War, tariffs and technological shift

Taken as a whole for the month, the U.S. S&P 500 fell 2,7 percent measured in USD, the European Stoxx 600 ended down 1,9 percent measured in EUR, and the Nordic VINX fell 5,2 percent measured in NOK. At home, the Oslo Stock Exchange rose 8,2 percent (OSEBX).

Oil price in the grip of geopolitics

The attack on Iran at the beginning of March marked a dramatic shift in the geopolitical risk picture. Iran’s supreme leader was killed, and retaliatory attacks against American military bases and Israel quickly followed. The threat of closing the Strait of Hormuz, through which around 20 percent of the world’s oil exports pass, sent the oil price up from around 70 to closer to 85 dollars per barrel. Since the start of the year, the oil price has thus risen almost 40 percent, and gas prices have followed. The sharp price increase pulls growth prospects down and inflation expectations up, and the longer the conflict lasts, the greater the real economic consequences become. Equity markets reacted with broad declines, while interest rates and the dollar rose on the uncertainty. The market now stands in a tension between hope for a short-lived conflict and fear of a prolonged energy crisis.

Tariff battle in new legal waters

The U.S. Supreme Court ruled in February that several of the tariffs introduced under the emergency law IEEPA are illegal and ordered repayment. The decision was a clear defeat for the administration’s trade policy and showed that institutional control mechanisms still function. The response nevertheless came quickly: new tariffs of 10 percent were introduced under another legal authority, with a time limit of 150 days before Congress must take a position. The uncertainty around the duration and scope of tariffs has therefore not disappeared, but has taken on a new character. The effective tariff rate may become somewhat lower than before, but further legal and political tug-of-war is expected. For the markets, this means that tariffs remain a persistent source of noise and unpredictability, even though the risk of a sudden escalation appears somewhat lower.

The AI boom gets a sharper edge

The launch of new AI products in February, Claude, accelerated a new phase of the technological shift. This time it was not only the infrastructure players that moved, but also software and service companies that were affected by increased competition and disruption. Several established companies experienced share price declines as the market began to price in the risk that services may become cheaper or redundant. This is the other side of the so-called diffusion of AI: while data centers, energy and semiconductors have benefited from the investment wave, the negative effects are now becoming more visible in other parts of the value chain. The development underscores that the AI boom is no longer only about who builds, but increasingly about who is displaced. The market is now assessing more nuanced which sectors and companies will remain as winners when the technology matures.

The road ahead

Although February has brought considerable unrest, there are good reasons to view the road ahead constructively. The earnings season has delivered solid results, and several markets showed strong development going into the unrest – a sign that the underlying economic health is good. Historically, geopolitical shocks of this kind have had a short-lived effect on the markets, and much suggests that the conflict in the Middle East may become more limited than feared. At the same time, the Supreme Court decision on tariffs has shown that institutional frameworks still function, which provides increased predictability over time. Central banks have shown the ability and willingness to adjust monetary policy when needed, and this provides an important safety net for growth. The AI revolution continues to create significant value across sectors, and the broader spread of the technology opens up new investment opportunities. For long-term investors, periods of unrest often provide attractive entry points, and the overall picture still points in the direction that equities remain a good choice for value creation over time.