Oil Back Above $100, Defence Stocks Surge, and AI Keeps Setting Records - What Drove Markets This Week

TradingKey - WTI briefly above $100 on renewed US-Iran friction. Enbridge (ENB), Exxon Mobil (XOM), Chevron (CVX), Lockheed Martin (LMT) lead weekly gainers. Nvidia (NVDA), AMD (AMD), Cisco (CSCO) set records. Warsh Fed era begins. S&P targets 7,500–8,000+.

The global financial markets this week were shaped by big stories: US-China AI summit, a fresh spike in US-Iran tensions sending WTI over $100 for a while and lifting energy and defence stocks, plus AI earnings season continuing to print headlines with record results from Nvidia, AMD, Cisco, Alibaba (BABA) and Palantir (PLTR). The S&P 500 and Nasdaq 100 still hover near all-time highs. Kevin Warsh has officially stepped in as the new Federal Reserve chair, and the Trump-Xi summit in Beijing means there is an added geopolitical dimension to what is already a complicated macro picture. 

How the interaction between oil, AI infrastructure investments, and the new Fed Chair's rate plans will play out in the days and weeks leading into June will likely set the tone in the market.

Iran tensions push WTI above $100, energy and defence in focus

In the wake of a conditional US-Iran ceasefire in early April, there has been renewed tension around this fragile peace with reports that the ceasefire was delayed earlier in the week, and new US ultimatums. The traders have priced in renewed risk of disruptions at the Strait of Hormuz, where around 20% of the world's oil and LNG supply passes through, as the Strait of Hormuz risk premium was reduced earlier this year. While the oil did trade for brief periods above $105 to $106 a barrel, the energy names closed up, with Brent following suit. 

USOIL Price Chart - Source: Tradingview

With oil inventories remaining low below seasonal averages, and OPEC+ remaining disciplined with output, the supply/demand balance was more than a bit tight for the energy trade and the potential for geopolitical disruptions to drive prices higher, as we have seen with the rise in oil prices in the past week.

Energy Stocks Gaining Support: Eyes on Enbridge, Exxonmobil, and Chevron

Energy stocks were among the leaders of the week with Enbridge moving higher after it reaffirmed its 2026 guidance, emphasizing its $40 billion in contracted backlog that provides the company with a pipeline of cash flow it would need if the market is going to go higher. ExxonMobil and Chevron outperformed the broader market on strong refining and upstream production in the Permian Basin and Guyana, the two companies are also increasing their buybacks. 

Kinder Morgan and other E&P names were also higher for the week and some even posted double digit gains. Energy was not alone with the rally, Lockheed Martin, Raytheon Technologies (RTX), and Northrop Grumman (NOC) were up for the week as the US military spends more and more on its ongoing defense programs in the Middle East, and in the face of the continuing competition with China, and the Trump-Xi summit in Beijing later this week on trade and tech and rare earths and whether any deal might be announced could further spur demand for defense stocks.

AI earnings season continues to deliver with Nvidia, Cisco, Alibaba and Palantir in focus

The AI infrastructure earnings cycle is one of the best AI infrastructure earnings seasons we have seen, with Nvidia, AMD, Cisco, Alibaba and Palantir all posting record earnings and/or revenue growth as they benefit from the AI infrastructure build-out, the hyperscaler capex and the continued momentum in AI infrastructure spending. Cisco reported its third quarter of FY2026 with revenue of $15.8 billion, up from last year with a record single quarter of $2.1 billion of AI infrastructure orders, and it guided its full-year AI revenue to $9 billion or 4x last year.

Alibaba announced that its Cloud Intelligence Group posted 38% revenue growth year over year in the period with triple-digit AI product growth and a three-year infrastructure commitment of $52 to $56 billion. The results of Palantir reported 85% revenue growth with a Rule of 40 score of 145% but the stock is trading at 97x forward earnings.

The stock market has also rallied on the AI infrastructure earnings results as the tech sector remains resilient in the face of the geopolitical headwinds. Google Cloud announced 63% year over year revenue growth with a record margin year over year as AWS and AWS are posting record margins as well. The AI infrastructure earnings cycle is continuing to drive the tech earnings cycle with Nvidia set to report its Q1 FY2027 results on May 20 as consensus calls for another 60%+ growth in data center revenue growth. Meta and Amazon were both signaling that their AI capex spending is continuing to accelerate. 

The S&P 500 was hovering at all-time highs as the AI earnings cycle continues to drive higher despite the geopolitical headwinds, and the Wall Street year-end targets are mostly calling for the S&P 500 to end higher in the 7,500 to 7,700 range, but with the AI bull case calling for an 8,000 level. 

S&P500 Price Chart - Source: Tradingview

The major downside risk remains the possibility of hyperscaler capex slowdown, as it would lead to a significant re-rating of the earnings cycle if it occurs.

What to watch this week

The top five things that will drive market sentiment next week, listed in order of significance:

1. Nvidia's Q1 FY2027 earnings (May 20) is the single best signal of whether AI capex is accelerating or slowing down
2. Wednesday's FOMC Meeting Minutes 
3. Any remarks by Federal Reserve Chair Kevin Warsh or other central bankers on the path for rates
4. Outcomes of the Trump-Xi summit regarding trade and tech
5. Further US-Iran ceasefire progress that keeps oil at $110+ or reopens the risk premium to $95.

What stocks were the top gainers this week?

Energy and defense led the week, with Enbridge, ExxonMobil, Chevron and Kinder Morgan moving higher on energy prices, and Lockheed Martin, Raytheon and Northrop Grumman on defense spending expectations.

On the AI front, Cisco announced record revenue with $2.1 billion in Q3 AI orders, Alibaba Cloud grew 38%, and Palantir saw 85% growth in revenue. Nvidia and AMD maintained their positions as the key AI semis before Nvidia's May 20 earnings.

What's the outlook for the stock market in the rest of May 2026?

Wall Street has year-end S&P targets between 7,500 and 7,700, with an AI-fueled scenario seeing 8,000+. Near-term catalysts are Nvidia on May 20 (the AI spending thermometer), Thursday's retail data (consumer strength), and any rate path remarks by new Fed Chair Kevin Warsh.

On the geopolitical side, tensions between the US and Iran and the Trump-Xi summit in Beijing could still cause volatility. The bulls are buoyed by strong AI earnings, but heavy tech leadership in the index and high valuations leave the market vulnerable to a negative shock.

The Take-away

Oil is above $105 because of the Iran impasse, Cisco and Alibaba have record AI earnings, and Palantir's 85% growth is hitting a valuation limit. Kevin Warsh is in. The market's holding at all-time highs because AI infrastructure is ramping fast enough that valuations make sense.

Next week's Nvidia is the bull market's test on May 20. If data centre growth is another 60%+ and guidance is higher, the AI thesis gets another stamp of approval and 8,000 is back on the table. A weak Nvidia means the AI infrastructure group reprices simultaneously. This is the week to be watching.