James Brodie
Head of Learning & Development, Flux
Historic US Equity Move, BP Doubles Profits in Q1’26, G7 Policies This Week
Equities hit highs as oil drives inflation risks; AI cuts jobs; energy shock hits Europe/Asia; central banks turn hawkish.
As crude and refined products grind higher, the higher inflation and demand destruction grind continues.
Headlines spook markets, but the daily grind here goes largely unnoticed. S&P and Nasdaq make new all-time highs, dollar and bond yields higher, precious metals lower. All correlated to the crude price.
The U.S. equity move is historic. We've never seen a 5-10% decline in markets and then this type of a rally. It doesn't exist in the data set. Meanwhile Philadelphia Semiconductor Index is set for the best month in 25 years.
British oil and gas giant BP has more than doubled profits due to the Iran war - from $1.38bn to $3.2bn for Q1 2026.
Banks getting more bullish crude. Citi now has base case for 0-3 mo. Brent price of $120/bbl but warns of a "Superbull" scenario where crude & products top $200/bbl. Count 500-mil barrel loss so far that will eventually top 1.3-billion barrels.
Meanwhile, in West Texas the natural gas price goes deeply negative, reaching a record low of nearly -$10 per mBtu over the weekend (so it costs a producer money to get rid of the molecules). For the U.S., there’s no energy crisis (yes, oil is expensive, but that’s as far as it goes)
China's real residential property prices hit a 20-year low in Q4 2025, with the BIS index falling to 86.79 — down 21.5% from its September 2021 peak of 112.99, the lowest since records began in 2005. An estimate of 80 Million unsold or vacant homes clog the market and many of the country’s largest private developers have defaulted on debts….. Remember this was the housing market that after the GFC would not stop rising. (Chart 1, BIS)
German IFO survey indicates a further decline in employment, while consumer confidence took a nosedive to the lowest levels since 2022. (Chart 2, Bloomberg)
Sir Keir Starmer warns that people may need to change their holiday plans and what they buy in supermarkets because of the impact of the Iran war
AI infrastructure stocks have outperformed the equal-weight S&P 500 by +115% since December 2023, more than any other AI-related category. This group covers semiconductors, data centre operators, cloud providers, networking equipment firms, and power companies, among others. (Chart 3, GS Global Investment Research)
More than 70% of the increase in 2026 EPS estimates comes from just six companies, benefiting from a shortage of oil and semiconductors, according to BCA Research. (Micron, Nvidia, Exxon, Mobil, Broadcom and Sandisk).
We have ten central banks & all of the G-7 issuing policy decisions this week. It’s going to be a hawkish week as inflationary pressures build across the global economy due to the effective closure of the Strait of Hormuz. Australia and NZ priced for hikes this week, by year end Fed -7bp, ECB +63bp, BOE +59bp. (Chart 4, Bloomberg)
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