AI Tech Capex Bust Meets Inflation Shock
The Escalation Trap
“Selling Is Just Starting” Me, Tues March 3rd
Right Tail Rally Timing
The Damage Is Done
US Hegemony At Risk
Oil Shock Meet VAR Shock
The Escalation Trap
Since my February 16th post with my conviction that Trump would take US to war in Iran for Israel, I have been warning & writing that this would be a protracted war, forcing oil, dollar & yields higher with equities lower. This has nearly played out fully - with the exception that my USD trigger has yet to spark.
I had already warned from my intermarket analysis that volatility would be bid March into mid-May. We are but a few weeks in…
Speaking of which, these are just my Iran-focused client posts you can find under Market Thoughts for more detailed insights:
Iran Is Winning, Which Is Dangerous
Agent Of Chaos
There’s A Torpedo Headed For The US Stock Market But It’s Not The One You Think
Brinkmanship: Weekend Risk Dead Ahead
Little Note: Big Warning
Hormuz Heightens Risk & My Crude Oil Price Target
Winning Isn’t Even On My Bingo Card
Prepare For A Protracted Middle East War
TACO or ESCALATION: That Is The Question
Strategic Patience Is Needed
Iran Risk Is Not Priced In
Several of these speak specifically to the risk I assessed in the AI ecosystem of equities - and how they will lose investment dollar flows from their Middle East sponsors.
Then recently I doubled down March 8th, before this recent sell-off of size: MONEY GOES HOME - GCC EDITION:
I contend, regardless of whether Trump wins this battle, he may have put at risk the GCC bid that has propped up US equities, treasuries and dollar for years.
Now the media is addressing the elephant in the room:
From the Financial Times:
“A number of Gulf countries have begun an internal review to determine whether force majeure clauses can be invoked in current contracts, while also reviewing current and future investment commitments in order to alleviate some of the anticipated economic strain from the current war,” said one Gulf official. “Especially if the war and related expenses continue at the same pace.”
Ironically, these oil-rich countries WERE a central part of the Trump industrialization and AI leadership plan, or so it seemed. Wasn’t it just last May, Trump returned from the Middle East having “secured” $600 Billion in investment commitments from the Saudis, $1.2 Trillion from Qatar, and $1.4 Trillion from the UAE?
Yes, there is a LOT of hype in those numbers, but it is not unreasonable to say the GCC sovereign wealth funds have financed a good amount of AI hype - pulling forward growth expectations by funding them. Not to mention, their involvement in the highly-publicized recent Paramount bid for WBD - with Kushner & Arab fund partners:
Paramount said it would use $24 billion in funding from Saudi Arabia, Abu Dhabi, and Qatar to help buy WBD. Now that Paramount has won that deal, it won’t say whether that’s still the plan.
Heck, they even helped Elon Musk’s takeover of Twitter. Arab sovereign wealth funds and state-backed entities, particularly from Saudi Arabia and the United Arab Emirates (UAE), have heavily invested in OpenAI, SpaceX, and Anthropic as well.
And what happens to all those promises in the tens of billions to build data centers if they declare Force Majeure on contracts and debt? Or the “trillions in great deals” the White House pumped? Open that last article link. At least scroll down the long list of American company/CEO names listed as recipients of the Gulf State’s commitment in US Tech!
That’s a lot of dollar recycling right there: their oil revenues exchanged in USD converted into NDX plays. What happens when it slows let alone reverses?
According to BEA, there are $35 trillion of equity investments in the U.S. held by foreigners, which equates to up to 25% of the market. We don’t know how much is Gulf Arab country-related specifically but let’s keep an open mind that they could feel compelled to sell some of these assets to self-fund their defense and rebuilding back home.
Here’s where that money is concentrated:
Should We Worry About Gulf Countries Reducing Investments In The U.S.?
“The six Gulf countries’ eleven sovereign wealth funds invest about $2 trillion in the U.S, which is over 35% of their total assets under management. These countries invest in U.S. stocks, bonds, alternative investments such as hedge funds, real estate, and infrastructure. Over 25% of the total Gulf investments in the U.S. are in equities and about 17% are in fixed income products, especially U.S. Treasuries.”
Given the recent redemption wave in private equity, I found it curious:
“The Gulf investments of about $420bn in U.S. private equity is proportionally far more significant than investments in the stock market. Gulf investments represent about 8–10% of the entire U.S. private equity market.”
Then there are their collective bond holdings:
”The bond market is potentially a far more dangerous pressure point than the equity market. Gulf states collectively hold about $307 bn in U.S. Treasuries and bonds. If equity and bond selling happened simultaneously, or even a quiet decision to stop rolling over maturing Treasuries, that could hit the bond market and push up yields.”
It is not a reach to consider Arab nation selling of equities and private equity and US treasuries are in play. And this is a contributing factor why yields are rising… and why higher borrowing costs are pulling forward a growth scare that can further trigger de-risking in Capex, private equity, treasury and equity markets.
With that, my technical read still says market selling is not done.
“Selling Is Just Starting” Me, Tues March 3rd
Friday marked the 3rd largest single-day loss of 2026 for the Nasdaq. And we were positioned for it - from my warning early February that market was done going up, to my warning mid-February that Iran risk was not priced in, or in my strong warning March 3rd, “Selling is just starting!”
Then this week I even helped you position for gold’s worst weekly loss since 1983, as well as my strong conviction for SPX $6508 & QQQ 578 for Mon/Tue. It hit Friday.
We are now Selling Into Critical Crash Level Support.
Poor breadth, rising yields, fragile support levels… means we could even trigger Crash Risk: 2008-Type Waterfall Level.
Selling pressure builds as crash support zones come into focus, so that is why I did a deep-dive of my intermarket analysis this weekend that supports my focus on my technical review of why SPX $6508 & QQQ $578 matter.
