Overview
Markets moved under an unusual calendar this week as trading was curtailed by public holidays in several major markets, yet the flow of macro and corporate news did not ease. U.S. and Canadian exchanges were closed for President's Day on Monday, while markets in China and South Korea were largely shut for the Lunar New Year. Despite the shortened schedules, commodity and equity moves were meaningful, led by a sharp rebound in crude oil prices and renewed scrutiny of AI-driven spending among large technology firms.
Oil spikes as Gulf tensions rise
Crude prices bounced back strongly this week, climbing about 6% to reach their highest levels since August. The market had shown signs of calm earlier in the week as talks between the U.S. and Iran, alongside separate negotiations over the Ukraine conflict held in Geneva on Tuesday, appeared to temper immediate supply fears. But with no decisive resolution emerging and military activity and manoeuvres in the Gulf escalating, traders increasingly priced in the risk of a supply disruption.
Market participants also face the near-term reality that sanctioned Russian crude is unlikely to flow back into global markets soon. Meanwhile, reports indicated OPEC+ might be inclined to approve a production increase in April - a potential supply response that has not, at least so far, fully offset market concern about geopolitical risk in the Gulf.
Demand signals strengthen
Supply worries were only one side of the story. There were clear data-driven signs that the global economy entered 2026 with stronger momentum, supporting the demand case for energy. U.S. manufacturing output registered its biggest monthly gain in 11 months in January. That industrial pickup came alongside a robust employment report for the same month, creating a broader narrative of strengthening activity rather than isolated datapoints.
Additional indicators reinforced the picture: weekly jobless claims continued to fall, the Philadelphia Federal Reserve business survey for February recorded activity readings roughly twice what forecasters had expected, and U.S. trade data for December showed a sharp surge in imports. Together, these datapoints supported expectations for higher energy consumption as economic activity picked up.
AI investment, hyperscaler deals and corporate spending concerns
On the corporate front, a notable theme was continued heavy spending on AI capabilities by major technology firms. Hundreds of billions of dollars in AI investment have been earmarked by big tech for 2026, a dynamic that is shaping markets and capital allocation decisions.
Investor attention is turning to Nvidia, with the market awaiting the company's quarterly results next week. There were signs the chip designer continues to secure large-scale cloud and hyperscaler engagements, including a reported deal with Meta. Meta itself has said it plans to nearly double its AI capital expenditure buildout this year, reflecting the broader wave of infrastructure and compute investment across the largest technology platforms.
Those same ties between suppliers and customers have also raised questions about circular capital flows inside the industry. One prominent example cited in market commentary is Nvidia's near-$30 billion investment in one of its largest customers, OpenAI. Such intertwined financial relationships have contributed to unease among some investors who worry about concentrated exposures and the potential for what they describe as AI overspending.
New AI breakthroughs over the past month have also stoked existential concerns across a range of sectors - from software vendors to wealth managers - about how rapidly evolving technology could disrupt business models, margins and pricing power. Simultaneously, a widening global political pushback over the perceived negative effects of social media on children has added to the cross-currents affecting part of the technology sector.
Market reactions and private credit strains
The combination of higher oil prices and stronger activity data fed through to bond markets, where traders expressed renewed concern about potential economic overheating. Treasury yields moved higher over the week as markets reassessed the balance of risks.
At the same time, strains surfaced in private credit. Blue Owl Capital experienced a 6% share drop after announcing it was selling $1.4 billion in assets from credit funds in order to return capital to investors and pay down debt, and that it would permanently halt redemptions at one of its funds. The announcement weighed on Blue Owl shares and led to declines at other private credit firms, as market participants assessed the implications of potential software sector distress stemming from rapid AI-led change.
Central banks and policy risks
Minutes from the January Federal Reserve meeting indicated that most policymakers were not in a frame of mind to resume easing. Officials were divided on whether the surge in AI-related investment would test capacity constraints in the economy before any disinflationary productivity gains materialise. That split reinforced the view that policymakers remain vigilant, which supported higher bond yields over the week.
Across the Atlantic, speculation over leadership at the European Central Bank picked up after a prominent newspaper reported that President Christine Lagarde might step down early to allow the outgoing French president a role in choosing a successor before he leaves office next May. The ECB initially pushed back on the reports, saying no decision had been made, and internal sources indicated Lagarde had told colleagues she was not planning to depart imminently. In an interview, she said her baseline remained completing her full term. Still, names of potential successors circulated once more, including Bank for International Settlements chief and former Spanish central bank head Pablo Hernandez de Cos as an apparent frontrunner, along with more hawkish figures such as former Dutch central bank head Klaas Knot and Bundesbank chief Joachim Nagel.
Back in the U.K., speculation that the Bank of England might ease policy increased after softer-than-expected headline inflation and private sector wage growth data. However, persistent core inflation pressures kept some caution in the market reaction.
Calendar and political events to watch
The truncated week concluded with fourth-quarter U.S. GDP data and attention on a possible Supreme Court ruling concerning the former president's use of emergency powers for tariffs. Looking ahead, the coming week will feature the State of the Union address, where the current president is expected to emphasise an election-year affordability agenda, and Nvidia's quarterly results due on Wednesday. Energy markets will remain attentive to tensions involving Iran, particularly after a recent warning that Tehran must reach a deal on its nuclear programme in 10 to 15 days or face "really bad things".
Reading, listening and viewing recommendations from the team
Several members of the editorial team highlighted analysis and media to follow over the weekend:
- Ron Bousso, ROI Energy Columnist - A policy report urging the British government to rethink its energy strategy argued that aggressive decarbonisation targets risk increasing consumer costs and recommended a mix of more domestic oil and gas production alongside net-zero commitments.
- Mike Dolan, ROI Finance & Markets Columnist - The Congressional Budget Office revised down its 2025 net immigration estimate by 1.6 million from a year earlier to 410,000, and cut its 2026 estimate by another 1 million. The CBO noted that, without immigration, population declines could begin by 2030. A Brookings study also highlighted that population growth had fallen to one of the lowest rates in U.S. history by 2024-25.
- Gavin Maguire, ROI Global Energy Transition Columnist - A paper from the think tank Ember argued that the global method for measuring "useful energy" requires updating.
For audio and video, the team called out:
- Andy Home, ROI Metals Columnist - A Power Current podcast episode discussing supply chain security for critical minerals, featuring conversations on stockpiling, price floors and tariffs.
- Clyde Russell, ROI Asia Commodities and Energy Columnist - A discussion on crude oil markets, the current Iran premium and China storage flows on Gulf Intelligence's Daily Energy Markets podcast.
Implications and concluding observations
This week underlined how geopolitics, robust domestic data and a concentrated wave of AI-driven corporate spending can intersect to produce outsized market moves across commodities, fixed income and equities. The oil rally reflected a clear risk premium tied to Gulf developments, while stronger U.S. industrial and labour indicators bolstered the demand outlook for energy. In parallel, the scale and structure of AI investment by large technology firms is altering capital flows and prompting investor scrutiny, with potential knock-on effects for private credit funds exposed to stressed sectors.
Policymakers remain cautious. The Federal Reserve's January minutes suggest a reluctance to ease policy, while leadership uncertainty at the European Central Bank and mixed UK inflation signals add to the list of variables markets must price. With Nvidia's results, the State of the Union address and developments in the Gulf all looming, next week could provide fresh data points to confirm or challenge the narratives that moved markets this week.