dedicated to evaluating ai models and the threats they pose. In a world with great possibilities but also great dangers, society needs impartial researchers to say what they really think. Academic economists have ground to make up.■ For more expert analysis of the biggest stories in economics, finance and markets, sign up to Money Talks, our weekly subscriber-only newsletter. This article was downloaded by zlibrary from https://www.economist.com//finance-and-economics/2026/06/15/meet-the-worlds-top-ai- pilled-economists

Finance & economics | Buttonwood America’s bull market has entered its manic phase Options markets show optimism is giving way to euphoria June 18th 2026 For most of the past couple of years the best argument that American stocks were not in a bubble was that things simply didn’t feel manic enough. Yes, prices had soared, and yes, valuations had risen so high that shareholders’ expected future returns were looking increasingly disappointing. Yes, the odds of unexpected returns were receding as well, with more or less everyone already convinced that corporate earnings would keep rocketing up while artificial intelligence revolutionised the economy. But a proper bubble needs more. It is not enough for investors merely to book tomorrow’s profits today. Share prices really come unstuck from reality only after a mania takes hold. Then comes the grim doggedness of revellers who know the next morning’s hangover will be dreadful and are

determined to put it off for as long as possible. Then, when it no longer can be, comes the crash. Has the manic phase now arrived? Imagine telling a time-traveller from a decade ago that on June 11th SpaceX sold shares which valued it at $1.8trn, over 90 times its annual revenue. Mad? No—a fantastic deal for buyers, since the rocketry firm’s bankers reportedly told them it would increase its AI arm’s sales by a factor of 100 by 2030, to $322bn. Why the focus on revenue rather than the conventional way of valuing a company, relative to profits? Because SpaceX doesn’t make any; last year it lost $5bn. Four trading days after its listing its share price had risen by over 40%, valuing it at $2.5trn. In the meantime it agreed to pay $60bn in shares for Cursor, an AI-coding firm. Some may argue, not unreasonably, that this is down to the seeming ability of Elon Musk, SpaceX’s founder, to distort both financial markets and reality. But investors’ euphoria extends far beyond the world’s first trillionaire. American shares, proxied by the S&P 500 index, are only a hair less expensive relative to long-run earnings than they were even at the peak of the dotcom bubble in 2000. This week prices popped again after President Donald Trump at last really did seem to strike a peace deal with Iran. For the clearest demonstration of investors’ manic mood, look beyond the stock market to the trade in options. These are often described as insurance contracts: a simple “put” option, for instance, confers the right but not the obligation to sell a stock for a set “strike” price on an expiry date. This allows an investor to own the stock while limiting losses should prices crash —in return for paying to buy the option in the first place. Today, however, much of the options market is better understood as a casino in which punters gamble on stock prices. Another way of describing a put option, after all, is as a bet that on its expiry date the underlying stock’s market price will be below the strike. If it is, you can buy the stock at the market price, sell it for the (higher) strike and pocket the difference. Otherwise, you let the option expire worthless and lose whatever you paid for it. Conversely, a “call” option, which confers the right to buy rather than sell a stock, is a bet on prices going up.

Trading in stock options has boomed. Volumes recorded in 2025 by OCC, a big American clearing house, were nearly double those in 2020, itself a blow-out year. In 2026 they are on course to be higher still. And trading in ultra-short contracts, which are great for gambling but almost useless as insurance, has expanded even faster. CME Group, a derivatives exchange, reckons that transactions for options on the S&P 500 index that expired on the same day were 3.7 times higher in 2025 than in 2021. In spite of all this, the insurance function of options still ought to mean that puts are more in demand than calls. Few institutional investors need to insure themselves against a sudden jump in prices; lots (imagine a university endowment) need protection against crashes. What is more, markets tend to rise slowly but plunge quickly, making puts more valuable than equivalent calls. And the institutions seeking such insurance are generally far bigger than the speculators looking for a quick flutter, and thus move the market more. So it is remarkable that the average call option for stocks in the tech-heavy NASDAQ index is now almost as expensive as the average put. It means the casino crowd is trading so furiously that its activity outweighs that of the much larger insurance buyers—and it is betting that prices will go to the Moon, or Mars. The party is entering the phase where things get out of hand. It may stay there for a while. But the longer the hangover is put off, the more it will hurt. ■ Subscribers to The Economist can sign up to our Opinion newsletter, which brings together the best of our leaders, columns, guest essays and reader correspondence. This article was downloaded by zlibrary from https://www.economist.com//finance-and-economics/2026/06/16/americas-bull-market- has-entered-its-manic-phase

Finance & economics | The new abnormal Deal or no deal, oil prices will stay volatile for months The pre-war days of $60 crude are not coming back soon June 18th 2026 IT IS A moment of relief for energy markets. A memorandum of understanding to end the war between America and Iran calls for lifting the naval blockade of Iranian ports and reopening the Strait of Hormuz within 30 days. While Donald Trump and his Iranian counterparts work out the details of a peace deal, the world can look forward to recovering 15-20% of its usual supply of oil and liquefied natural gas. It may all still be derailed by skirmishes or disagreements over the fine- print. Yet both sides have incentives to stop fighting. Iran’s wrecked economy needs oil exports to resume; Mr Trump wants cheaper petrol ahead of the midterms in November. Markets are pricing in peace. Brent crude, the

global benchmark, has slid below $80 a barrel, from well over $110 in May. Some analysts expect an oil glut next year, as supply recovers faster than demand. The optimists may be getting ahead of themselves—especially in the short term. Wary buyers are not yet placing large orders for Gulf crude, notes Tom Reed of Argus Media, a price-reporting agency. Even if the deal holds, tankers must start returning to the Gulf, not just leaving it, production must restart and refining ramp up worldwide—all of which will take time. Before any of that, the strait must first be cleared of mines. A map from the IRGC, Iran’s elite fighting force, seen by The Economist, suggests they have been laid precisely where ships usually sail. Alternative lanes, along the Iranian and Omani coasts, are dangerous and narrow. Few ships brave them (see chart 1). America has mine-clearing vessels in the region, and Britain and France have offered to help what is left of Iran’s navy. Intrepid vessels will attempt passage before then. One Greek shipowner says he will do so shortly. A few insurers are cutting top-up premiums for Gulf voyages by 50% for some clients, says Argus. Mercuria, a Swiss trader; a Vietnamese refiner; and a Chinese importer are looking for vessels to lift Gulf oil in the next week. But most shipowners may wait for mines to be

fished out, which could take six weeks or more. The 118 laden tankers now idling in the Gulf would normally need 10-15 days to exit, reckons Kpler, a ship-tracker. With demining in process this will take longer. As tankers return, Gulf producers will start pumping. They have reported no severe damage to fields. Most have enough spare storage to raise output before maritime bottlenecks are fully resolved. Large fields with lighter crude, such as Saudi and Emirati ones, should reach pre-war production within three months, says Frédéric Lasserre of Gunvor, a trader. Most analysts expect overall Gulf output to reach 30-50% of February levels by mid-July, 60-70% by mid-September and 80-90% by the end of the year. In this scenario Brent would edge towards $75 a barrel. Prices in the Gulf and outside it, which diverged when the strait was first shut, are converging again (see chart 2). Still, the pre-war world of abundant oil is a long way off. Even if outbound vessels start crossing the strait, inbound ones may not return in full for four or five months, predicts BRS, a ship broker. The 50 or so of the biggest crude carriers waiting near the Gulf can load only about two weeks’ worth of pre-war Middle Eastern exports. Many ships that migrated to safe and lucrative Atlantic routes must complete their voyages and will wait for Gulf