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The Wall Street investment bank says that a re-escalation of hostilities in the Middle East or a prolonged closure of the Strait of Hormuz remain “the most obvious downside threat” to financial markets, even as a continued rally in artificial intelligence-related (AI) stocks pushes valuations to new highs.
In a note to clients, Goldman Sachs said that the Iran ceasefire has allowed markets to compress risk across asset classes, with renewed optimism lifting AI stocks and sending indices up to record highs. But investors shouldn’t become complacent, warns the bank.
Oil Prices Remain Key
The bank believes a gradual restart of energy flows through the Strait of Hormuz would provide meaningful relief across oil prices and stock markets, leading the current market rally that is concentrated in AI names to broaden out to other stocks and sectors.
