Key insights
- Iran's rejection of a ceasefire proposal raises concerns about sustained high oil prices. This could pressure corporate profit margins, especially for businesses reliant on energy and raw materials. The author highlights potential downside risks to future earnings guidance and questions the sustainability of large capital expenditures by hyperscalers given rising energy costs and strains in the private credit market. This could lead to a negative revision in earnings expectations for US equities.
This is a follow up to Trump's latest game of perpetual "deadline" that involves Pakistan, Oman and the US.
Iran said, , "go fly a kite".
source: https://www.aol.com/articles/iran-rejects-call-temporary-ceasefire-090748450.html
It is appalling that the market continues to buy into the game of perpetual "deadlines" because someone is unable to bear taking the L, choosing instead to drag the entire economy through the dredges.
Earning calls is when the high oil prices passed on to consumers and businesses are reflected in the profit margins, with a likely downside risk to guidance revision for 2026. Asia is the biggest importer of Middle Eastern crude but major Asian economies are also the biggest exporters to the world - high energy cost are passed on the consumers through price spikes at each step of the supply chain.
Clarity sets in when one walks to their nearest petrol kiosk, compared the oil prices from 5 weeks ago and ask, "if I were running a business, how would my profit margins be impacted".
Take this one reasonable step further: Hyperscalers are moving beyond at - the - market offerings and into an anxious private credit market, which has seen investors en - mass looking to redeem their investments, to shore up their ability to continue large CapEx spending wherein the major cost components of the buildout are metals and energy - where do we see sustainability in these astronomical CapEx with energy prices that has almost doubled since 5 weeks ago?