Q1 market themes: private credit, AI, war

The first quarter of 2026 looked less like one market and more like three pipes feeding the same system: private lenders were supplying cash to companies that could not or would not tap public markets, giant technology groups were vacuuming up that cash for artificial intelligence infrastructure, and war in the Middle East abruptly raised the price of energy and shipping. (blackrock.com) (eia.gov) Private credit is just lending done outside ordinary banks and public bond markets, and it got bigger because fewer companies are going public and merger activity has stayed slow. BlackRock said in its 2026 outlook that private credit and secondaries are becoming “core” sources of growth and liquidity as companies stay private longer. (blackrock.com) That worked well while money was flowing in, but the weak spot showed up when investors wanted cash back. AICPA and CIMA said the United States private credit market was about $2.1 trillion, and several semi-liquid funds hit redemption caps in the first quarter, including BlackRock at 5% after requests reached 9.3% and Morgan Stanley at 5% after requests reached 10.9%. (aicpa-cima.com) The phrase showing up in that market was “liquidity mirage,” which means a fund owns loans that can take months to sell but promises withdrawals every quarter. AICPA and CIMA said higher rates also pushed private credit default rates to a record 9.2% in 2025, which made that mismatch harder to ignore in early 2026. (aicpa-cima.com) At the same time, the biggest companies in the stock market were spending at levels that used to be reserved for governments and utilities. Microsoft said capital expenditures were $34.9 billion in its fiscal 2026 first quarter, driven by cloud and artificial intelligence demand, with roughly half going to short-lived assets such as graphics processing units and central processing units. (microsoft.com) Meta went even bigger, saying on January 29, 2026 that its 2026 capital spending would be between $115 billion and $135 billion after spending $72.22 billion in 2025. Its fourth-quarter 2025 revenue was $59.89 billion, up 24% from a year earlier, which shows how advertising cash is being redirected into chips, data centers, and power. (investor.atmeta.com) Alphabet then reset expectations again on February 4, 2026 by telling investors its 2026 capital expenditures would be $175 billion to $185 billion. Chief Financial Officer Anat Ashkenazi said in March that the “vast majority” of that plan was technical infrastructure, which means servers, networking gear, and the buildings that hold them. (abc.xyz 1) (abc.xyz 2) Amazon added another leg to the same buildout on February 5, 2026, when it reported Amazon Web Services revenue of $35.6 billion for the fourth quarter of 2025, up 24% year over year. Two weeks later, Amazon said it would invest up to $50 billion to expand artificial intelligence and supercomputing capacity for United States government customers, adding nearly 1.3 gigawatts of capacity. (ir.aboutamazon.com) (aboutamazon.com) Then war hit the cost side of everything. The Energy Information Administration said Brent crude started the quarter at $61 a barrel and ended it at $118 after military action in the Middle East on February 28, 2026 and the de facto closure of the Strait of Hormuz. (eia.gov) The Strait of Hormuz is the narrow shipping lane at the mouth of the Persian Gulf, and the Dallas Federal Reserve said a complete stop in Gulf exports would amount to removing close to 20% of global oil supplies from the market. United Nations Trade and Development said the strait normally carries around a quarter of global seaborne oil trade, plus large volumes of liquefied natural gas and fertilizers. (dallasfed.org) (unctad.org) That shock did not stay in oil. The World Bank said crude prices rose nearly 40% between February and March, liquefied natural gas shipments to Asia rose by almost two-thirds, and nitrogen fertilizer prices jumped nearly 50% in March as shipping disruptions spread from energy into agriculture. (worldbank.org) Put those three pieces together and the quarter makes more sense. Private credit was supposed to be the flexible cash drawer, artificial intelligence was demanding industrial-scale spending right now, and war made fuel, freight, insurance, and financing more expensive at the same time. (blackrock.com) (eia.gov) (worldbank.org) That is why the first quarter felt split between abundance and strain. The largest technology firms were still writing nine-figure and ten-figure checks for chips and data centers, while parts of private credit were already enforcing withdrawal gates and the global economy was repricing energy around a live military conflict. (microsoft.com) (investor.atmeta.com) (aicpa-cima.com) (dallasfed.org)