Good morning, investors. It’s not every week that the leading sector in the stock market can widen its lead based on a completely new, unrelated catalyst.

That’s exactly the story with energy.

Let’s dive in.

Energy stocks are suddenly benefitting from the dual tailwind of AI and war.

The S&P 500’s Energy sector — up more than 27% year-to-date and leading the index by a wide margin — has shifted from a structural AI trade to a geopolitical hedge almost overnight. 

With the outbreak of conflict in Iran, what began as an undervalued bet on soaring data-center power demand has layered on a second catalyst of rising oil prices and supply-chain risks.

Over the last year, the bull case for energy resembled past cycles.

Investors gravitated toward natural gas producers and LNG operators as “pick-and-shovel” plays on AI. 

Hyperscalers such as Amazon and Meta have been explicit about the scale of their AI spending ambitions, effectively underwriting a long-term demand floor for power.

That thesis had gained traction well before Iran entered the calculus.

On Full Signal, “Big Short” investor Danny Moses, Bloomberg Intelligence strategist Michael Casper and veteran investor Lou Basenese each made the case that energy was an under-appreciated opportunity.

Over the last four days, that narrative has broadened.

Escalating tensions in the Middle East have pushed Brent crude as high as $85 a barrel for the first time since 2024.

Markets are now pricing in vulnerabilities around the Strait of Hormuz, which handles roughly 20% of global oil flows.

For investors, this creates a rare alignment of long-term and near-term catalysts:

Energy is outperforming the second-place Materials sector by about 10% year-to-date.

And unlike parts of Big Tech, many energy companies trade at modest valuations while maintaining attractive dividends and buybacks. 

With exposure to both the defining technological cycle in a generation and a geopolitical risk premium, energy offers upside participation and downside protection.

It’s hard to bet against that cocktail of bullish forces.

Staying on top of markets that hit a new all-time high seemingly every week, a never-ending news cycle and volatility that’s frankly...volatile is a lot of work.

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📉 Luxury stocks are falling. The Middle East has been a bright spot for sales in the struggling sector, but the conflict has led to sell-off in shares of LVMH, Gucci-owner Kering, and Burberry. (CNBC)

🌍 Hard to hide in the current market uncertainty. Tuesday marked the first time since February 2025 that the S&P 500, gold, and bitcoin all saw at least a 1% drop during the session with the iShares 20+ Year Treasury Bond ETF also negative. (Sherwood)

📊 European stocks saw the worst drop since Liberation Day. Major regional benchmarks across the UK and Germany tumbled, and both the FTSE 100 and DAX indexes saw their steepest one-day decline since April 7. (WSJ)

I sat down with veteran market strategist Lou Basenese to discuss the fears driving the market sell off, his bullish outlook on the energy and biotech sectors, and his highest conviction stock picks for 2026 — several of which I've never heard anyone else mention.

Tune in on YouTube, Spotify, or Apple Podcasts.

🗓 March 4, 2009: The S&P 500 tumbled over multiple trading days before hitting its bear-market bottom just days later, marking a 57% decline from its October 2007 high.

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