As markets focus on tensions around the Strait of Hormuz and the risk of higher oil prices, two deeper forces may deserve equal attention. The first is rising fragility within private credit markets, where leverage, opacity and liquidity questions continue to build. The second is the accelerating strategic importance of artificial intelligence, which is increasingly reshaping competition across economies, militaries and global power structures.
Some analysts have raised concerns that segments of private credit show familiar late-cycle characteristics, including aggressive underwriting, tighter spreads, and limited transparency. This is not, at least for now, a full-blown crisis, but the trajectory is familiar. Risk is increasingly migrating toward less-regulated parts of the financial system, a trend policymakers are monitoring closely.
The second dynamic runs even deeper. The exponential development of artificial intelligence is accelerating beyond the capacity of markets and institutions to fully absorb its implications. This is no longer about incremental productivity gains or automation. It is about a structural redefinition of economic, military, and political power.
In this context, recent commentary from firms such as Palantir has amplified arguments that technological leadership may become central to national competitiveness. What emerges is not merely a set of ideas, but a coherent doctrine for navigating the current transition.
From soft power economy to a "technological republic"
Soft power alone may no longer be sufficient in an era of strategic competition. The combination of globalisation, finance, and consumer technology that defined the past decades is no longer sufficient to guarantee growth and security.
Software and digital systems are becoming central pillars of power, not only in economic terms, but in strategic and military ones. Power will be built on software, semiconductors, energy, manufacturing, data, logistics, finance and demographics. The critical question is who will build AI-enabled weapons and for what purpose. In a context of great power competition, delay is not neutral; it is a liability.
This marks a clear break from the prevailing narrative of the past twenty years, in which technology was framed primarily as a force for global integration. It is now returning to its historical role as an instrument of competition.
The return of hard power - digitised
One of the most consequential elements of this framework is the redefinition of hard power. It is no longer limited to industrial capacity or conventional military strength. It now encompasses software infrastructure, artificial intelligence, and the ability to integrate public and private capabilities. In this sense, Silicon Valley is no longer just an economic ecosystem. It becomes an extension of national security architecture.
Some strategists argue that AI may introduce new forms of deterrence based on speed, decision advantage and autonomous systems. Nuclear deterrence was based on mutually assured destruction. Algorithmic deterrence will be based on decision superiority, speed, and the capacity to integrate data and systems in real time. This represents a fundamental shift in the nature of risk and of power.
Implications for markets
For investors, oil shocks may remain important but episodic.
The more durable repricing may occur elsewhere: in credit risk, defence technology, semiconductors, infrastructure and the firms positioned to shape the AI era.
The deeper systemic risk and simultaneously, the most significant opportunity, lies in the reconfiguration of technological power. Control over AI infrastructure, models, and strategic applications will shape economic outcomes, and geopolitical balances.
Markets often price the visible risk first. The structural shift usually comes later.