Oil plunges on Iran deal. Treasury market is split in two.

Transcript

Tom Oil plunges on an Iran peace deal, and suddenly the war premium is a memory. But the bond market? Still can't make up its mind. We're breaking it all down right now.

Marie It's Monday, May 25th, 2026, and this is the New York Edition of Investment Flash. I'm Marie, joined by Tom and Gerald.

Tom So Marie, that 'Watch Oil' signal from yesterday's London Edition... I don't think anyone was expecting it to be a 'watch it plummet' kind of day.

Marie Right? The tightest supply in years, and then boom — peace headlines, and every long liquidates at once.

Gerald Yeah look, the crude move was violent. The US Oil Fund down another one-point-one percent last session, five-point-six percent on the week. Energy stocks dragged the Energy Select Sector ETF down with it.

Tom And the thing is, the positioning was so crowded. CTAs just unwound mechanically — there's your air pocket under the war premium.

Marie Hold on — but isn't there a flip side? If peace reduces inflation pressure, that could let the Fed ease, right? Bonds should be rallying.

Gerald Well that's the debate. Bloomberg came out arguing yields will stay high even if the Iran war ends. Structural stuff — fiscal profligacy, deglobalization.

Tom Wait, so oil crashes and bonds don't catch a bid? That's counterintuitive.

Marie BlackRock's out there saying the opposite — they see 'sufficient factors' for a cut, especially under new Chair Warsh.

Gerald So you've got long-duration Treasuries sitting just eight percent above their fifty-two-week low. The short-duration trade is incredibly stretched. If BlackRock's right, that short squeeze would be brutal.

Tom Exactly. The risk in bonds is to the upside right now, no matter what the structural bears say.

Marie But Tom, the structural bears have a point. Yields could stay high for years. The policy put is fading everywhere.

Gerald Alright, speaking of things that aren't coming back, let's talk UK lending. The FT reports business lending at a thirty-year low.

Tom A thirty-year low? What, are they lending like it's 1996 and the Spice Girls just dropped 'Wannabe'?

Marie ha — fair enough.

Gerald alright, I'll hold off on the nostalgia. But seriously, Lloyds and Barclays are heavily exposed. Lloyds trades at one-point-two times book, but if loan growth is dead, that multiple doesn't hold.

Marie And it's not just cyclical — tighter regulation is choking SME lending. Structural headwind for the UK economy.

Tom Gerald, you've been banging the UK macro drum. Is this the cue to short the banks?

Gerald Look mate, I wouldn't jump in front of a freight train, but both Lloyds and Barclays had nice bounces last week. Might be an opportunity to fade that.

Marie Alright, switching gears — I'm going to push back on the doom and gloom because there's a bright spot: China AI.

Tom Yes! Morgan Stanley is overweight Tencent and Alibaba, and these names are absolutely wrecked — down thirty and sixteen percent year-to-date.

Gerald But retail sales were the weakest since COVID. Is AI really going to save Chinese equities?

Marie That's the bet. The Gavekal manager on CNBC said AI is the cleanest theme to ride out macro volatility. And at these prices, a lot of bad news is priced in.

Tom To be fair, that's a classic 'bad news priced in' setup. If the AI narrative gains traction, the re-rate could be fierce.

Gerald Alright, I'll give you that. But I'm still watching those bond yields before I touch any growth name.

Marie And speaking of structural squeezes, the gambling sector is getting crushed. The FT says short sellers made over two-point-three billion dollars betting against them.

Tom Wait — shorting gambling was the safest bet? That's a meta-trade if I've ever heard one.

Gerald ha — I'm almost impressed. DraftKings down nearly thirty percent year-to-date. Prediction markets are eating their lunch in the US.

Marie And UK tax rises are hitting Flutter. The regulatory risk is real — this isn't just a growth scare.

Tom So the sports betting ETF down eleven-point-nine percent, and the headwinds aren't going away. Hard pass.

Gerald But — and here's where I turn less gloomy — not all energy is getting crushed. CNBC highlighted some dividend monsters.

Tom Energy Transfer! Six-point-seven percent yield, just raised their distribution, TD Cowen raised target to twenty-three dollars. It's barely off its fifty-two-week high.

Marie And Chevron, yielding three-point-seven percent, with Wells Fargo reiterating a two-twenty-two-dollar target. That's a pullback entry.

Gerald Yeah, Chevron is down eleven percent from its high. At three-point-seven percent yield, I can stomach that. Williams Companies too — two-point-seven percent yield, UBS target ninety-one dollars.

Tom This is income from the energy patch, not levered to the oil price. It's the cleanest way to play the rotation.

Gerald Right.

Marie Absolutely.

Tom That's the whole play.

Marie Alright, but let's not ignore the cash-rich names Wolfe Research screened. Deckers Outdoor — twelve percent net cash ratio, stock up twelve-point-seven percent last week on earnings.

Tom What happened, did they cure shoe leather? That's a massive move.

Marie Earnings beat, apparently. But the point is the cash cushion provides downside protection. And it's still below its fifty-two-week high.

Gerald Okta's my pick here — fifteen percent cash ratio, twenty-one-point-eight times forward earnings, up ten percent year-to-date. Growth at a reasonable price with a safety net.

Tom And Airbnb with eleven percent cash, twenty percent analyst upside. It's basically flat year-to-date, so if the consumer holds up, that could run.

Marie But here's the thing — the FT argues the policy put is fading. Investors can't rely on a central bank backstop anymore.

Gerald I've been saying this. The S&P five hundred is at twenty-eight times trailing earnings and one percent from a record high. The market is priced for perfection, but the safety net is gone.

Tom But if the safety net's gone, why is the VIX at sixteen-point-six? That's priced for calm, not panic.

Marie The VIX is up fourteen-point-seven percent year-to-date — there's nervousness creeping in. And without a policy put, any shock hits harder.

Gerald Bloomberg's take on rates was the most original thing today. Yields staying high even if peace breaks out? That's a structural call.

Marie It's the fiscal profligacy and deglobalization argument. The market's not fully pricing in that regime shift.

Tom So we're saying the forty-year bond bull market is definitively over? Come on.

Gerald I'm not saying definitively, but it's a compelling case. Position accordingly.

Marie Our view today: this is a rotation, not a correction. Energy leaders are being challenged, and growth could catch a bid if real rates ease.

Tom Fading the consensus energy trade — that's the move. Energy income stocks over outright crude exposure.

Gerald And those beaten-down China AI names? If peace boosts global risk appetite, the rotation into cheap growth could be fierce.

Tom Totally.

Marie One hundred percent.

Gerald Nailed it.

Marie One thing nobody's talking about: second-order effects of a peace deal. Industrials, materials, logistics — they benefit from post-war rebuilding.

Tom Alright, as always, none of this is investment advice. Just three friends talking markets.

Marie We're back tomorrow with the London Edition at seven-thirty a.m. London time. If you're just finding us, hit follow on Spotify — or check investmentflash.com for the full digest with charts and sources.

Tom See you then, people.