With tensions in the Middle East dragging on and oil prices rising higher as a result, economists had feared that inflation, paired with slowing growth, would lead to a stagnating economy with rising prices. But suggestions that a deal may be possible were enough to boost markets’ mood this morning, as Deutsche Bank’s Jim Reid noted: “The positivity saw the S&P 500 (+0.58%) hit another record yesterday, advancing for a 6th consecutive session, with futures up another +0.05% this morning …

"So even before the formal confirmation of any deal, there’s already been a strong reaction in markets.”

ONE BIG THING

White-collar woes

White-collar work was never meant to stick around indefinitely, ADP’s chief economist Nela Richardson recently told Fortune’s Nick Lichtenberg. While many are concerned that AI will mean the end of the office jobs they recognize today, significant labor market shifts were inevitable. 

“No one ever promised a 50-year cycle for white-collar work,” Richardson told me. “This has really taken off with the expansion of the internet,” she said, which created so many “digital jobs” that people could do in front of a computer. But just because that’s true, it won’t necessarily stay the case, she pointed out. 

“I think there was this embedded assumption that these jobs would just keep going on and on forever. Really what started with the boomer generation would just be handed down through millennials into Gen Z. But that was never a guarantee.”

IRAN

Fallout on non-oil supply

Despite negotiations between Iran and the U.S. seemingly (slowly) moving in the right direction, Goldman Sachs has warned that fears persist that it’s “just a matter of time before accumulating supply shortages lead to outsized reductions in activity.” 

Analyzing these outcomes, Goldman’s Megan Peters wrote in a note this morning, seen by Fortune, that the biggest risk of outright stockouts (where inventory is totally depleted) is in non-oil commodities, where markets are less global, and supply is often regional.

While non-oil supply from the Middle East only accounts for 1.3% of global GDP, at the most extreme end, losses could drive “very large reductions to output.”

That being said, there are three reasons why the hit to growth is likely to be contained. Peters writes: “First, the implied GDP hit falls sharply when we exclude inputs that account for a trivial share of production. Second, reallocating scarce inputs from low- to high-value-added uses materially lowers the drag. Third, even modest substitutability across inputs lowers it further.”

MORE FROM FORTUNE

• Top analyst has harsh words for SpaceX debut: ‘We recommend that investors avoid this IPO’ - by Shawn Tully
• Ferrari’s $640,000 electric car is getting roasted online—and its former chairman says it risks ‘destruction of a myth’ - by Phil Wahba
• Sweeping Silicon Valley layoffs are proof that tech CEOs are suffering from ‘AI psychosis,’ Box CEO says - by Jake Angelo
• The ‘imminent’ oil crisis isn’t at the pump—it’s under your hood - by Jordan Blum

CHART OF THE DAY

Healthy opportunities in the wellness sector

The global wellness economy is expected to grow by some $3 trillion in value over the next three years, according to Lynelle Huskey and Vanessa Cook at the Bank of America Institute. 

The duo writes that constant connectivity and AI-driven tools increase reliance on screens at the expense of in-person interaction. Spending more time looking at screens is linked to poor posture, eye strain, obesity, and loneliness, the pair highlights.

Wellness isn’t confined to the physical; it also addresses emotional and social well-being, meaning that products and services addressing everything from nutrition and physical activity to travel to offset digital strain stand to gain. 

“While heavy screen use is linked to health risks, other technologies can support wellbeing, like virtual therapy and wearables. Together, all these forces underscore the rise of the wellness market,” they wrote.

NUMBER OF THE DAY

87%

Nearly 9 out of 10 U.S. voters say a plan to address national debt is a factor in helping decide which candidate they’ll vote for in the 2026 election. 

According to the fiscal think tank, the Peter G Peterson Foundation, that’s an increase from the 83% reported last month. 

The organization’s monthly fiscal confidence index showed 93% of voters (including 95% of Democrats, 92% of independents, and 92% of Republicans) are concerned that the national debt’s effect on inflation and how it could impact their standard of living.

THE FRONT PAGES TODAY

• SpaceX said to cut IPO valuation goal to at least $1.8 trillion - Bloomberg
• US, Iran reach deal on extended ceasefire pending Trump approval - Bloomberg
• Russia overspends on Putin’s war in Ukraine by $28bn - FT
• Corporate America is starting to ration AI as cost skyrockets - WSJ

ONE MORE THING

Room to climb

Goldman Sachs is feeling good about stock market returns but warns investors they’ll need to hold tight through some volatility to get there.

In a note this week, Ben Snider and his team wrote they expect the S&P 500 to rise 6% by year's end, and a further 10% over the next 12 months. 

But there are headwinds: “From a macroeconomic perspective, softening consumer spending and elevated input cost pressures should create incremental earnings headwinds in coming quarters for much of the equity market.” 

However, these pains will likely be offset by (you guessed it) AI. Analysts forecast capex for AI infrastructure to grow by 83% this year to $754 billion and by 20% in 2027 to $905 billion.

But “analysts have been too conservative during each of the past three years,” the trio wrote, and “commentary from the hyperscalers reiterated their commitment to strong investment spending in 2027, and revenue backlogs point to a continued supply/demand imbalance.”