U.S. and Iran closing in on one-page memo to end war, officials say

The White House believes it’s getting close to an agreement with Iran on a one-page memorandum of understanding to end the war and set a framework for more detailed nuclear negotiations, according to two U.S. officials and two other sources briefed on the issue.

The U.S. expects Iranian responses on several key points in the next 48 hours. Nothing has been agreed yet, but the sources said this was the closest the parties had been to an agreement since the war began.

Among other provisions, the deal would involve Iran committing to a moratorium on nuclear enrichment, the U.S. agreeing to lift its sanctions and release billions in frozen Iranian funds, and both sides lifting restrictions around transit through the Strait of Hormuz. (…)

But the two U.S. officials said President Trump’s decision to back off his newly announced operation in the Strait of Hormuz and avoid a collapse of the fragile ceasefire was based on progress in the talks.

The one-page, 14-point memorandum of understanding (MOU) is being negotiated between Trump’s envoys Steve Witkoff and Jared Kushner and several Iranian officials, both directly and through mediators.

• In its current form, the MOU would declare an end to the war in the region and the start of a 30-day period of negotiations on a detailed agreement to open the strait, limit Iran’s nuclear program and lift U.S. sanctions.
• Those negotiations could happen in Islamabad or Geneva, two sources said.
• Iran’s restrictions on shipping through the strait and the U.S. naval blockade would be gradually lifted during that 30-day period, according to a U.S. official.
• If the negotiations collapse, U.S. forces would be able to restore the blockade or resume military action, the U.S. official said.

The duration of the moratorium on uranium enrichment is being actively negotiated, with three sources saying it would be at least 12 years and one putting 15 as a likely landing spot. Iran proposed a 5-year moratorium on enrichment and the U.S. demanded 20.

• The U.S. wants to insert a provision whereby any Iranian violation on enrichment would prolong the moratorium, the source said. Iran would be able to enrich to the low level of 3.67% after it expires.

• Iran would commit in the MOU to never seek a nuclear weapon or conduct weaponization-related activities. According to a U.S. official, the parties are discussing a clause whereby Iran would commit not to operate underground nuclear facilities.
• Iran would also commit to an enhanced inspections regime, including snap inspections by UN inspectors, according to the U.S. official.
• The U.S. would commit as part of the MOU to a gradual lifting of the sanctions imposed on Iran and the gradual release of billions of dollars in Iranian funds that are frozen around the world.

Two sources with knowledge also claimed Iran would agree to remove its highly enriched uranium from the country, a key U.S. priority that Tehran has rejected up to now. One source said an option being discussed is moving the material to the U.S. (…)

SERVICES PMIs

S&P Global: New business intakes fall for first time in two years aswar in the Middle East and inflation hit demand

The headline S&P Global US Services PMI® Business Activity Index registered 51.0 in April following 49.8 in March. Whilst an improvement since the previous month, growth was nonetheless only marginal and well below the series average.

Growth was limited by a weakness in demand as new business fell into contraction territory for the first time in two years. Panelists often commented on a rising degree of uncertainty stemming from high inflation and the war in the Middle East. Tariffs remained a source of instability in relation to international demand. Latest data showed new export business declined solidly in April to extend the current sequence to five months.

Meanwhile, employment volumes rose slightly in April, following a fractional contraction in March. Panelists noted a number of part-time staff had been taken on to fill vacancies. Some pressure on capacity was sustained nonetheless as backlogs of work rose modestly for the fourteenth month in a row.

Input price inflation remained elevated during April and well above its historical trend level. Service providers reported that costs were driven higher by rising supplier charges, increased fuel and gas prices alongside an uplift in staffing costs. The rise in expenses led to another sharp increase in selling charges over the month. Firms commonly attributed higher output prices to efforts to offset some of the adverse impact on profit margins of increased input costs.

Finally, expectations about the year ahead were again positive overall at the start of the second quarter, but still below trend. Where growth is forecast, hopes of an end to the war in the Middle East, improved marketing and business expansion plans were all seen as sources of growth for the year ahead. That said a degree of uncertainty over the impact of the conflict and upward pressure on the cost of living weighed on sentiment.

Chris Williamson, Chief Business Economist at S&P Global Market Intelligence

“Although business activity returned to growth after a small decline in March, it’s clear the pace of growth has kicked down a couple of gears since the start of the year. The survey data are indicative of GDP growing at a modest 1% annualized rate.

