Oil's deal-hope dip masks the tightest supply in years.

Transcript

Tom Oil's sliding on hope, buddy, but the tanks are running dry. Here's what the market's missing.

Marie Good morning, it's Monday, May twenty-fifth, London Edition. I'm Marie, with Tom and Gerald.

Tom Tom here, ready to ride this momentum train.

Gerald Gerald, and I've already got my eye on the P-E ratios.

Marie Alright, so oil took a hit last session on hopes of a US-Iran deal, but Nikkei Asia warns inventories are slipping below a hundred days of demand. That's the tightest in years.

Tom And our buy oil call from the weekend is still up one hundred and four percent year to date. That's a bull market on pause, not a reversal.

Gerald Yeah, but Tom, if that deal actually happens, the supply flood could swamp those gains. Trump says no rush, but markets are already pricing it. The dip's a trap if the waterway opens.

Marie Wait, Gerald — that's IF the deal happens. The physical damage to supply is already done. Below a hundred days of inventory is a dangerous vulnerability. We saw what happened in twenty-twenty when storage got tight.

Tom Exactly, Marie — this is not a knee-jerk. The supply losses are real. The market's pricing the deal, not the shortage.

Gerald Alright, fair point. But the counter is clear: if I'm holding oil here, I'm hedging against a headline that says 'Strait reopens.'

Marie That's the tug-of-war. And no one's talking about OPEC's response if Iranian barrels return — they'd have to cut elsewhere. That's not priced in.

Tom Second-order effects matter.

Gerald Alright, fair enough.

Gerald And as always, folks, none of this is investment advice. We're just three friends talking markets.

Marie Speaking of records, Bloomberg says momentum stocks just had their best run in decades, AI rally driving the whole thing.

Tom Nvidia at a forward P-E of seventeen — still cheap for that growth! And the momentum ETF near a fifty-two week high, up twenty percent this year. This is the trade, buddy. Remember that China AI implosion yesterday? The global momentum train is leaving it behind.

Gerald Tom, remember when you said that about semis last quarter? Nvidia's already pulled back nearly two percent last session and three percent in a week. Momentum cuts both ways.

Tom Sure, but it's still up fourteen percent year to date. The AI capital spending isn't slowing down, Gerald.

Marie Hold on, Tom. The FT is waving a red flag on AI IPOs — if a wave of them hits, that's new supply soaking up capital. Those momentum names could get diluted right at their peak.

Tom Pff, IPOs take months to come to market. The momentum is NOW.

Gerald And that's exactly what people said before the last I P O wave — remember twenty-twenty-one? Then the rug pull. I'm just saying, keep an eye on the exit.

Marie So maybe the cleanest play isn't chasing momentum, but fading the top with puts on the Nasdaq ETF, while staying long oil.

Tom Meanwhile, Brazil's got a debt problem: Nikkei says eighty-two million adults behind on payments. That's nearly half the population, man.

Marie And that's partly driven by high interest rates and rapid fintech expansion. Nubank's down twenty-five percent this year already — that's a credit cycle risk we can't ignore.

Gerald Banco Bradesco's forward P-E is six-point-three, but if asset quality cracks, that's value trap territory. Brazil's been the teflon EM, but this is a real stress test.

Tom Yeah, I'm not touching Brazil equities. The ETF's up thirteen percent year-to-date, but on price-to-book of just under one, no buffer for a consumer-led recession.

Marie Right, and government relief might be too little, too late. I'd rather watch from the sidelines.

Gerald Speaking of second-order effects, the FT reports fertilizer groups are cutting production because the Iran war is choking sulphur supplies. That's hitting phosphate fertilizers.

Marie And farmers in poorer countries are paying the price — lower yields ahead. Wheat is up twenty-three percent year to date, partly on that.

Tom So Mosaic and Nutrien are getting squeezed: Mosaic down ten percent this year, Nutrien down two percent in a week. Input costs are brutal.

Gerald If you want to play it, buying wheat makes sense, but the fertilizer stocks? Their margins are getting compressed from both ends.

Tom But here's a bright spot: FT says Japanese retail trading volumes nearly doubled on AI fever. The Japan ETF's just three percent off its fifty-two week high, up twelve-point-six percent year to date.

Marie And the hedged ETF is up seventeen percent. That's a clean way to play the tech-driven gains without the yen risk.

