Ray Dalio Sounds Alarm on AI Bubble as Middle East Tensions Propel Oil Prices

Billionaire investor Ray Dalio has issued a stark warning that artificial intelligence is a "classic bubble" nearing its bursting point, citing rising interest rates and the growing need to convert wealth into cash. His comments come as global markets face mounting pressures from escalating attacks on tankers in the Middle East, which have pushed oil prices higher and halted a stock rally. The S&P 500 futures remained flat after hitting a record high in the previous session, while Europe's Stoxx 600 fell 0.6%, ending a three-day winning streak. In Asia, SK Hynix dropped nearly 3% as investors weighed the dual threats of an AI bubble and geopolitical instability. The surge in oil prices follows a series of attacks on tankers in the Strait of Hormuz, a critical chokepoint for global energy shipments. Iran has increased the pace of these attacks in recent days, raising concerns about supply disruptions and adding upward pressure on crude prices. The combination of geopolitical risk and Dalio's warning has created a cautious mood among traders, who are also monitoring bond markets where global bonds fell. The situation remains fluid, with investors closely watching for further developments in the Middle East and any signs of a broader market correction. Dalio's warning adds to a growing debate about the sustainability of the AI-driven rally that has powered markets to record highs. While AI has been a major theme, rising rates and the need for liquidity could trigger a sharp reversal. The attacks in the Strait of Hormuz further complicate the outlook, as they threaten not only oil supplies but also broader market stability. With the S&P 500 at a record high and European stocks retreating, the coming days will be crucial in determining whether this is a temporary pause or the start of a deeper downturn.