Wall Street piles into ‘NACHO’ bet on looming oil shortages in June

Good morning. On Fortune’s radar today:

- AI’s rampant token fraud problem.

- Markets: Stocks fall as shooting resumes in the Gulf.

- The ceasefire is still in effect, Trump says.

- Wall Street’s new “NACHO trade.”

- Oil begins to run out in June, J.P. Morgan warns.

- The surprisingly good news about unemployment.

- The economics of being unhappy.

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THE MARKETS

Gulf flares up, stocks cool down

- S&P 500 futures were up 0.5% this morning. The index fell 0.38% yesterday.

- In Europe, the Stoxx 600 was down 0.67% in early trading and the U.K.’s FTSE 100 was down 0.24% before lunch.

- Asia: South Korea’s KOSPI rose 0.11%. Japan’s Nikkei 225 was down 0.19%. India’s Nifty 50 was down 0.39%. China’s CSI 300 was down 0.58%.

- Brent crude was $100 this morning, up from a low of $96 the day before.

- Bitcoin slipped to $80K.

Why the stock market has done so well despite the international chaos

As this chart from Deutsche Bank shows, corporate America just reported one heck of an earnings season. Something like 85% of companies beat expectations, way above the historic average. (Not all companies have reported yet.) “This represents arguably the strongest earnings growth in two decades,” Jim Reid and his colleagues Binky Chadha and Parag Thatte say.

ONE BIG THING

One in six AI signups is a thief

Criminals are defrauding AI firms by signing up for new accounts in order to steal tokens used to buy computing power, according to Stripe CEO Patrick Collison. Token thieves now account for one in every six new customer signups, he says. Thieves steal the tokens to resell them or use them for criminal ventures. “Token pilfering” is so widespread it’s becoming too expensive for some AI startups to offer free trials to prospective customers.

“I think token theft is the most under-discussed topic in AI,” Emily Sands, Stripe’s Head of Data and AI, told Fortune’s Jeff John Roberts. “One of the things that’s really scary about that is that these attackers can burn inference costs, can rack up massive usage bills that they never intend to pay, and they can do that very, very quickly because they are consuming tokens at machine speed.”

The crooks’ AI agents burn through the tokens in minutes. Unlike at traditional software companies, where an anti-fraud manager would investigate suspicious transactions, the crime takes place too fast for the company to intervene. They sign up for multiple accounts at multiple companies to use the tokens for purposes unrelated to what the firms are offering, or to resell them. In every case, they disappear after burning through the tokens—a scam that Sands likened to people who “dine and dash” at restaurants.

- Anthropic’s SpaceX compute deal comes as AI data center backlash grows—fueled by both real grievances and conspiracy theories - Sharon Goldman

- Elon Musk called Anthropic ‘evil’ 3 months ago. Now he’s taking $4 billion to become its data landlord - Eva Roytburg

- Indosat CEO Vikram Sinha is building an AI for Indonesia’s local languages. Can he make a business case for sovereignty? - Nicholas Gordon

IRAN

Despite all the firing, the ceasefire officially remains in effect

Iran fired upon three U.S. warships in the Strait of Hormuz yesterday, according to the BBC, and the U.S. targeted an Iranian tanker and another ship, according to Iran. In addition, the UAE said it successfully fended off a drone and missile attack from Iran.

The ceasefire officially remains in effect, President Trump said, while threatening further strikes on Truth Social: “We’ll knock them out a lot harder, and a lot more violently, in the future, if they don’t get their Deal signed, FAST!”

Wall Street bets on NACHO trade

Wall Street, however, is seriously considering the idea that the Strait will remain closed for months to come. They are calling it the NACHO trade—“Not A Chance Hormuz Opens”—and it involves assuming that insurers will not cover ships in the Strait, that oil prices will continue to remain high, fueling inflation, and that therefore the Fed will not be in a position to cut interest rates anytime soon.

Oil will dwindle to “operational stress levels” in June, J.P. Morgan says

Right now, the world is using up its strategic oil reserves, its stocks from private storage, and the oil that has arrived on tankers that escaped the Gulf before it was blockaded. But that oil is running out. So the question becomes, when do the real shortages kick in? An alarming note from J.P. Morgan says “commercial inventories are on track to approach operational stress levels by early June.”

After that, all the available stored oil will be gone and companies and governments