Oil Fell. AI Got Its Valuation Back.

GOOD MORNING, Tuesday was the cleanest relief trade Wall Street has seen since the Iran shock began. Brent fell 4.6% and WTI dropped nearly 8% after President Trump said U.S.-Iran talks could resume in Pakistan, while March producer inflation came in softer than feared. Treasury yields fell and the Nasdaq jumped 1.95% as investors moved back into long-duration technology. The important point is not that the war risk disappeared — it did not. It is that oil and inflation expectations moved in the right direction at the same time, briefly restoring the valuation math behind the AI trade.

MARKETS | TLDR

Wall Street rallied on Iran-talk optimism: The S&P 500 rose 1.17%, the Dow gained 0.66% and the Nasdaq jumped 1.95% as investors priced a higher probability of renewed U.S.-Iran negotiations.
Oil fell sharply on de-escalation hopes: Brent dropped 4.6% to $94.79 a barrel and WTI fell nearly 8% to $91.20, reducing the immediate inflation premium that had pressured equities and bonds.
Producer inflation was softer than expected: March PPI rose 0.5% month over month versus a 1.1% consensus forecast, though annual producer inflation still reached 4.0% as energy costs surged.

VALUATION RELIEF

Oil Fell. Tech Got Its Discount Rate Back.

Brent crude fell 4.6% Tuesday to $94.79 a barrel and WTI dropped nearly 8% to $91.20 after President Trump said talks with Iran could resume in Pakistan. Treasury yields moved lower and the Nasdaq gained 1.95%, leading the major U.S. indexes higher.

That matters because the transmission from oil to AI valuations has become unusually direct. Higher crude raises headline inflation, pushes up inflation expectations and makes the Fed less willing to ease. That keeps Treasury yields elevated, which reduces the present value of the long-duration earnings investors assign to AI infrastructure and software. A sharp oil decline reverses that mechanism even before any company reports new fundamentals.

The relief should not be confused with resolution. The market was responding to the possibility of talks, not restored Hormuz traffic or a signed agreement. If diplomacy stalls and physical energy flows remain constrained, the inflation premium can return quickly. Tuesday's rally showed how much valuation pressure was geopolitical rather than company-specific — and how sensitive AI multiples remain to every move in crude.

INFLATION MIX

PPI Was Softer. Energy Was Still Doing the Damage.

U.S. producer prices rose 0.5% in March, less than half the 1.1% increase economists expected. Services prices were flat, core goods excluding food and energy rose a modest 0.2%, and some tariff-related price pressure appeared to be easing. On the surface, that gave the market a second reason — alongside falling oil — to lean back into risk.

The composition matters more than the headline. Gasoline prices at the producer level jumped 15.7%, while jet fuel and other energy products also surged. Annual PPI reached 4.0%, the highest since February 2023. In other words, underlying price pressure looked more contained than feared, but the war had already created a powerful energy shock moving through goods and transportation.

For the Fed, that is both encouraging and uncomfortable. Flat services inflation suggests the shock has not fully spread into the stickier parts of the economy, but policymakers cannot assume it stays there. Economists cited by Reuters estimated the March PCE price index could still rise around 0.7%. The next few inflation prints will determine whether oil remains a headline problem or becomes a broader monetary-policy problem.

HEADLINES

JPMorgan beats on record trading revenue: First-quarter profit rose 13% as trading revenue hit a record and dealmaking improved, showing how market volatility can support large banks even when the macro outlook becomes less predictable.
Wall Street banks warn against extrapolating the trading boom: JPMorgan, Wells Fargo and Citigroup all benefited from heavy client activity, but executives cautioned that Iran-driven volatility and higher oil could still weaken borrowers and corporate confidence.
Goldman's quarter shows the same volatility trade: Revenue reached $17.2 billion as M&A advisory and equity trading surged, reinforcing the idea that Wall Street can profit from uncertainty even while the real economy absorbs the cost.
The dollar weakened with the oil-risk premium: Easing geopolitical tension and a softer PPI print reduced demand for the dollar and helped financial conditions loosen at the margin.
TSMC becomes the week's key AI supply-chain test: Investors are entering Thursday's report focused on whether advanced-chip demand remains strong enough to justify continued capacity expansion despite war and energy risks.

UPCOMING

Bank of America and Morgan Stanley earnings — April 15: The next bank results will show whether record trading conditions are broad-based and whether credit or client activity is beginning to reflect the energy shock.
TSMC earnings — April 16: The world's largest advanced-chip foundry will provide the clearest near-term read on whether AI demand remains strong enough to keep capacity tight and capex elevated.
U.S. retail sales — April 21: Consumer spending will help separate genuine demand strength from higher nominal spending caused by gasoline prices.
Fed decision — April 29: If oil remains volatile, the Fed's tolerance for energy-driven inflation will matter as much as the underlying growth data.

DEEP INSIGTHS

March Producer Prices: Softer Headline, Hot Energy

Read this for the composition behind the inflation relief. The headline PPI undershot expectations, but energy prices were still surging. That distinction explains why bond yields could fall on the day without giving the Fed an all-clear on inflation.

Amazon's AI Revenue Disclosure

This is useful context for why lower yields matter so much to technology right now. Amazon says AWS AI services are already running above a $15 billion annualized revenue rate and its custom-chip business above $20 billion, but the company also plans roughly $200 billion of 2026 capex. Stronger monetization helps justify the spending; a lower discount rate makes those future returns worth more today.