Weekly Sentiment: AI Rally Dominates, Hormuz Tensions Linger, BTC Holds $80K

Risk-on dominated this week's tape, but with caveats. Equities pushed to fresh highs on the back of the AI capex story, the dollar softened broadly, and Bitcoin held the $80,000 line into the weekly close. Yet the backdrop is not uniformly constructive: Middle East tensions resurfaced around the Strait of Hormuz, the ECB flagged caution on inflation, and analysts began questioning whether the rally has the structural support to continue. Three threads stood out, and each carries into next week's calendar.

Equities Chased the AI Trade as the Dollar Weakened

The headline behaviour was a clean risk-on rotation in equities paired with broad dollar weakness. Coverage this week noted that markets spent the week aggressively chasing the AI-driven equity rally while largely ignoring geopolitical tensions in the Middle East, with stocks surging to new records and the dollar weakening on strong risk appetite. The S&P 500 reached new highs into the close.

The nuance came late in the week. Bank of America flagged that CTA buying — a key systematic flow that has supported the index — is losing momentum even as price prints fresh records. Separately, Goldman Sachs lowered its expectation for S&P 500 share buyback growth to roughly 3% this year, citing a shaky economic backdrop and the capital intensity of AI build-outs as forces pulling cash away from shareholder returns.

The market read this combination as constructive on the topline but with thinner internals. Index-level gains masked a narrowing in the supportive flow set: less buyback bid, less systematic chase, more concentration in the AI complex. For traders watching breadth and positioning, that is the divergence to file away rather than dismiss.

Hormuz Re-Entered the Risk Premium Conversation

The second thread was the Middle East. After a month-long ceasefire, clashes in the Strait of Hormuz strained the truce, and the US was reported to be awaiting Iran's response to its latest proposal to end the war. Separately, the UK said it would deploy a warship as part of planning for a European-led mission to escort vessels through the Strait once a stable ceasefire is in place.

Energy flows began to normalise in parallel. A tanker carrying liquefied natural gas from Qatar appears to have transited the Strait of Hormuz, marking the country's first export out of the region since the Iran war began — a meaningful data point for the LNG complex after weeks of disrupted shipments. On the crude side, the DOJ and CFTC opened a probe into at least four suspicious oil-market transactions tied to the Iran war, where traders reportedly profited substantially.

Markets did not price a fresh war premium into the major risk assets — equities still climbed and the dollar still softened — but the energy and shipping headlines kept a floor under attention. The pattern this week was that geopolitical risk was acknowledged in the news flow but did not propagate into broad cross-asset volatility. That is itself a sentiment signal: positioning was leaning into the AI and rate-cut narrative, not hedging tail risk.

Crypto Held the Line, but Caution Flags Multiplied

Bitcoin held $80,000 into the weekly close, avoiding the weekend drop some had positioned for, though traders flagged that the dip below may not yet be complete. Spot Bitcoin ETFs logged a sixth consecutive week of net inflows — the longest such streak since a seven-week run in the summer of 2025 that drew in $7.57 billion. That is the constructive read: persistent institutional bid through the dip.

The cautionary signals stacked up alongside it. Santiment warned that the rise in bullish-versus-bearish crypto commentary on social media has reached levels that historically precede short-lived rallies. A separate piece flagged that BTC's rising-wedge structure points to a possible move toward $70,000 as Strategy paused buying and cooler Fed rate-cut expectations weighed on the bid. Strategy's CEO clarified that any BTC sales would be confined to specific cases and would not move the market, addressing supply-overhang concerns directly.

Structural news added depth to the week. CME Group is set to launch Bitcoin volatility futures on June 1, pending regulatory approval, giving traders a direct instrument to express views on the degree of price swings rather than direction alone. Seven major Bitcoin mining pools joined the Stratum V2 working group, a protocol-level development for block-template construction. And a Swiss initiative to require the SNB to hold BTC alongside gold and FX reserves failed on a signature shortfall — a marginal sentiment negative for the sovereign-adoption narrative.

The net read on crypto was mixed: price holding, ETF flows constructive, but social sentiment and technical structure both flashing caution. Across our books we observed elevated two-way interest at round-number levels, consistent with the indecision in the news flow.

Central Bank Tone Stayed Cautious

ECB President Christine Lagarde said the central bank is carefully weighing its response to the Iran war and the inflation impact, framing the choice as between acting too early and acting too late. That language kept EUR price action contained — EUR/USD held its range below 1.1848 with neutral bias and 1.1642 as the relevant downside level on the weekly outlook.

USD/JPY dipped to 155.01 before recovering, with neutral bias into the new week and 157.92 as the upside level that would signal a deeper pullback from 160.71 has run its course. Bank of England Governor Andrew Bailey, in his Financial Stability Board capacity, warned of a looming dispute with the US over stablecoin rules and flagged run risk for the UK if hard-to-redeem US stablecoins flood in during a crisis — a structural rather than near-term FX driver, but one worth filing.

Looking Ahead

The calendar front-loads the macro signal. US CPI on Tuesday 12 May at 08:30 GMT+3 is the headline event, with consensus looking for headline CPI at 3.7% year-on-year (up from 3.3% prior) and core CPI at 0.3% month-on-month. A hotter print would test the rate-cut leg of this week's risk-on narrative; a softer one would reinforce it. US PPI follows on Wednesday 13 May at 08:30 GMT+3, providing the upstream check on the same disinflation question.

China CPI and PPI on Monday 11 May at 21:30 GMT+3 will set the Asia-session tone, and a US Fed Chair nomination vote is scheduled for Tuesday 12 May at 12:00 GMT+3. With AI-trade flows already showing signs of thinning, the inflation prints are the data points most likely to either confirm or interrupt the regime that defined this week.

If you'd like to discuss execution conditions across the events listed above, our team is available through the usual channels.