THE MARKETS

Stocks are mixed in reaction to yet another oil price spike

• S&P 500 futures were flat this morning. The index sank 0.49% yesterday. 
• In Europe, the Stoxx 600 declined 0.35% in early trading and the U.K.’s FTSE 100 was down 0.65% before lunch.
• Asia: South Korea’s KOSPI was up 0.75%. Japan’s Nikkei 225 was down 1.02%. India’s Nifty 50 was up 0.8%. China’s CSI 300 was up 1.1%. 
• Brent crude was $112 per barrel this morning, up from $111 the day before.
• Bitcoin was at $77K.

It has been two months since the start of the war—here’s how asset markets performed in that time.

“Unsurprisingly, oil is beating everything, and Brent 1-month contracts are up +49%. However, investors are still expecting this to be a temporary shock, as the 6-month Brent contract is ‘only’ up +25%. US assets have outperformed, reflecting that the US is more insulated from the shock as a net energy exporter,” says Deutsche Bank’s Jim Reid.

ONE BIG THING

CEOs got millions after boards ‘neutralized’ the impact of tariffs on executive comp

Among 22 large public companies with significant exposure to Trump’s import tariffs, eight boards shielded their top executives’ pay from the negative effects of those tariffs on company performance, according to an exclusive analysis released on Wednesday by executive pay consulting firm Compensation Advisory Partners. RTX CEO, Christopher Calio, for instance, collected $27.7 million in compensation last year, after the aerospace and defense giant’s board decided the trade war wouldn’t touch his bonus. Fortune’s Amanda Gerut has the details here.

• Mark Zuckerberg’s AI ambitions back in the spotlight as Meta execs begin ‘moonshot’ mission for $9.5 trillion valuation and massive payouts - Amanda Gerut

AI

Musk testifies in OpenAI case: AI “could kill us all” and Larry Page thinks I’m “a specieist”

Elon Musk had a colorful first day of testimony in his lawsuit against OpenAI, Fortune’s Eva Roytburg reports. Taking the stand Tuesday afternoon in an Oakland federal courthouse, the world’s richest man reportedly told the jury that AI “could kill us all.” He testified his concerns about AI crystallized during a 2015 meeting with Larry Page, when the Google co-founder predicted AI would bring utopia. Musk worried Page wasn’t taking the risks seriously, to which Page accused him of being a “specieist”—someone who favors humans over digital life-forms. “The reason OpenAI exists is because Larry Page called me a ‘specieist,'” Musk told the court.

Nvidia’s Jensen Huang: AI isn't killing your job—it's giving you more ideas than you can handle

“AI is expanding the scope of human work, not shrinking it. We’re busier than ever because we have more ideas to pursue, and AI makes it possible to go after them,” Huang said in a series of messages to Fortune’s Preston Fore. “When productivity rises, capacity expands. And when capacity expands, societies create more, build more, and take on bigger problems.” 

• “Every young person should become an AI expert. It is an incredible technology that significantly lowers the knowledge barrier of any professional field…AI fluency will empower you and elevate your chosen craft,” he said.

The last 30 years of office software were a warm-up act, says Amazon's Matt Garman

“I don’t think personal productivity has really been remade for the last 30 years,” the AWS chief told Fortune’s Alexei Oreskovic at the launch of Amazon Quick, a new desktop app for the office. “As we look across applications, we see that so many applications are getting done with AI and agents. And we think that there is just such a massive change out there that everything is going to be remade,” Garman said.

IRAN

Trump eyes long-term blockade of Iran

President Trump believes the blockade of the Strait of Hormuz will be an extended process as he squeezes the Iranian economy, the Wall Street Journal reports. That’s a tone-shift from the beginning of the war, when Trump said he expected the conflict to last about six weeks.

• On Truth Social he said: “Iran has just informed us that they are in a ‘State of Collapse.’ They want us to ‘Open the Hormuz Strait,’ as soon as possible, as they try to figure out their leadership situation (Which I believe they will be able to do!).”

Markets are betting on peace. Wall Street thinks that's a fantasy.

The U.S. blockade of the Strait is its key leverage over Iran and the Americans will not give that up anytime soon, according to Macquarie analysts Thierry Wizman and Gareth Berry.