“Growth may weaken further, as service providers are reporting lower inflows of new business for the first time in two years, reflecting an intensifying hit to demand from the war in the Middle East.

“The direct impact of the war has been most evident in consumer-facing services, as high prices have led to a pull-back in discretionary spending on activities such as holidays and recreation, though transport has also been curbed by high fuel prices and travel disruptions.

“However, a secondary additional driver of renewed weakness is a drop in demand for financial services, in part linked to heightened uncertainty about market outlooks but also reflecting expectations of higher inflation and interest rates, which has hit real estate and lending activity.

“A further increase in input cost inflation reflected not just higher fuel prices but a widening spread of goods and services rising in price, as well as higher wages, which will feed through to consumer price inflation in the coming months. The scale of the price rises will put pressure on the Fed to prevent higher inflation becoming entrenched.”

ISM:

In April, the Services PMI^® registered 53.6 percent, a decrease of 0.4 percentage point compared to March’s figure of 54 percent. The Business Activity Index remained in expansion territory in April, increasing 2 percentage points to 55.9 percent from March’s reading of 53.9 percent.

The New Orders Index registered 53.5 percent, 7.1 percentage points below March’s figure of 60.6 percent and 0.4 percentage point below its 12-month average reading of 53.9 percent.

The Employment Index contracted for the second month in a row with a reading of 48 percent, a 2.8-percentage point increase from the 45.2 percent recorded in March,” says Miller.

“The Prices Index held steady at 70.7 percent in April, the same as March’s figure and repeating its highest reading since October 2022 (70.7 percent). The index has exceeded 60 percent for 17 straight months, increasing its 12-month average from 67.2 percent to 67.7 percent. Diesel, gasoline, oil and related price increases were the most frequently mentioned commodities up in price in April.

WHAT RESPONDENTS ARE SAYING

• “Spring selling season for the homebuilding construction market is here, but interest rates, inflation, and oil supply issues are keeping buyers on the fence. Discounts and rate buy-downs remain the driver of sales, as affordability continues to be the hinderance for buyers. Cost cutting and value-engineering have reduced costs to pre-coronavirus pandemic levels, but inflation and rising oil prices threaten that hard work. Fuel surcharges, previously whispers, have become requests.” [Construction]
• “First quarter 2026 finished strong for tertiary care and beat revenue expectations by 6 percent, patient volumes remain strong, and labor is holding steady. Despite macroeconomic concerns, supply chains remained resilient, yielding few significant back orders and functioning quite well compared to expectations. Forecast is good for the next quarter.” [Health Care & Social Assistance]
• “The war has caused many banking customers to back off equipment purchases and other spending. Just as the recovery was under way, it is now turning off. Not a good thing.” [Management of Companies & Support Services]
• “For ongoing projects, we are anticipating a 7 percent to 9 percent increase in expenses, primarily driven by the current local political environment. While projects in Western Hemisphere markets remain relatively stable in the short term, the broader global geopolitical landscape is expected to exert pressure over the medium to long term. We estimate that market normalization and cost recovery will require approximately 12 to 18 months.” [Mining]
• “Our services sector continues to expand, supported by strong new orders, but softer employment and rising input costs are shaping a more cautious outlook. Clients are prioritizing efficiency, risk management and strategic advisory, driving sustained demand across our core accounting and consulting offerings.” [Professional, Scientific & Technical Services]
• “Bracing for significant impacts due to increasing fuel costs. Expenditures for city fleet have increased, and we are starting to see fuel surcharges from suppliers. Actually, we are surprised that supplier fuel surcharges have not been more robust.” [Public Administration]
• “Housing sales slowed in March, and the residential real estate market is still well below historical norms. If sales continue at the current rate for the rest of 2026, 3.98 million homes would be sold, the lowest since 1995. A prolonged conflict could maintain structural pressure on rates for 12 to 18 months.” [Real Estate, Rental & Leasing]
• “Current business conditions continue to place pressure on purchasing operations due primarily to ongoing supply chain volatility, elevated transportation costs and inflation-driven pricing from key suppliers.” [Transportation & Warehousing]
• “Business conditions in the transmission and distribution utility sector remain stable to slightly expanding, supported by ongoing grid modernization and infrastructure investment. Activity continues to be influenced by tariffs and elevated input costs, particularly in copper, aluminum, and steel, which are driving sustained pricing pressure across key materials. Supply chain conditions have improved modestly; however, lead times for critical equipment remain extended. Utilities are mitigating risk through early procurement, supplier diversification and strategic inventory positioning. The overall outlook remains positive despite cost and supply pressures.” [Utilities]
• “Activity level and project activity remains high in most verticals. Data centers are front and center and show no signs of slowing down.” [Wholesale Trade]

Ed Yardeni plots the ISM price indices over 20 years commenting that “The data are consistent with a resilient economy expanding at a healthy pace but experiencing some inflationary pressures.” Some?

