Yesterday also marked the end of the quiet period for SpaceX, allowing Wall Street analysts to reveal what they think about the company. And it blew my mind to see that opinions ranged from bullish to extremely bullish. Goldman Sachs and Citi analysts set price targets of around $200 per share (more than a one-third increase from yesterday’s closing price), Deutsche Bank expects the stock to rise to $255 per share (+70% from yesterday’s close), and Morgan Stanley to $300 per share—that would represent a 100% gain from yesterday’s closing price.

Morgan Stanley analysts say they "believe SpaceX can convert energy into intelligence at scale with optionality to monetize through a range of consumer and enterprise solutions for the next era of AI," while also acknowledging that there is "still considerable uncertainty about the company's prospects." That part is actually more interesting than their average price target: Morgan Stanley sees a valuation range of $75 to $600 per share. It's quite a gap!

If SpaceX can pull off its orbital data centre business, it would indeed mark a turning point for the future of AI infrastructure. But the company will have to spend heavily to get there, and it seems that the amount of cash it will burn is not being taken seriously enough into account when these price targets are set. It is a difficult task to assign a price target to a company promising a revolutionary business. But the promised business doesn't exist yet, it is highly ambitious, and SpaceX's existing money-making businesses have so far been unable to finance those costs. Selling computing power to data-hungry AI players could eventually reduce that funding gap. So, we are watching SpaceX—we are all watching.

Middle East tensions threaten again

Meanwhile, back on planet Earth, things are souring again. Tensions in the Middle East have increased a notch after Iran attacked ships in the Strait of Hormuz, to which the US responded with retaliatory strikes.

What a peaceful peace negotiation period!

Iran is reportedly laying mines in the Strait of Hormuz, which would force ships to pay for additional security even after a peace deal is signed. That would be a terrible long-lasting consequence of an unnecessary war. I won't comment on the geopolitical dimension of the story, but the peace talks are in jeopardy when you add the nuclear ambitions of both sides to the mix—the US demanding that Iran scrap its nuclear programme, and Iran seeing little incentive to do so after being so heavily attacked by the US-Israel duo.

US crude rallied more than 5% yesterday on renewed Middle East concerns, consolidating gains above the $72pb level. It's too bad because the oil market had recently returned to contango, meaning that spot prices fell below futures prices—the normal state of the oil market because oil has storage costs. If you buy oil today, you have to store it somewhere, and storage costs money. Therefore, if you buy oil today rather than tomorrow, you would expect to pay a lower price. This market structure flips during periods of stress and scarcity. In such periods, buyers prefer to secure supply immediately, fearing there won't be enough oil later or that it will become more expensive, pushing spot prices above futures prices. That is exactly what happened during the Iran war. The further out the maturity, the lower the futures price relative to the spot price. The market returned to contango in mid-June and could remain there if Middle East tensions do not escalate further and stress in the oil market remains contained. As for oil prices, the $75 pb area (the 200-DMA) is the next important resistance.

In the event of renewed de-escalation, however, it remains unclear how low oil prices could go. The previous pullback was mainly driven by the supply side of the story. Yet one major uncertainty remains: demand. More specifically, what will China do? China sharply reduced its oil purchases during the Iran war, and according to the Financial Times, it has just started returning to international markets to replenish its reserves as prices fall. The good news is that if prices rise again, China may stop buying. The bad news is that if energy prices rise because of renewed geopolitical tensions, the recent easing in inflation expectations could reverse quickly, forcing investors to rebuild expectations for more hawkish central banks.

Note that global bond yields rose sharply yesterday alongside the rally in oil prices. The benchmark German 10-year yield climbed back to 3%, the US two-year Treasury yield is flirting with 4.20% again, while the Japanese 10-year government bond yield rose to 2.87%, a fresh multi-decade high. As such, equity markets could come under renewed pressure if tensions do not ease quickly, increasing the risk of a pullback from fresh all-time highs for some indices at a time when technology investors are already walking a tightrope.

Today, investors' attention will shift to the Fed minutes. Given how quickly the headlines change, however, I think whatever was discussed at that meeting is already outdated. Rising US inflation was the main focus at the time. Since then, Middle East tensions had eased and US crude had fallen from its war peak of around $120pb to below $70, significantly easing inflation expectations. Today, however, the peace deal is in jeopardy again, oil prices are rising, and inflation expectations are following.

As such, geopolitical headlines will likely determine market sentiment over the coming hours. A further deterioration in the situation could weigh further on equity valuations along with rising stress in technology. Kospi is down another 5.74% right now, down more than 20% since its June peak, stepping into the bear market.