“Crucially, for the US, China has a major structural disadvantage in that it must source its energy from abroad, given its negligible reserves of oil and gas. The Middle East remains the world’s key depository of both—aside from the US. A mutual agreement to unblock the Strait would strengthen the global economy, but would weaken the US strategically, while strengthening Iran and China. So…Trump likely will say 'no' to a clean reciprocal proposal to unblock the Strait,” they told clients in a note seen by Fortune.

“Iran's economy is suffering greatly, based on the data that has leaked out through various channels. The [US] administration is likely aware of this, and will use it to rationalize keeping the blockade, and push back on the 'defeatism' emanating from other quarters.”

But the markets are pricing in a quick resolution to the conflict, according to Adam Turnquist of LPL Financial. “Risk appetite [for stocks] has remained surprisingly resilient given Brent is trading only around $10 below its March 31 peak of $119.24. Markets appear to be looking through current tensions and assigning higher odds to a further de-escalation with Iran, alongside a relatively rapid reopening of the Strait of Hormuz,” he said in an email to Fortune.

“Bottom line: Markets are anticipating further easing in geopolitical tensions, helping to soften the drag higher oil prices exert on equities,” he wrote.

And yet…Goldman Sachs raised its oil price forecast on the assumption that the Strait will not return to normal until the end of June. Analysts Kevin Daly and Clemens Grafe see Brent crude at $105 per barrel through May, and at $90 per barrel through the end of the year—32% higher than in 2025. 

Saudi, Oman see revenue boost from the war

Some countries in the Gulf Cooperation Council are actually benefitting from the war, Goldman’s Farouk Soussa said in a recent research note, because the increased price of oil is more than offsetting the lower volumes being shipped out of the region.

“We estimate that weekly oil revenues are currently up 80% in Oman and 10% in Saudi Arabia, relative to pre-war levels. In the UAE, we think oil revenues are down around a quarter despite export volumes declining 60%. By contrast, weekly oil revenues in Bahrain, Qatar and Kuwait are close to zero given their lack of access to market while the SoH remains largely shut,” he said.

• ‘Take the money and run’: Johns Hopkins economist Steve Hanke on why the UAE quit OPEC - Shawn Tully

MORE FROM FORTUNE

From Warren Buffett to Tim Cook, these 5 Fortune 500 legends all share the same childhood job - Sydney Lake

The uncomfortable truth about AI and the American worker - Nick Lichtenberg

Islamic finance aligns naturally with ESG, says Maybank’s first-ever chief sustainability officer - Angelica Ang

The $39 trillion national debt just got its own version of the viral Doomsday essay - Nick Lichtenberg

A 160-year-old paradox explains why AI will create more lawyers and accountants—not fewer, top economist says - Jake Angelo

CHART OF THE DAY

The number of people who say jobs are “hard to get” predicts the unemployment rate

Unfortunately, the differential between them and those who believe jobs are “easy to find” is currently predicting that unemployment will rise, according to this chart from Grace Zwemmer of Oxford Economics.

NUMBER OF THE DAY

19%

The scale of the selloff in the stock markets that tends to occur in the second half of any year in which the U.S. holds midterm elections, according to Wells Fargo’s Ohsung Kwon and his team. Correction-level declines occurred in 71% of those years, versus only 44% in other years. 

THE FRONT PAGES TODAY

How Citi’s $52mn hire was forced out of JPMorgan over his behaviour - FT

Major data center company pauses investment decisions in Middle East amid Iran war - CNBC

White House workshops plan to bring back Anthropic - Axios

Jimmy Kimmel Mocks Trump Again After FCC Opens Review of ABC TV Licenses - WSJ

The Taylor Swift Interview - NYT

ONE MORE THING

When you wish upon a star, hold still for the facial-recognition cameras

Disneyland has expanded facial-recognition technology at entrances to its parks after months of testing, to make reentry easier and to prevent fraud, Fortune’s Cat Gioino reports. Disney says the system is optional: Guests who do not want to use it can enter through non-facial-recognition lanes, where a cast member manually validates their ticket. However, those guests may still have their photos taken; Disney says biometric technology is not used on those images.