Canada Services PMI: Service sector downturn softens as new work rises marginally in April

• Slowest contraction of activity for six months as demand stabilises
• Sentiment improves to 18-month high
• Selling prices raised at fastest rate for two years

 

Euro area economy contracts for first time in almost ayear-and-a-half as inflation continues to rise

The latest S&P Global PMI^® survey data pointed to stagflation in the euro area economy at the start of the second quarter, as the first fall in private sector business activity since December 2024 was accompanied by the sharpest rise in prices charged in three years.

The decrease in business activity at the composite level was entirely reflective of contraction in the service sector, which was the fastest in over five years, and more than offset a stronger increase in manufacturing production. This was also true for total new business, which fell in April for a second month running and to the quickest extent since November 2024. (…)

Input cost pressures continued to rise substantially in April. The rate of inflation accelerated further to a 40-month high, reflecting a broad-based quickening at the sector level. Prices charged were subsequently raised more aggressively at the beginning of the second quarter, with firms in both sectors lifting their fees to greater degrees than in March. The overall rate of increase in charges was the sharpest in three years.

 

March Labor Market Was Stable, if Sluggish The rate of open jobs slipped to 4.1% from 4.2% in February

The rate of open jobs slipped to 4.1% in March, from 4.2% in February and 4.4% in January, according to the latest job openings and labor turnover survey. The rate of workers facing layoffs also ticked higher, to 1.2% in March, from 1.1% in February.

Other indicators from the monthly survey were more positive. The hiring rate improved to 3.5%, from 3.1% in February, with about 5.6 million Americans landing new jobs in March. That is the best hiring rate in more than a year. A slightly greater share of workers also voluntarily quit their jobs in March – a sign that more people were finding opportunities to switch to a new role.

Overall, the data showed little sign of a worrying downturn. Yet the labor market remained stagnant by historical standards, with a relatively small share of workers moving jobs or getting pink slips. For more than a year, the job market has been slipping into what many economists have called a low-hire, low-fire balance.

A sharp immigration crackdown by the Trump administration, volatile economic-policy moves and elevated interest rates have all leaned against hiring. But amid solid consumer demand, many companies also have been hesitant to lay off workers – especially given the hiring challenges they faced during the booming postpandemic labor market earlier in the 2020s.

Indeed Job Postings peaked in early March and have dropped 2.3% since through April 23.

Ed Yardeni has a more hopeful look of the same stats (through April 17):

From Indeed:

Recent layoffs announcements, especially in the technology sector, have explicitly cited AI as a driver. As firms ramp up investment in AI, the key thing to look out for is whether and how quickly new roles are created that offset those losses. Either way, these layoff announcements are still working their way through the data, meaning March may be foreshadowing what April and May will confirm.

The job openings data reinforce the same divide. Information job openings were down -33% year-over-year, the steepest decline of any private sector, followed by other services (-21%) and professional & business services (-20%).

The Indeed Job Postings Index, which tracks job openings closer to real time than JOLTS, tells the same story. Tech-adjacent sectors remain among those with the largest declines in job postings levels relative to pre-pandemic levels. For example, IT infrastructure, operations, and support have around 30% fewer roles than before the pandemic.

Government job openings are down 13% year-over-year, driven largely by a 41% drop in the number of federal openings since last March – a time that coincides with DOGE’s efforts to cut government headcount. On the other end, retail trade openings grew 58% year-over-year, and manufacturing was up 18%. These highlight segregated labor markets that barely resemble each other.

Put simply, a software engineer, a construction worker, and a retail trader looking at the same headline job opening numbers or hires rate are experiencing fundamentally different realities as job seekers. Stability, in this market, is less a general condition and more a matter of where you are standing.

Anthropic deepens finance push as CEO Amodei warns of software disruption

Artificial-intelligence lab Anthropic is diving deeper into the financial services industry, releasing tools ‌on Tuesday that can speed up myriad tasks for banks and insurers while CEO Dario Amodei predicted further software disruption.

