Oil prices may face upward pressure for longer than expected. Goldman Sachs: CTA ammunition has been exhausted, and downside risks in the stock market are accumulating.

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Oil prices continue to rise amid persistent geopolitical deadlock, releasing signals of systemic pressure to the global financial markets that have been ignored by equities but are increasingly hard to overlook.

Rich Privorotsky, Head of Delta-One at Goldman Sachs, warns that trend-following funds (CTAs) have basically exhausted their long ammunition, and the technicals show clear asymmetric downside risks; meanwhile, the deadlock in Iran nuclear negotiations could mean upward pressure on oil prices lasts longer than the market expects.

Even if the Iran situation is resolved quickly, the impact on refined oil product prices is likely to continue until year’s end. Oil prices have returned to near recent highs, but the stock market is currently ignoring this. The key risk in the current situation is that the market is pricing this as a temporary shock—if the stalemate persists, the macro impact will compound rather than naturally dissipate.

Meanwhile, expectations for sustained AI spending are starting to waver. Reports say OpenAI failed to meet its revenue target, and SoftBank Group plummeted more than 10% in a single day, shaking the highly confident optimism about tech capital expenditures in the market.

This week, major cloud providers will release earnings one after another, and return on investment (ROI) will replace the scale of capital expenditures as the key focus of market disputes.

Iran Situation: Negotiation Deadlock May Mean Prolonged Oil Market Pressure Until Year-End

The structural fragility of Iran's oil system is becoming an implicit variable in market pricing. Macro hedge fund manager Hugh Hendry explains this in detail: Iran's oil system is a flow system, not designed for shutdowns.

Crude oil must continuously travel from underground layers to port tankers and then to Asian buyers. If this chain is interrupted, not only does it mean tens of billions in income loss, but also physical and irreversible damage. When wellheads stop operating, formation pressure drops rapidly, and the heaviest asphaltene components will clog the rock pores, causing permanent, solidified reservoir damage—production capacity will be lost forever.

This means that the longer negotiations are delayed, the more Iran is effectively trading its core asset in exchange for strategic persistence. Shipping restrictions and gas pipeline controls remain in place, and both sides believe they are in advantageous positions, which in itself extends the duration of this stalemate equilibrium.

Rich Privorotsky points out that the market still prices Iran as a temporary shock, but if the deadlock persists, the transmission effect on product prices will amplify over time in a non-linear way. Persistently rising oil prices will put pressure on the rates market via nominal inflation channels, posing a deeper challenge for stock market valuations.

RBOB gasoline futures (XBA) have reached new highs; without export controls, U.S. gasoline retail prices could be heading to $5 per gallon.

CTA Ammunition Exhausted, Technicals Show Asymmetric Downside Risk

From a technical perspective, current market fragility is building. Rich Privorotsky points out explicitly,“CTAs have used up their bullets,” and asymmetric risk is to the downside. Currently, the last important source of buying is volatility control strategy funds (Vol Control).

The S&P 500 is pinned by local options gamma effects, suppressing realized volatility and continuously providing buy-side support for vol control strategies. SpotGamma has adjusted the risk pivot up to 7090, which serves as key support; resistance is at 7200.

It is worth noting that, even as the stock market remains high, the MOVE index (measuring interest rate volatility expectations) has steadied at levels far above its previous lows, and the VIX shows a similar feature. Bulls may read this as a temporary reflection of oil price premiums, but historically, this combination often presages deeper pressures yet to be released.

In addition, as blackout periods end, IPO supply is accelerating, adding marginal pressure to market liquidity. Month-end rebalancing is also on the radar, and as the stock-bond yield gap widens, asset allocators may face passive rebalancing pressures.

At the end of this week, with the release of Mag 6 earnings alongside month-end fund flows, market moves may be more complex than the current calm pricing suggests.

Diverging Interest Rate Signals; Fed Likely To Stay On Hold

The rates market is sending signals sharply different from equities. Rich Privorotsky notes this divergence is well worth watching.

Global yields are under pressure: The Bank of Japan maintained a hawkish stance by a 6-3 split vote, the Japanese government bond yield curve has seen bear flattening; Australian bond yields are back above 5%, and the UK 50-year bond yield also saw a major upward move.

Structurally, rising oil prices push nominal inflation higher, the AI and capex cycle support nominal GDP, and U.S. fiscal deficits running at 5%-7% of GDP create persistent pressure on treasury supply. These three factors mean a fundamental underpinning for rising rates.

Regarding monetary policy, if the Fed follows the “Warsch-style” reaction function (i.e., focusing on trimmed mean inflation and being more cautious on rate cuts, as described by Rich Privorotsky), then policy rates will effectively remain on hold as multiple pressures build.

The U.S. 5-year Treasury auction last week saw a tail, confirming concerns about the market's ability to absorb supply.

Regarding gold, Rich Privorotsky says structurally he is bullish on gold as a hedge against government balance sheet deterioration, but cash shortages caused by high oil prices are leading to emerging-market style “piggy bank” gold selling. Gold will only really start performing its safe-haven function once oil prices stabilize.

AI Spending Narrative Pressured, ROI Becomes New Focus

Another major variable for global asset prices this week is the reassessment of the AI narrative. Rich Privorotsky points out that the period of deep confidence in capital expenditures from hyperscale cloud providers may be ending, and market focus will shift toward return on investment.

According to reports, OpenAI failed to meet its revenue target, prompting doubt over the whole logic for hyperscale compute investment. SoftBank Group shares tumbled over 10% in a single day, further heightening market concerns about the sustainability of AI spending.

Rich Privorotsky also notes that the most instructive breakthrough in Q1 was not that models got smarter, but rather an evolution at the level of computing orchestration—greater synergy between GPU computing, CPU, memory, and scheduling systems, significantly enhancing practical value.

This trend has fostered new AI-related winners in photonics, CPUs, and other niches, broadening the scope of AI-driven gains. Even though some cloud providers' spending expectations are softening, investors still have a strong tendency to buy the dip in this vertical. However, for the direct beneficiaries on the capital expenditure end, market attitudes may become more cautious.

This week, downstream supply chain earnings already show record strength in both demand and pricing; the tone of optimism hinges on whether the upstream capital end is confirmed by statements from the cloud majors.

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