Markets amid strong dollar, retreating oil, and AI cracks

The week changes center of gravity: less war, more growth

The second half of the week shifted the markets' focus. Geopolitical risk remained: Iran reclaimed control of the Strait of Hormuz, a commercial ship was hit, and the United States responded by attacking Iranian missile installations, drone depots, and coastal radar. However, the market no longer priced in the worst-case scenario of a total energy shutdown. Instead, it began to look elsewhere: a strong dollar, high real rates, more fragile growth, and rising costs within the technology supply chain.

On Wall Street, the S&P 500 closed nearly flat on Friday at 7,354 points, but lost 2.0% for the week. The Nasdaq fell 0.2% in the last session and 4.6% for the week, weighed down by semiconductors and artificial intelligence. The more defensive Dow Jones closed the week up 0.6%, while the Russell 2000 gained 1.0%. In Europe, the picture was more stable but not immune: the STOXX 600 lost 0.7% on Friday, the DAX 1.29%, the CAC 40 0.55%, and the FTSE 100 0.21%.

Commodities: Gold below 4,000, oil below 70

The most significant move came from gold. The metal fell below $4,000 an ounce during the day, touching $3,974, before rebounding above $4,060. When the dollar strengthens and the market begins to price in a more hawkish Fed, even the safe haven asset could correct. Gold continued its negative week, with a loss of about 3.4% on Comex futures.

Even more important is oil. WTI fell below $70, closing at $69.23 a barrel, down 3.7% on the day and nearly 9.6% for the week. Brent closed at $71.99, down 4.3%. The key fact is that WTI is now only 3-4% above its late-February levels, before the US-Iran escalation and the Hormuz crisis. The war premium has almost completely deflated.

This doesn't mean normalcy. It means the market sees more incoming supply and less fear of a total blockage. Saudi Aramco has resumed loading operations at Ras Tanura after nearly four months, while several oil tankers have returned to moving through the strait. But the macroeconomic message is colder: the decline in oil, metals, and raw materials also points to a deterioration in growth expectations.

Rates and currencies: flattened curve, central dollar

The bond market confirmed this view. Short-term yields remain supported by expectations of a restrictive monetary policy, while the long end of the curve benefits from the decline in oil prices and fears that future growth will lose momentum. The 10-year Treasury has returned to 4.38%, the 2-year Treasury around 4.10%, and the 10-year German Bund near 2.86%.

It's a curve that speaks to two things at once: inflation still too high to allow for rapid cuts, but a less promising economic outlook. US GDP for the first quarter has been revised upward to 2.1% annualized, versus the previous estimate of 1.6% and 0.5% for the fourth quarter of 2025. Beneath the surface, however, the data is less robust: consumption has been revised down to 0.5%, and the PCE price index rose by 4.6%. Growth is therefore better than expected, but the quality of the cycle is more fragile.

The dollar remains the linchpin in the currency market. The dollar index is around 101.35 and is on track to close the first half of the year with a gain of about 3% since the beginning of the year. The euro is just above $1.13, while the yen remains around $161.8 against the dollar, levels that continue to fuel speculation about Japanese intervention.

Technology: Micron shines, but AI costs weigh heavily

The week was a two-pronged affair for technology. On the one hand, Micron Technology reported significantly better-than-expected results: quarterly revenue of $41.46 billion versus estimates of $35.85 billion, adjusted earnings per share of $25.11 versus expectations of $20.78, and guidance above consensus. The company reported $22 billion in strategic customer agreements and approximately $100 billion in future contracted revenue. The stock rose 12% in after-hours trading.

On the other hand, the boom in memory and AI hardware is becoming a problem for buyers of those components. Semiconductors fell 5.3% on Friday and 7.7% for the week. Apple suffered after price increases related to memory costs; SpaceX remained volatile after its IPO, with the stock returning to near $153 after a peak above $225; OpenAI may postpone its listing until 2027. The market isn't denying the AI theme: it's starting to wonder how much it costs to finance it.

Defense, Hormuz, and tariffs: political risk remains

The defense sector has seen profit-taking and selective movements. Rheinmetall fell as much as 20% after Germany's cancellation of a frigate program, wiping out over €11 billion in market capitalization. This is an important signal: even "wartime" sectors no longer automatically rise when valuations are stretched and order visibility deteriorates.

On the geopolitical front, the US-brokered framework agreement between Israel and Lebanon has reduced some of the regional risk, but it remains fragile because it hinges on Hezbollah. Hormuz, however, remains the most sensitive point: trade is resuming, but under declared Iranian control and with the United States ready to strike in the event of renewed aggression.

Finally, Trump reopened the trade front by threatening 100% tariffs against countries that impose digital taxes on American companies.

For the markets, it's another reminder: even when oil prices fall and the war seems less central, political risk doesn't disappear. It changes shape.