Pegged to a New York event hosted by Anthropic, the startup launched 10 financially focused agents, or AI programs that carry out tasks with limited human intervention. These include agents that can build ​a pitchbook, audit statements or draft credit memos, Anthropic said.

Hardly a year into unveiling ambitions to tailor AI for finance, Anthropic ⁠has rapidly expanded its business, with adoption by Goldman Sachs, Visa, AIG and others. Some 40% of Anthropic’s top 50 customers ​are financial institutions, and the industry represents its second-largest by enterprise revenue after technology clients, Anthropic said.

Speaking from the stage at the packed ​event, Amodei said Anthropic’s revenue in the first quarter had grown “80x” on an annualized basis. A later slide presentation also stated: “Coding has changed forever. Finance is next,” referring to the rise of AI-powered programming, a domain led by Anthropic. (…)

Amodei said at ​the event that AI is ⁠making software development cheaper and will cause the industry to grow overall. However, he said, “I don’t know what will happen to the group of today’s SaaS incumbents.” The companies that address AI head-on can ​do better than ever, while others may “lose market value, go bankrupt, completely go bust,” he said.

In ​an earlier Reuters ⁠interview, Nicholas Lin, who leads Anthropic’s financial services product work, said an increasingly capable Claude would develop “vertical-specific intelligence,” for instance in finance, even as the startup’s AI is widely applicable across industries.

AI model advances, coupled with hands-on customer support and key office software integrations, were underpinning the rapid ⁠uptick in ​Anthropic’s financial services business, said Lin.

As part of its product announcement, Anthropic said its ​10 new AI agents could plug in to its Claude Code and Cowork software out of the box, and could be customized to a firm’s policies and style.

More on AI demand:

• “At our companies — and by the way, we have 270 companies, 13,000 pieces of real estate, it’s massive in its scale — their LLM spend was up 15-fold in Q1 this year over last. Now, off a small base, yeah, but it tells you what’s happening. All these companies are trying to find ways to be more efficient.” – Blackstone President Jon Gray
• “Right now we have way more customers asking us, ‘No matter what the price is, can you give me more? I just need more capacity, I’ll pay you extra”, than we have arguing with us about the price.” – OpenAI CEO Sam Altman
• “And when the developers are coming to interview for jobs, they want to know, “Am I going to have access to the absolute latest development tools? Am I going to be able to use Cuda and Claude Code?” And in some places, they’re saying, “What is my token budget as a developer? And am I going to be able to move at the speed that I need?” In fact, at Amazon, we try to make sure that those token budgets are largely unlimited so that our developers are unblocked by technology.” – Amazon AWS CEO Matt Garman (via The Transcript)

• Jamie Dimon, speaking at the Anthropic event: “The technology is so powerful, it’s worth the trillion-dollar investment.”

Supply?

From Goldman Sachs:

We expect US data center capacity to more than double between end-2025 and end-2027, reaching 95GW in end-2027, as annual additions accelerate from 8.5GW in 2026 to 13.6GW in 2026 and 36GW in 2027.

This forecast takes into account that only 60/50% of currently scheduled additions are realized over the next 1/2 years.

To mitigate risks from local pushbacks, permitting delays, or resource scarcity (crucially, power, land, and water), it is not uncommon that data center developers submit multiple applications across regions and proceed only with the most favorable site.

US Gasoline Supplies on Way to Seasonal Low, Morgan Stanley Says

Stockpiles are expected to fall below 200 million barrels by the end of August, Morgan Stanley analysts wrote in a Monday note. The projections for record seasonal low fuel inventories are the latest indication that the global energy supply crunch appears set to continue for months to come.

“The US gasoline market is genuinely tight and tightening further into summer,” Morgan Stanley analyst Martijn Rats and strategists Charlotte Firkins and Amy Gower wrote.

Total gasoline inventories stood at 222 million barrels as of late April — the lowest for that time of year since 2014, according to the Energy Information Administration.

In Morgan Stanley’s base case projection, in which current market trends “partially normalize,” inventories will fall to 198 million barrels by the end of August. That’s less than levels for the period at any time in modern data, according to the note. The decrease would push total gasoline stockpiles to the lowest at any time since October 2012, according to the EIA. (…)

Falling US stockpiles are likely the result of a “collapse” in gasoline imports into the East Coast as the global market scrambles to secure fuel, Morgan Stanley said.

