Rising Geopolitical and Policy Uncertainty: AI and Rate Cuts Face Concurrent Reevaluation

On July 16, columnist and researcher Chloe (@ChloeTalk1) analyzed that the escalation of the U.S.-Iran conflict and the divergence in Federal Reserve policies are jointly increasing the uncertainty of global risk assets. If the U.S. expands its actions from limited airstrikes to targeting energy facilities, nuclear sites, or even seizing Khark Island, market pricing will no longer reflect just a short-term geopolitical conflict but rather the tail risks of long-term disruptions in the Strait of Hormuz, interruptions in Iranian oil exports, and the spillover of regional wars. Even if the U.S. does not directly strike oil facilities, blockading ports and intercepting vessels could raise transportation, insurance, and energy risk premiums, thereby undermining the inflation optimism brought by the June CPI decline.

In terms of monetary policy, Waller did not signal easing due to a significant drop in the monthly CPI; instead, he emphasized potential inflation, demand expansion from AI investments, and price pressures over the next 12 months. This suggests that the market's previous trading logic around "rapid inflation decline—Fed rate cuts imminent" may have been overly aggressive. Hassett continues to advocate for rate cuts on behalf of the White House, but the final policy still depends on the FOMC. The contradiction between political calls for easing and the central bank's anti-inflation stance may continue to amplify interest rate and dollar volatility.

For U.S. stocks, the short-term environment leans towards high volatility and structural differentiation. Sectors such as energy, defense, cybersecurity, and some infrastructure may benefit, while airlines, transportation, consumer sectors, and highly leveraged small-cap stocks face dual pressures from costs and interest rates. AI-related capital expenditures can still support demand for semiconductors, data centers, and power equipment, but if Waller views AI investments as a new source of inflation, long-duration tech stock valuations may be suppressed by higher real interest rates, shifting the market's focus from merely trading AI growth to examining cash flows and profit realizations.

The core pressure on the crypto market comes from liquidity rather than a single geopolitical event. If oil prices and inflation expectations rise, the timing of rate cuts is delayed, and the dollar and real yields strengthen, both BTC and high-beta altcoins may come under pressure. BTC may initially be viewed as a non-sovereign asset by some funds during the onset of conflict, but in a true deleveraging phase, its performance typically aligns more closely with high-liquidity risk assets. From a market observation perspective, the current environment may favor defensive strategies that reduce leverage and increase cash ratios, with oil prices, Hormuz shipping, U.S. Treasury real yields, and the dollar index being the main variables to track. Only when military escalations are controlled and the Fed reaffirms a path of easing can U.S. stocks and crypto assets potentially restore a more sustainable risk appetite.