For more than 60 days, speculation that the U.S. and Iran would establish a peace deal boosted stocks. Bullishness for a settlement is so strong that stock markets hit all-time highs again on Wednesday.
When might the peace deal news cycle fueling the S&P 500 (IVV) and Nasdaq (QQQ) end?
Chip stocks led the markets higher. Nvidia (NVDA) added 5.77%, while AMD (AMD) gained 18.61%. Demand for AI hardware far exceeded supply in the first quarter. Mega corporations like Alphabet (GOOG), Microsoft (MSFT), and Amazon (AMZN) increased their capital expenditure forecast for this year.
Stock markets are ignoring the potential shortage of helium, a key ingredient for cooling AI hardware. Instead, they are pricing in for the Strait of Hormuz to reopen.
Oil stocks traded sharply lower as WTI crude prices fell. The energy market is also pricing in for shipping traffic to rebound. In reality, no one knows when Pakistan will broker peace. The predictions market set high odds of normalcy for June or July.
Energy traders might take advantage of the sell-off in oil and gas integrated firms. ExxonMobil (XOM) lost 4% on Wednesday, while Chevron (CVX) was down by 3.88%. Companies like Occidental (OXY), Devon Energy (DVN), EOG, and Valero (VLO) risk pulling back to pre-war levels.