“The traditional resupply mechanism from Europe and the Middle East has effectively stopped,” the analysts wrote. “Saudi, Malaysian and large ARA cargoes are absent.”

Meanwhile, high margins for diesel and jet fuel — supplies of which are running shorter as a result of the effective closure of the Strait of Hormuz — are incentivizing refiners to produce more of those fuels instead of gasoline. US gasoline exports have also remained elevated as foreign buyers snap up barrels that might otherwise be delivered to domestic markets. And US demand for gasoline remains “resilient,” according to the note. (…)

Trump’s China Trap Why Xi Keeps Winning the Summitry Game

(…) In 2025, the leaders of Australia, France, Georgia, New Zealand, Portugal, Serbia, Slovakia, Spain, and the European Union all traveled to China. In January, the pace of visits accelerated, with the leaders of Finland, Ireland, South Korea, and the United Kingdom arriving in quick succession, followed in February by Uruguay’s president and Germany’s chancellor. In April, Spain’s prime minister cemented the pattern with his fourth visit in four years.

They walked red carpets, shook hands with senior Chinese Communist Party officials, and signed memorandums to shore up relations. The accumulating spectacle—what Chinese state media has called a “wave” of visits—reinforced the CCP’s narrative of a rising China and a declining United States. (…)

For Canada and other U.S. allies and partners, the primary impetus for deepening ties with China is Trump himself. Under pressure from a United States behaving like a predatory hegemon, these politicians feel that they have no choice but to hedge. Meeting Chinese President Xi Jinping sends a signal to Trump that they have other options and will not be subordinated into all-or-nothing allegiances or unfair trade agreements. In this way, the growing distance between Washington and its partners is a diplomatic gift for Beijing. (…)

The United States’ partners, now hedging against a transactional Washington, are compelled to accommodate China. But deeper entanglement with China’s authoritarian state-capitalist system risks the greater danger: subordination to Beijing. (…)

Rather than seeking superficial adulation from Beijing, he [Trump] should use the upcoming visit to strengthen deterrence by coordinating in advance with allies and setting redlines that none will cross, signaling he will impose costs for Chinese coercion that targets any of them, and conditioning any concessions on verifiable follow-through. That would diminish Beijing’s confidence in its strategy of compelling accommodation from individual countries. (…)

Having seen so many leaders score their own mini-deals in Beijing, Trump may be tempted to outdo them, issuing grand statements and accommodating Beijing in order to land an even flashier deal. To set a positive tone for the meeting, his administration has already approved sales of advanced computer chips, delayed arms sales to Taiwan, and shelved sanctions for cyberattacks traced to China.

Trump hopes to secure commitments from China to purchase American soybeans, natural gas, and Boeing aircraft, as well as for China to restrict exports of fentanyl precursors and ensure a steady supply of rare- earth elements. In return, Xi would likely expect restraint or rollback on U.S. support for Taiwan as well as on export and technology controls, sanctions on Chinese firms, and barriers to investing in the United States.

But this approach carries significant risk for the United States. If allies see that Trump is sacrificing shared interests for a headline announcement, their hedging will accelerate, deepening the rupture in the Western alliance. And if Trump’s visit results in a tactical deal at the cost of enduring strategic interests—such as U.S. security guarantees in the region and technology controls—it will confirm to Xi that even Washington is now willing to accommodate Beijing.

That would leave the United States dangerously weakened in the decisive years of its rivalry with China.

There is a better path. Trump could reframe the purpose of going to China—away from the self-censorship, ephemeral dealmaking, and authoritarian lexicon that cedes the advantage to the CCP, and toward using such encounters to gather information, defend bottom lines, and convey firm messages on U.S. and allied priorities. (…)

Wealth Effects are not evenly distributed:

Iran Draws a Line and Puts Markets on Notice Clash in Gulf sends Brent, inflation expectations to landmark highs.

(…) Analysts tended to dismiss Iran’s retaliation as perfunctory, but the incident makes clear that the month-old ceasefire is fraying. As Tina Fordham of Fordham Global Foresight put it:

By launching renewed missile attacks today, Iran is signalling that they still have the capacity to inflict pain and won’t be forced into capitulation. The US increasingly faces a choice between a long war it doesn’t want to fight, or a bad, embarrassing deal.

