The question traders and strategists have been wrestling with for weeks: how does the S&P 500 notch a 7th consecutive weekly gain while the Strait of Hormuz remains effectively closed to commercial tanker traffic? BlackRock's Investment Institute has a clean, data-driven answer: "There is no inconsistency."

Their framework, published in their weekly client note, rests on a fundamental insight about the current market structure. The AI investment supercycle — driven by hyperscaler CapEx and GPU demand — is generating enough earnings momentum to absorb the macroeconomic drag from the Hormuz shock. Meanwhile, energy markets have not fully priced in a permanent closure, still embedding expectations of an eventual reopening.

The Key Insight: BlackRock's data shows that since the conflict began, U.S. and emerging market equities tied to the AI boom — particularly South Korea (Samsung, SK Hynix) and Taiwan (TSMC) — have been the top-performing global equity markets. Countries most exposed to the energy shock have been the laggards. The market is not ignoring the war. It is pricing it precisely, and the AI premium is winning.

The Two-Speed Global Economy

BlackRock's framework reveals a bifurcated global economy operating at two distinct speeds. In one lane, you have the "AI accelerator" economies: the United States, South Korea, and Taiwan, whose equity markets are driven by the semiconductor supply chain and whose corporate earnings are structurally insulated from oil price volatility.

In the other lane, you have the "energy shock absorbers": European economies, Southeast Asian energy importers, and supply-chain-intensive manufacturers for whom higher fuel costs are a direct hit to margins. This is reflected in European rate markets, where BlackRock's data shows traders are now pricing in approximately three rate hikes in Europe as inflation pressures build — while U.S. rate expectations remain unchanged.

Why the Pro-Risk Stance Holds

BlackRock maintains its pro-risk stance despite the elevated geopolitical environment for two structural reasons:

  • AI Earnings are Non-Cyclical (for Now): Hyperscaler CapEx commitments to AI infrastructure are multi-year budget line items — not discretionary spending that gets cut when oil rises. Microsoft, Google, and Meta have all explicitly stated their AI buildout plans are insulated from near-term macro conditions. This creates a floor under semiconductor earnings that is largely immune to the Hormuz premium.
  • Energy Markets Are Still Pricing a Reopening: WTI Crude is elevated, but not at "full shock" levels. If energy markets were pricing a permanent Hormuz closure, oil would be trading significantly higher. The contained energy price tells BlackRock that markets are embedding a ceasefire probability — and if that probability resolves positively, the macro setup for equities improves further.

The Risk Factor: Inflation and Yields

BlackRock is explicit about the primary risk to their thesis: rising inflation expectations and higher long-term yields. Under the new Warsh Fed regime, the political willingness to tolerate higher-for-longer inflation has diminished. Any data that forces the Fed's hand toward a rate hike will challenge the AI growth narrative by raising the discount rate on future earnings.

For traders, this means the 10-year Treasury yield is now the single most important daily signal. A sustained move above 5.0% would force institutional portfolio managers to rebalance out of growth equities, regardless of how strong Nvidia's earnings print is.

Original Analysis by Toastlytics Research Team. Sources: BlackRock Investment Institute Weekly Commentary, CNBC, TradingView, and Bloomberg data.