Are markets wrong on oil?

What can Micron’s blow-away earnings tell us about the AI theme?

Market recap

• As the bull market rages on, the debate about valuations and an AI bubble is getting tenser.
• We’ll start by reiterating what we have said all along—this cycle will most likely end in a bubble, but bubbles tend to run stronger, and longer, than most people initially think.
• We wrote last year, in Bull, Bear or Bubble?, that we were only around inning five or six of this cycle.

AI

On Thursday, memory maker Micron’s blow-away earnings report caused its stock to soar 15%, with the news seemingly reviving the artificial intelligence (AI) trade after a slump earlier in the week.¹ However, that momentum faded on Friday. We see two major takeaways from this story. For one, it highlights that, despite some misgivings about mega-cap valuations, the AI theme is still strong. Earnings remain relatively good across the board, with many companies beating expectations, and that fuels momentum for AI-related stocks to move higher, as Micron and others did before coming back down to earth a bit on Friday.² Crucially, this momentum is not being driven by multiple expansion—rather, it is being driven by higher earnings multiples, which means that to keep the same price-to-earnings (P/E) ratio, the stock price has to move higher. This is an important distinction, because it should be supportive of markets moving up even more. Secondly, Micron’s earnings underscore that investors don’t need to be in on the big initial public offerings (IPOs) or chase the Magnificent 7’s (Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla) higher multiples in order to access the AI theme; you can be in lower-visibility names and still potentially benefit. In addition to Micron, memory names like SanDisk, Western Digital, and Samsung have done well recently, and we’re currently overweight that segment of the market.

Bottom line: Micron’s earnings tell us that the AI theme still has momentum, and that it goes beyond just the biggest names in the space.

Oil

With the U.S. and Iran having reached a 60-day agreement and actively negotiating a more permanent deal, oil prices have started to ease, with West Texas Intermediate (WTI) Crude coming down from a high of over US$100 per barrel to the US$70 per barrel range—in line with pre-crisis levels.³ Our view, however, is that prices have come down too far, too fast. Though a temporary settlement has been reached, it will take some time for supply to fully come back online—and that is assuming that the ceasefire holds. It appears that oil markets have essentially jumped the gun to where things might stand in three to six months, when the flow of oil through the Strait of Hormuz is expected to have returned to normal. Prices in the US$60-70 range also do not seem to account for damage that may have been done to production facilities, though this appears to have affected natural gas production more than oil. In six months, we should be back to normal supply-demand dynamics (assuming no flare-ups), but there is also the possibility that oversupply could become an issue. With markets already pricing in a ‘return to normal,’ any snag in negotiations could cause prices to shoot back up, and there is little room for a positive surprise if negotiations do go well. Keep in mind that Iran still holds significant negotiating leverage: the U.S. midterm elections are around the corner, and the Trump administration likely wants to see oil prices stay down so that they do not become a major ballot box issue.

Bottom line: We think oil prices have come down too fast, with markets essentially jumping ahead to where the supply situation may be in three to six months’ time.

Gold

Gold prices have retreated to approximately US$4,000 per ounce—essentially erasing all of the gains they’ve made this year.⁴ What has caused this momentum to stall? We see four reasons. First, demand from retail investors has dropped off, perhaps in part due to interest in the SpaceX IPO or other AI-related names. That rotation appears to be affecting cryptocurrency as well. Second, some central banks slowed down or paused their gold buying due to higher oil prices. We would expect this trend to reverse now that oil prices have come down, assuming that supply does gradually return to normal. Third, as equity market momentum has picked up, we’ve seen something of a pivot from gold to energy. With energy prices now stabilizing, we expect to see some of that money return to gold. And finally, from a longer-term perspective, some investors are likely to get back to looking for a hedge against the U.S. dollar (USD). The USD has been strong lately, so there has been little reason for investors to seek refuge elsewhere. However, over the next five years, we do expect the USD to weaken somewhat, which will increase the need for an alternative store of value like gold. We recently moved to an overweight to the Canadian dollar (CAD) versus the USD.

Bottom line: Declining retail demand, higher oil prices, and USD strength have all contributed to a gold prices’ retreat this year.

Positioning

For a detailed breakdown of our portfolio positioning, check out the latest BMO GAM House View Report, titled Fundamentals are still in the driver’s seat, but keep your belt buckled .

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Originally Posted June 29, 2026 – Are markets wrong on oil?

Source

¹Sawdah Bhaimiya, “Micron soars 15% after blockbuster earnings, lifting some chip stocks,” CNBC, June 25, 2026. 

²Sawdah Bhaimiya, “Micron falls 5% as tech stocks struggle,” CNBC, June 26, 2026. 

³OilPrice.com, as of June 26, 2026 .

⁴GoldPrice.org, as of June 26, 2026.