Summit, oil price decline and new records

For the month as a whole, the U.S. S&P 500 rose 5,3 percent measured in USD, Europe’s Stoxx 600 ended up 3,2 percent measured in EUR, and the Nordic VINX rose 2,2 percent measured in NOK. Here at home, the Oslo Stock Exchange fell by 0,9 percent (OSEBX).

Towards a rate hike in the eurozone

Three months after the attack on Iran, the Strait of Hormuz is in practice still closed, but the oil price has nevertheless fallen clearly through May. Expectations of a reopening have increased, and negotiations between the U.S. and Iran appear to be real, even though there have been violations of the ceasefire and conflicting signals from both sides. In Southeast Asia, rationing and shutdowns as a result of reduced oil access have already been a reality for quite some time, while prices are now also rising noticeably in the U.S. and Europe. Rising inflation expectations mean that the European Central Bank will likely raise the policy rate in June for the first time since 2023. At the same time, growth expectations for the eurozone have been revised down from 1.2 to 0.8 percent for 2026 over the past two months. Only a full reopening of the strait and an oil price decline back towards 60–70 dollars per barrel can change this picture before the rate meeting on 11 June.

Great-power dialogue and “strategic stability”

China’s growth expectations have remained surprisingly stable at around 4.6 percent for 2026, despite the country’s dependence on oil imports. Large oil inventories are likely the most important explanation. The summit between Trump and Xi in May dealt surprisingly little with the Iran conflict, but was well received economically and politically. The relationship between the great powers is now more often referred to as “G2”, and the term “strategic stability” has become the recurring theme. Specifically, China has committed to purchases of U.S. goods, and the two countries have established joint bodies for trade and investments. Xi is scheduled to visit the U.S. towards the end of September, with further meetings planned during the year. Overall, the dialogue has contributed to reducing the risk of geopolitical tension between the great powers.

The equity market continues to rise

The global equity market rose further in May to yet another new all-time-high level. Emerging markets continue to lead the way, with technology and AI as the most important drivers both in May and so far this year. South Korea stands out in particular, driven by bottlenecks in AI chips and share price increases in Samsung Electronics and SK Hynix. In other words, the AI boom is no longer reserved for the U.S., but is spreading to Asia and traditional emerging markets. The energy sector, which has performed strongest so far this year, fell back in May together with the oil price. Credit spreads tightened further for the second month in a row and are approaching the record-low levels from January.

The way forward

The Strait of Hormuz is still closed and the European Central Bank is moving towards a rate hike, but the oil price has fallen clearly through May and expectations of a reopening are increasing. The summit between Xi and Trump has reduced the geopolitical risk between the great powers, with concrete agreements and further dialogue planned throughout the autumn. The earnings season in the U.S. has surprised on the upside, AI investments are spreading far beyond the U.S. market, and credit spreads are approaching the lowest levels of the year. For investors with a long horizon, equities therefore still appear to be an attractive alternative for capital allocation.