Alex Altman

If the Strait of Hormuz blockade continues through the end of May, WTI will rise to approximately $110 and Brent to $130 due to low gasoline reserves, the start of driving season, and Europe's jet fuel shortage.

Commodities, especially miners, offer a positive opportunity due to extreme scarcity of global listed commodity equities (only $0.4 trillion market cap). The narrative of U.S.-China decoupling and autonomy supports a long position in commodity equities.

A more negative narrative is brewing around the AI theme, supported by massive accumulation of leveraged ETFs in semiconductors that can amplify downside moves. The rally in memory and AI tech looks fragile, and the setup calls for tactical bearishness on the AI/semiconductor complex.

The U.S. equity market is overly concentrated in AI/momentum names with stretched metrics. A rotation, possibly triggered by an Iran resolution or oil price drop, would benefit the other 493 S&P stocks. The equal-weighted S&P 500 provides a way to diversify away from the narrow leadership and capture that rotation.

If the blockade persists, equities will start to decay similarly to what was seen in March, driven by the positive re-rating from oil and other factors turning negative.

Despite the market looking past near-term geopolitical risks, there are still physical supply issues, making the broader commodity theme attractive as countries and companies build stockpiles in an 'every man for himself' environment.

Altman expects base metals like copper to be the real commodity driver moving forward, at the expense of energy. As the extreme risk premium in energy subsides following the ceasefire, capital will rotate out of the crowded energy hedge trade and into base metals, which are essential for global production and industrial demand. LONG because copper is positioned to absorb the capital rotating out of energy while benefiting from structural global demand. A collapse in global manufacturing demand or a severe geopolitical escalation that forces capital back exclusively into energy as a panic hedge.