The Strait Is Still Shut, and Software Just Figured It Out

Brent crude hit $105 last Thursday. WTI crossed $96.50 intraday after Iran's parliament speaker walked out of nuclear talks, and the Strait of Hormuz remains the world's most expensive closed door. None of this was supposed to matter to software companies. Software runs on electrons, not tankers. Code doesn't need to ship through a 21-mile chokepoint.

And yet.

The iShares Expanded Tech-Software ETF fell 5% Thursday — its worst day in over a year. ServiceNow, Adobe, Salesforce, Workday, Snowflake, HubSpot, Atlassian, Datadog — all down. Some of them hard. ServiceNow had its worst single day in a decade despite posting a beat-and-raise quarter. IBM, which also beat top and bottom line, fell nearly 10%. The war that was supposed to hurt oil majors and airline margins is now sitting inside enterprise software valuations like an uninvited auditor, and it's finding things.

Here's what the market just acknowledged, slowly and then all at once: geopolitical friction has supply chains that nobody mapped properly. ServiceNow disclosed that delays in closing large government deals in the Middle East weighed directly on first-quarter subscription revenue growth. Government IT procurement, it turns out, does not proceed on schedule when the region's institutional buyers are occupied with something more pressing than renewing workflow automation licences. IBM held its full-year guidance rather than raise it, which in the current environment reads less like conservative prudence and more like an honest admission that visibility is poor. Investors translated that into a 7% haircut after hours.

You can construct a clean narrative here: the war has injected macro uncertainty that freezes enterprise decision-making, particularly in government and near-government sectors. Procurement committees don't sign multi-year SaaS contracts when their finance ministers are trying to model $105 oil. Fair enough. But the stock moves last week were more violent than that simple transmission mechanism would justify. What the sell-off was really pricing is the dawning realisation that the entire 2026 software earnings thesis — AI monetisation arriving fast enough to justify current multiples — has a hidden dependency on geopolitical stability that nobody disclosed in the roadshow.

Of the 87 S&P 500 companies that reported through Thursday, 81% beat earnings estimates and 76% topped revenue expectations. That's a genuinely strong season. And the index barely cares, because the companies with the biggest weighting in the collective imagination are either frozen in guidance purgatory or bleeding out from macro exposure that their bulls never modelled. ServiceNow's Q1 subscription revenue rose 22%. The stock lost more than 15%. That's not an earnings problem. That's a repricing of the optionality embedded in the narrative.

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Meanwhile, the divergence inside tech is becoming structurally important and under-discussed. Texas Instruments surged the most in 25 years after a big earnings beat, with results pointing to strengthening data centre demand alongside signs that industrial and auto customers are beginning to restock. Siemens Energy raised its full-year outlook on the back of explosive demand for power infrastructure underpinning AI systems. The semiconductor index is on a seventeen-session winning streak. Hedge funds bought a record $86 billion in stocks over five sessions, driven by systematic trend-following strategies.

So pick your frame. Either the market is rationally distinguishing between companies with real physical infrastructure leverage on the AI buildout versus pure SaaS players whose growth is sensitive to deal cycles and geopolitical distraction — or the market is playing a game of hot and cold where chips are hot and enterprise workflow tools are cold, regardless of fundamentals. The honest answer is probably both, which is uncomfortable.

The oil signal deserves more attention than it's getting in the software conversation. Iran's ceasefire has left the Strait largely shuttered, and oil prices have been climbing since the conflict began in February. Every dollar that Brent sits above $90 is a slow tax on global corporate margins that compounds into deferred capex, delayed hiring, and — eventually — smaller software budgets. The IMF revised its global growth forecast to 3.1%, down from 3.4% in 2025. That's not collapse, but it's the kind of number that gets a procurement director told to slow the pipeline.

American Airlines cut its full-year earnings outlook because fuel costs are running billions above forecast. That's obvious. The non-obvious version of the same story is a government IT director in Riyadh putting ServiceNow renewals into the parking lot. These are the same conflict, just with different reporting lines.

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The US tech sector is up 11% so far this month. But that aggregate hides a faultline opening between the companies physically embedded in the AI infrastructure build — power, chips, cooling, data centres — and the companies that monetise that infrastructure through subscription software sitting on top of it. The latter cohort just discovered that their growth assumptions had geopolitical counterparties. Thursday's sell-off was the market updating its distribution.

The Strait of Hormuz doesn't care about your ARR.

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April 26, 2026