is due to a change in spending habits from consumers who are cutting down on non-essentials as it is not only homegrown demand that pushes pump prices higher.

The US is now acting as the global swing exporter; it is feeling an unprecedented draw on its feedstock. According to S&P Global, crude oil exports surged to a record 5.6mbpd in May, as well as increased sales to existing customers, new destinations are emerging such as Croatia, Philippines and Turkey. The largest oil producer in the world is now obliged to come to the aid of an oil-thirsty atlas because, and as seen in a Reuters survey, OPEC’s production has now fallen to 16.13mbpd, below that of the pandemic and not seen since the year 2000. 

After further attacks from the US into Iran overnight, Tehran has once again declared the Strait of Hormuz closed with particular reference made to commercial ships and oil tankers. Those which try of navigate through will be shot at. The layers of resistance to finding a lasting peace continue to build and that pressure can only commute to oil prices once again, and with such stress, as discussed below, far-reaching consequences.

Don't worry about a thing 'cause every IPO, gonna be alright

With apologies to the magnificence that was the late, great Bob Marley. There have been some incredibly defensive moves across almost the whole investment suite recently and while it is easy to lay blame at the foot of the Iranian war, the issues for the wider markets are many and varied going forward. This includes the incredible draw of attention and monies into the IPO (Initial Public Offering) of OpenAI, SpaceX, Anthropic and likely others. These are almost guaranteed to be blockbuster listings, defining not only the IPO markets for 2026 but how, and eventually, investments will be measured come the end of the year. 

Markets are thoroughly too complex to ever draw a full conclusion, hindsight aside, which is why it might just be mistaken to call the current woe befalling bourses and particularly the authors of great riches, the tech giants, as being part of a great spate of ‘risk off’. It is worth then considering that there is a new expression of ‘risk on’ occurring and one that is even more gung-ho than we have thus far experienced from the marauding hordes of investment tourists and sober institutions alike.

Because of the spectacular ascent of Nvidia and its other cohorts in the brotherhood of tech, whatever might be the next vehicle to riches cannot be missed and those that wish to jump on this bus to El Dorado are making all the above-mentioned IPOs severely oversubscribed. Taking views from across varied financial writings, and in the case of SpaceX, the $75 billion target in the listing has attracted $250 billion in demand. Indeed, and according to Reuters, this is not just from individual investors, a source revealed that long-only funds have put in sizable orders. 

Where then does the funding for these bids come from? It is derived from the so-called ‘rotation’ being experienced across equities as seen in the last few days of severely negative closes of bourse indices. The very thing that has generated such wealth, is now being leveraged to enter into the next step in industrial revolution, or cynically translated, the next best bank account filler. The tech-heavy US Nasdaq 100 has seen $1.7 trillion disappear in value at time of writing, and in Bitcoin ETFs, according to I.G., a similar amount of outflow has been seen. And what of the epitome of inflation hedges, namely Gold? It is down nearly $500/ounce in the last week just as the US CPI was printing at 3-year highs.

Given such relocation of monies, it is entirely understandable how our market continues to be left out of the party. Metaphorically, it is the smallest kid in the school playground when there is picking of a basketball team, not even another exchange of military hardware between Iran and the US is enough to ignite much reaction in oil prices. There is a dislocation here; between the state of oil inventories and prices being traded on futures. The world sees banner numbers, it sees Brent prices flashing across television graphics, but they are always futures prices. Which is why it is so important for the Trump Administration to hold the narrative. That narrative has bred mistrust and if we believe there is a flight from the winners in stock markets to fund new ventures, then it is only logical to presume that long-only investments in Brent, which will be futures, are a dying breed. It will be interesting to see what the commitment of traders will be at the end of this week, but the scepticism toward our market which has turned into downright avoidance is represented in ICE Brent futures volumes. On the 3rd of March this year total volume was some 4.5 million lots, on Tuesday of this week it was 1.1 million lots. 

These are without doubt then strange times. Our market is caught in the eye of the storm. Deception roars around us, coupled with things that are just way more attractive. This ‘eye’ is also in the dull spot of oil demand, still in transition from winter to summer and intravenously sated by the dripping flow of the rundown in OECD oil stocks. Volumes have dried up and many wonder when we might be relevant again. But there is a sting in our tail, and whether it will pour forth enough venom to thwart the dreams of owners of these IPO candidates of cashing out their investments to an over-hyped public remains to be seen. 

The oil price sting of inflation has not and will not go away. It has been conveniently written out of the narrative by global investors way too accepting on the hollow assurances of a White House that oil from the Middle East will soon be flowing. Without a physical, and not hyperbolic war ending, oil inspired inflation is set to be the equivalent of a police stinger, cast across the road to bursts the tyres of speeding cars, and while it might not violently deflate this new part of the technology bubble, it might put a hole in the value of these overvalued flotations and prove right those that are selling these companies because they suspect the ‘top’ is in sight. Never discount or dismiss the influence of our beloved market, even when it is out of fashion.

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