Morning Bid: Gulf singe, AI binge

By Mike Dolan

May 5 (Reuters) –

What matters in U.S. and global markets today

By Mike Dolan, Editor-at-Large, Finance and Markets

Gulf tensions flared on Monday as U.S. attempts to shepherd ships through the Strait of Hormuz met resistance from Iran, including an attack on a UAE ‌oil port. Crude prices leapt in response, but they’ve eased slightly heading into Tuesday.

Markets remain torn between the precarious geopolitical situation on the ‌one hand and dramatic upgrades to U.S. earnings growth and AI spending forecasts on the other, with global shares edging higher early on Tuesday.

I’ll get into that and more below.

But first, ​listen to the latest episode of the Morning Bid daily podcast, where I discuss why markets still appear upbeat despite the latest tensions in the Gulf.

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GULF SINGE, AI BINGE

Oil prices jumped by about 6% and major U.S. indexes retreated on Monday as the fresh U.S.-Iran exchanges suggested that we could see the return of a hot war. Brent and WTI crude settled at over $114 and $106 per ‌barrel, respectively.

But reports that at least one ship – a ⁠U.S.-flagged vehicle carrier – was escorted out of the strait by the U.S. military took crude off those highs and helped calm wider markets early on Tuesday.

Wall Street futures were in the green before the bell, while European shares opened higher ⁠thanks to upbeat earnings. Asian shares edged down in holiday-thinned trading, with markets closed in Japan and South Korea.

Investors will be hoping the geopolitical situation doesn’t escalate further, so that they can refocus on what’s proving to be another blockbuster earnings season. Full-year S&P 500 earnings growth forecasts have been revised upward to as high as 23%, ​from ​18% just a month ago.

Driving that was another upgrade of AI spending estimates, with ​Morgan Stanley now seeing the capex growth of the top ‌five ‘hyperscalers’ exceeding $800 billion this year and $1.1 trillion next year. Goldman Sachs reckons the cumulative spend to 2031 will be as much as $7.6 trillion.

U.S. companies set to report earnings later today include AMD, Pfizer and KKR.

Elsewhere, markets are keeping a wary eye on transatlantic tensions after President Trump’s threat late last week to raise tariffs on EU auto imports to 25%. That dragged down European automakers’ shares by around 2% on Monday.

Stateside, a big week for labor market data will also kick off today with the release of JOLTS job openings data for March. And in deal activity, investors are puzzling over an audacious $56 billion ‌bid for online retailer eBay by GameStop, the video game retailer that achieved ‘meme stock’ fame ​in 2021.