This feeds into the oil price. Futures now put Brent crude for the end of this year above $90. That’s its highest since the conflict started, taking out the previous peak set when Iran attacked a liquefied natural gas facility in Qatar:

Any escalation that permanently removed regional oil infrastructure would be deadly for the market. Ditto any sign that the impasse will continue. Not coincidentally, prediction markets now give less than 50-50 odds that traffic will be back to normal by the end of June. Two weeks ago, this was a 90% shot. (…)

With midterm elections due, that puts pressure on the US to make a deal. The logic points to a resolution like the nuclear agreement done by President Barack Obama (known as the JCPOA) from which Trump pointedly withdrew in 2018. (…)

If there is anything positive, it’s that December oil prices couldn’t be so high unless markets were confident that the world economy would survive intact, and keep demanding oil. Marko Papic of BCA Research argues:

The alarmist view has been proven incorrect. We can muddle through. There’s no recession around the corner. And that unfortunately means there’s no pressure on either side to come to a deal.

That economic optimism stems from AI…

AI boom poised to be ‘massively disinflationary’, Northern Trust says

(…) Mike Hunstad said it was clear that “many companies are talking about efficiency gains from AI”.

“If even a portion of those actually materialise on an economy-wide basis, it could be one of the biggest positive supply shocks we’ve ever seen,” he told the FT, referring to dramatic increases in goods and services that drive prices lower. “You can’t ignore that.” (…)

Donald Trump’s Fed chair nominee Kevin Warsh has predicted that an AI boom will be “the most productivity-enhancing wave of our lifetimes — past, present and future”.

Warsh has argued that AI advances will allow the Fed to cut rates without raising inflation, and has compared the situation to the productivity boom in the 1990s, when Alan Greenspan helmed the central bank.

Other Fed policymakers dispute the idea that the AI boom creates space for lower borrowing costs. Officials such as Fed vice-chair Philip Jefferson note that soaring investment in AI infrastructure, such as data centres, boosts demand immediately — and risks raising prices, while the effects on productivity will take longer to play out. (…)

Yesterday, I posted this BofA chart showing the decline in S&P 500 employees in 2025.

I also posted Bain’s findings that CFOs, witnessing in real time how AI investments help across their companies, are now using AI for their own benefits.

The capital commitment to AI is real and growing, and finance is catching up. A recent Bain & Company survey of senior finance executives shows 56% are increasing enterprise-wide AI investment by more than 15% this year. Over the next two years, 83% of CFOs plan AI budget increases above 15%, with 42% expecting increases above 30%. (…)

This is not incremental experimentation; it’s a serious commitment to AI in the operations of a function known for fiscal discipline. (…)

When CFOs describe their biggest AI win, speed and cycle-time reduction leads at 48%, ahead of headcount or cost savings at 34%. That ordering matters. Tighter close cycles, streamlined reconciliations, and early variance insight improve a company’s ability to detect exceptions, correct course, and redeploy capital faster. (…)

A finance function that compresses the cycle from market signal to management decision from weeks to days is better positioned to help the business move faster than its competitors. (…)

Among all CFOs, 31% rate AI outcomes as strongly positive. Among those who have scaled any type of AI (machine learning, GenAI, or agentic) into full production, that figure rises to 41%, compared with 25% among those still in pilot mode.

Among top-quartile organizations by AI maturity, it exceeds 60%.

Goldman Sachs observes “large impacts on labor productivity in the limited areas where generative AI has been deployed. Academic studies imply a 23% average uplift to productivity, while company anecdotes imply slightly larger efficiency gains of around 33%. Industries with higher AI adoption rates are now showing a slight acceleration in productivity growth over the past year in official US data.”

SemiAnalysis (SA) sees the “flood of demand” from concrete AI ROI:

Over just the past few months, agentic AI has crossed a real inflection point, driving a step-change in the value of tokens while software and hardware improvements have sharply reduced the cost of generating them.

This flood of demand is driven by end users enjoying a huge return on investment (ROI) from consuming tokens, and this demand growth is arguably only in its early innings. (…)

End users are enjoying a productivity bonanza – tasks that used to take tens of person-hours costing thousands of dollars can now be accomplished in minutes with a just a few dollars’ worth of tokens. This huge surge in revenue and margins is because the value of tokens being created is dramatically improving businesses. For example, SemiAnalysis has reached as high as $10.95 million dollar annual spend rate on Anthropic Claude tokens, but the value we derive allows us to outcompete all our competitors and gain market share. (…)

The world changed in December 2025, when Agentic AI began to really work. SemiAnalysis has written and talked extensively about our Claude Code usage, but it is important to emphasize that agentic AI is no longer limited to just coding. Our analysts are using agents every day to convert excel models into dashboards, create charts for all our notes, build financial models and analyze company earnings, and much more.

