Hi YXI friends,

According to the US officials, the US-Iran peace talks are 99% of the way there. The only 1% left is the US “self-defence strikes” in southern Iran, the Strait of Hormuz control dispute, and what Iran should do with its enriched uranium.

Against such optimism, and after equities ran super hot, even the oil market is now giving in to the temptation to price a smooth-ish deal.

The front WTI contract has dropped by 10% vs a week ago.

Now, in all seriousness, it is unclear whether the recent reversal in oil prices or optimism about negotiations could persist.

However, lower oil prices in the near term will definitely help ease inflation concerns. This in turn could make the new Fed Chair, Keven Warsh’s job of keeping the same rates easier.

WTI Price (USOIL) vs 10-Year Inflation Expectation (T10YIE)

As you can see above, while the 10-year inflation expectation (pink line) is supposed to be forward-looking, it is heavily influenced by the near-term oil prices (light blue line).

Housekeeping:

I will cover the usual AI Infrastructure and AI Application stock charts tomorrow and on Thursday. Next week, I plan to expand the coverage into some Energy generation and equipment names related to AI. Stay tuned.

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