Gerald To be fair, the volume surge could be froth. Remember the last time Japanese retail went wild was in twenty-one, right before the top. But the trend is your friend, Tom.

Tom Ha — yeah, yeah. But I'll ride this wave. The Nikkei's got momentum, buddy.

Marie And in deal news, the FT exclusive: Uber weighing a higher bid for Delivery Hero after its eleven-and-a-half billion euro offer was rebuffed.

Tom Delivery Hero's up nearly eight percent in a week, near its high. Bid speculation is a beautiful thing.

Gerald Honestly, eleven-and-a-half billion already feels rich. Uber's down four percent in a week — if they up the bid, they risk overpaying. That's a red flag for me.

Marie And don't forget the regulatory risk. Consolidation in food delivery? Antitrust regulators will be all over it, especially in Europe.

Tom Fair enough, but I like Uber's chances. They're building an empire, one delivery at a time.

Gerald Alright, UK update: the FT says financial reforms are set to give a one-point-six billion pound boost to the City of London. Rachel Reeves championing growth.

Marie The pound's been stuck near fifty-two week lows, so could be a re-rating if the reforms actually materialize.

Tom LSEG up six percent year to date, forward P-E about seventeen. Financials-heavy UK index could get a lift.

Gerald Yeah, but the detail is thin. One-point-six billion sounds nice, but it's a rounding error compared to the cost of the war. I'm not loading up the pounds just yet.

Marie Still, sentiment matters. I'll take it as a short-term tailwind.

Tom And the short sellers are feasting on gambling stocks: FT says over two-point-three billion in profit betting against them.

Gerald DraftKings down thirty percent year to date, Flutter down fifty-four percent. Predictions markets and UK taxes are a brutal combo. The short sellers made billions betting against gambling — that's the most appropriate win ever.

Marie Ha — fair enough. See, THIS is what I mean. Regulation and competition can destroy a sector faster than any bear case. These stocks were priced for growth that just isn't there.

Tom And that's the whole story. No bounce in sight.

Marie And Gerald, you'll love this: the FT's most original take is that I P O mania could signal a top. New supply removing the scarcity premium.

Gerald Exactly. If AI darlings go public, they'll soak up the capital that's been juicing Nvidia and the gang. It's the oil story in reverse — supply floods equities.

Tom No way, buddy. IPOs would just bring more attention and fresh money. The AI trade isn't a zero-sum game.

Marie Tom, it IS a zero-sum game for the existing names. Every dollar an I P O raises is a dollar not going into Nvidia. That's basic capital allocation.

Gerald And history says I P O waves often mark sentiment peaks. I'm not saying sell everything, but a hedge here is smart.

Tom Alright, I'll admit the risk, but I'm not fading momentum just yet.

Gerald Also from FT, the Iran war is adding billions in interest costs to US debt. TLT down three percent year to date, near its fifty-two week low.

Marie That's the other side of the oil story: higher yields from the war are crushing bonds. Long duration is getting smoked.

Tom So the trade isn't just long oil, it's also short bonds. The war premium is everywhere.

Marie And one more from Nikkei: a Japanese firm warns of vicious stagflation in Indonesia. The Indonesia ETF is down thirty percent this year already.

Gerald Another EM under pressure. Demand destruction from high oil prices is a real theme, and it'll eventually cap crude.

Tom Yeah, but that's a lag effect. For now, the supply shock dominates.

Tom Last signal: Korea and Netherlands deepening chip partnership beyond ASML. ASML at an all-time high, up eleven percent in a week. That's a semiconductor capex story.

Gerald At a forward P-E of thirty-four, it's not cheap. But to be fair, the moat is massive.

Marie And that partnership is a big structural tailwind. I'd rather own ASML than chase momentum names.

Tom So Marie, your cross expression from earlier — fading rich momentum with QQQ puts while staying long oil via XLE call spreads — that's locking in the divergence.

Marie Exactly. The war premium is under threat from deal talk, but physical scarcity hasn't gone away.

Gerald And the AI I P O wave is the equity mirror of that: a supply shock to the scarcity premium. The most important risk no one's talking about.

Tom Alright, I'm not fully convinced, but I'll hedge my bets. If you're just finding us, hit follow on Spotify — or check investmentflash.com for the full digest with charts and sources.

Marie And we're back at nine a.m. New York time for the New York Edition. See you then.