These are all tasks that either 1) we simply wouldn’t have been able to do before or 2) would’ve previously taken our junior analysts many hours, taking them away from far more value added tasks. (…)

Annualized token spend at SemiAnalysis is already ~30% of employee compensation and we’re consuming just under 5B tokens per month per employee (…). It’s obvious that this is still just the beginning, and that all white-collar enterprises will soon embrace agentic AI.

Anthropic’s annualized revenue run rate has exploded from $9B last December to potentially $44B+ YTD as agentic AI took off. Truly phenomenal.

SemiAnalysis provides proof that corporate users are now seeing real value from AI agents.

Anthropic’s most recent Opus version is being “priced 6x higher than regular Opus, and Mythos being announced at $25/$125 (5x regular Opus pricing). (…) yet the most AI-pilled businesses are still more than happy to pay the increased prices because the productivity gains outweigh the cost. If Anthropic let us pay $150/$750 for Mythos fast, we would.”

BTW, SA also notes that as demand continues to accelerate,

compute supply remains structurally constrained. Upstream bottlenecks in memory and leading-edge wafers continue to limit availability, with N3 utilization expected to exceed 100% in the second half of 2026 and DRAM fabs already running above 90% utilization. There is no meaningful relief in sight. (…)

Demand for Nvidia systems remains extremely strong across all tiers, with buyers willing to lock in long-term contracts and accept higher pricing to secure capacity. (…)

The market has structurally shifted, with demand scaling faster and more persistently than supply can respond.

At Goldman Sachs’ March 30 Shoptalk 2026:

• Brands and retailers noted that consumers are increasingly beginning their shopping journey inside AI platforms rather than on brand websites or search engines, with adoption accelerating rapidly over the past several months.

• GAP stated it is seeing stronger purchase intent and higher conversion from customers arriving through agentic channels, and described itself as explicitly not in a wait-and-see mode.

• Retailers and brands are applying AI across every function of the business.

Another BTW from SA is that “Neocloud GPU rental pricing is surging as well, up with 1-year H100 rental contract prices up 40% from the bottom in October 2025.” Nvidia’s H100 was launched in March 2022. So much for rapidly depreciating chip values!

Back to the overall economy, David Rosenberg’s analysis of the recent GDP data reveals that “net of AI capex, health care, and financial services (which collectively expanded at a +11% annual rate), the other 72% share of the economy contracted at a -1.1% annualized rate after a -1.8% falloff in Q4. Nearly three-quarters of the U.S. economy is in recession.”

In fact, real spending on cyclically sensitive durable goods, which strongly carried the economy during and after the pandemic, has been flat since mid-2025 …

and up only 1.0% YoY in Q1’26 after +0.1% in Q4’25.

Interestingly, the sharp drop in the savings rate, from 5.5% in August 2025 to 3.6% in March 2026, was not used to sustain growth in durables consumption but rather in non-durables and services.

Americans’ remarkable resiliency so far came from significant dissaving to offset a rapidly slowing disposable income stream, from +3.5% YoY in Q1’24 to +2.0% in Q1’25 to +1.1% in Q1’26 (+0.4% in March).

Rosie calculated that “had the household sector been constrained to spending its real after-tax earnings, the trend would be flat — not only that, but it would have contracted at a -2.6% annual rate over the January-March period. How is that for a solid economy?”

This is through March, the first month of the war when PCE inflation shot up from 2.8% YoY in January-February to 3.5%.

Andre Schulten, Procter & Gamble CFO, said last week that “the consumer has been hit with cumulative inflation beyond anything that they’ve seen in recent history”. P&G, Colgate-Palmolive and Kimberly-Clark told analysts that soaring oil prices would collectively cost them nearly $1.5B.

The FT today posted these charts showing how rising costs are hitting companies.

We will soon find out if companies are successfully passing on these costs, maintaining margins, but at the possible cost to sales given that consumers have already brought their savings down.

Jonathan Feeney, of Optimal Advisory, a consultancy, said that the costs of the Iran war had on average cut about 2 percentage points of gross profit margin from consumer groups, which they would eventually need to recoup by imposing higher prices on consumers if conditions persisted. 

