Take Five: Between Geopolitics and Technological Wave

Next week will crystallize the three major obsessions of investors: the conflict in Iran, the trajectory of interest rates, and the rise of artificial intelligence.

Four of the world’s major central banks will come together to discuss their ability to sustainably ignore the surge in energy prices caused by the blockade of the Strait of Hormuz. Meanwhile, five of the seven American technology giants, the famous ‘Magnificent Seven’, will release their financial results.

Here is what you need to know about the upcoming week in the financial markets, by Marc Jones and Dhara Ranasinghe in London, Lewis Krauskopf in New York, and Rae Wee in Singapore.

1/ THE CORRIDOR OF POWER

Next week, similar to the past eight, will be dominated by hopes for de-escalation in Iran and a reopening of the Strait of Hormuz, a strategic pivot in the conflict.

The extension of cease-fires between Washington and Tehran, as well as between Israel and Lebanon, has provided some relief, but the oil price remaining well above $100 per barrel reflects the persistent concerns of the markets.

Diplomacy, signs of unofficial negotiations, and social media posts by US President Donald Trump and Iranian Supreme Leader Ayatollah Mojtaba Khamenei will continue to fuel volatility. Especially as Donald Trump now states he will not rush into any agreement, demanding a ‘lasting’ result.

This prolonged conflict is also deepening the divide between the United States and NATO. Trump has reiterated his criticism towards alliance members for their lack of support during the strikes against Iran. According to some official sources, Washington is now considering sanctioning ‘difficult’ countries like Spain.

2/ THUNDERSTRUCK AT THE FED

The Federal Reserve, the world’s most influential central bank, is expected to keep interest rates unchanged on Wednesday. Attention will turn to its future plans, as most economists now believe a rate cut is unlikely in the short term.

A subplot is unfolding behind the scenes: will this be the last meeting chaired by Jerome Powell? His governorship, which runs until 2028, is itself being challenged.

The 73-year-old’s term at the helm of the Fed is supposed to end next month, marking his swan song. However, an American senator has vowed to block Trump’s chosen successor, former governor Kevin Warsh, until an investigation into renovations at the Fed headquarters under Powell is dropped.

Several major indicators will also be published on Thursday: the first-quarter GDP and March PCE price index, the Fed’s preferred inflation measure.

3/ A WEEK OF ALL DANGERS FOR TECH

The earnings releases of five of the ‘Magnificent Seven’ will be the highlight of an avalanche of first-quarter results next week.

This sequence comes as investors’ unwavering optimism about AI-driven profits supports stock indices near historic highs.

For Wednesday alone, Alphabet, Microsoft, Amazon, and Meta are in focus. These four ‘hyperscalers’ are currently investing billions in data centers and cutting-edge infrastructure.

Apple, the iPhone maker, will release its results the next day, shortly after announcing the appointment of John Ternus, a historic hardware executive, to succeed CEO Tim Cook, fifteen years after he took over from co-founder Steve Jobs.

The tech sector won’t be alone in the spotlight. Over a third of S&P 500 companies will report earnings, including obesity treatment giant Eli Lilly, oil major Exxon Mobil, and credit card leader Visa.

4/ OPTIONALITY AS THE WATCHWORD

The European Central Bank and the Bank of England are expected to leave their respective key rates at 2% and 3.75% on Thursday, after both dashed hopes of preemptive rate hikes in recent weeks.

The fragile cease-fire in Iran has provided some breathing room, but with oil back above $100 a barrel, monetary markets still anticipate two rate hikes by year-end.

Optionality will be the order of the day. ECB President Christine Lagarde will face questions about the likelihood of a tightening before the summer. She will want to avoid repeating the mistake of another Frenchman at the institution’s helm, Jean-Claude Trichet, who raised rates too soon just before the euro zone crisis exploded.

In London, BoE Governor Andrew Bailey has already warned that market expectations are premature. Given the domestic political jitters weighing on the Gilt market, he too is walking a tightrope.

5/ CAUTION IN JAPAN

The Bank of Japan closes the list of major central banks at play. Its meeting on Tuesday will kick things off, and like in the US or Europe, what seemed like a window of opportunity for a rate hike now looks like a new phase of watchfulness.

Sources told Reuters that Kazuo Ueda and his team will likely need more time to assess the repercussions of the Middle East conflict, although observers expect them to leave the door wide open for action in June.

Some fear the institution may lag behind events. The president of the Asian Development Bank himself warned that the yen could face further pressures if markets view the BOJ as too slow to address inflation risks.

For now, the Japanese currency continues to hover near the 160 yen per dollar threshold. Investors have long considered this level a potential trigger for intervention in the foreign exchange market. They are still waiting.