“They can’t sit and quietly rub their lucky rabbit’s foot and hope things change in the second half of the year,” he said.

• The oil price crunch is looming The longer the Strait of Hormuz blockade continues, the more likely a crisis-like adjustment in rich economies becomes

(…) For Iran, the prospect that a naval blockade will force its government into serious negotiations is dim. Technically, the government still has control over its oil and gas production, including the ability to scale it up or down. Even if the blockade cuts into revenues and damages production capacity in the long term, why would economic misery sway a regime with a long record of prioritising dogma over wellbeing, and with its back to the wall? At a minimum, that will take time.

For the rest of the world, time is running out. In volume terms, the de facto blockade of the Strait of Hormuz by Iran is the largest disruption in the history of global oil markets.

Many observers wonder why markets appear surprisingly unfazed: oil prices are up but not as much as after Russia’s invasion of Ukraine. Stock markets, in particular, are strong.

The lack of market panic is not irrational. Inventories and expectations tell the story: oil markets were well supplied when the attacks on Iran started, with supply exceeding consumption and inventories high. Financial markets signal expectations that the war and disruption will stop before inventories show the strain. While the spot price for oil has escalated, futures prices for delivery a few months from now are lower and falling. But what if the two blockades continue? (…)

One argument often marshalled to explain why markets are sanguine is that oil is no longer as important as it used to be. (…)

Unfortunately, the improvements in oil intensity are a double-edged sword. Oil consumption today is more concentrated in high-value uses and in areas where there is no substitute, like road or air freight and maritime shipping. These are load-bearing economic activities, less price sensitive than discretionary or consumption-oriented drivers of growth. Once disrupted they are likely to cascade through the economy.

Traditionally, oil price increases translate into an economic recession via inflation and tighter monetary policies; or by affecting growth directly, through diminished purchasing power or by triggering fiscal and balance of payments constraints. It is mostly the average cost of oil that matters to these channels.

Today, price increases will hit the high-value use of oil which cannot be substituted. The cost then is the loss of economic activity and value creation, caused by shutting down a particular node. Oil concentrated in high-value uses is a little bit like rare earths, tiny compared with the size of GDP but essential for much of it.

If the size of a supply disruption requires demand to come down and prices surge to the required level, the response will be sudden with a potentially unforeseen and disproportionate impact on economic activity.

Modern, wealthy and service-based economies do not have an escape hatch. With transport disruptions, their supply chains become vulnerable and disruptions unpredictable.

The longer the two blockades continue, the more likely a crisis-like adjustment in the world’s leading economies, rather than the slow-growth recession we have been used to. A theocracy like Iran can suppress economic pain. In a democracy, deliberately gambling away economic stability eventually means paying a political price.

• NY Fed president John Williams: the Middle East conflict has added “significant and unpredictable risks.”
• Europe Is Facing Stagflationary Shock, EU’s Dombrovskis Says

How America’s retail army came to rule the stock market

(…) The share of US households that own stocks has surged this decade to nearly 60 per cent, the highest proportion in any country. Americans are all in on the market, holding more wealth in stocks than in their homes for the first time. And retail is now the most active class of traders as well.

Retail’s share of daily trading in US stocks doubled in the past 15 years to 36 per cent, surpassing that of big banks or hedge funds, and making them the market price-setters. Last year US retail trading topped $5tn, exceeding the pandemic high, only this time Americans weren’t stuck at home or flush with savings.

They were chasing returns and the shock of the Iran war has barely slowed them down. So far in 2026 they have remained net buyers on most days. (…)

They still skew increasingly young, male and overeager. They chase returns when markets are rising fast and are classic “momentum” investors. So their habits have found fertile ground in the current momentum bull run (…).

Nearly a third of the stocks held by retail are also held by “aggressive” institutions like hedge funds and growth-focused mutual funds — a record overlap. Lately, some institutions have even begun offering mutual funds that track stocks favoured by the retail class. (…)

Tech platforms and products favoured by retail investors, such as exchange traded funds, are growing explosively to meet demand. ETFs now outnumber publicly traded stocks in the US (5,000 to around 4,000) and more than half of them launched in just the last three years. Many of the newer ETFs are offering amateurs first-time access to risky options once reserved for pros, such as leveraged bets on single stocks. Over the past decade, the assets managed by leveraged ETFs rose sevenfold to $140bn. (…)