# Oil finds a way, Nvidia keeps the story alive

_A quiet week with two things in it that matter: more oil is getting out of the Gulf than the blockade models allowed for, and Nvidia’s numbers say the AI build-out is still accelerating._

Neil Woodford · 28 August 2026 · 4 min read

![Robots at the World Humanoid Robot Games 2026](https://cdn.sanity.io/images/v3acfbvo/production/ed8dca3fb424821733ef5e0c0076e9560628267d-1536x1024.jpg?w=1600&fit=max&auto=format)

_"Athletes" at the 2026 World Humanoid Robot Games in Beijing, the world's first international, comprehensive science and technology sports event with humanoid robots as the primary competitor._

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As the summer holiday season ends, not surprisingly, this has been a relatively subdued week. Financial markets have been generally quiet and, aside from the US Treasury Secretary’s “Operation Economic Outcast” plan in relation to Iran, geopolitics has been in holiday mode. 

Against this muted backdrop, some interesting announcements stood out: oil and gas flows through the Strait of Hormuz, which appear to have affected oil prices, and Nvidia’s results on Wednesday. 

Finally, I am writing this update ahead of the Fed chairman’s much-anticipated speech at the Jackson Hole Economic Symposium later today, and so will update you on that in next week’s edition. _(Neil in the margin: The Kansas City Fed's annual gathering of central bankers in Wyoming, held since 1978. It has become the traditional venue for signalling shifts in policy thinking, which is why the chairman's speech there is scrutinised so closely.)_

_[Watch: This week's show covers Britain's productivity crisis which might actually be the result of poor data — Britain’s Productivity Crisis: A Great Deception?](https://www.noisecancelling.co/the-show)_

## More sanctions, and the limits of them

On Monday Scott Bessent [announced just over 60 new economic sanctions on Iran](https://www.aljazeera.com/news/2026/8/24/trump-administration-announces-global-economic-war-on-iran), adding to the more than 1,000 existing measures. Whilst this new list will add to the economic pressure on Iran, which was reflected in further falls in the Iranian rial’s black market price against the dollar this week, as long as China continues to support the regime (it has traditionally bought over 90% of Iranian oil exports) it is highly unlikely that they will result, at least in the short term, in any form of reappraisal of Iran’s position. _(Neil in the margin: Iran runs multiple exchange rates; the official one is largely fictional, so the free-market (street) rate is the truer gauge of how sanctions and inflation are biting. A falling rial here means it takes more rials to buy a dollar.)_

It will be interesting if this subject emerges as a contentious issue at the Trump-Xi summit next month in the US, but I don’t expect it to lead to the US sanctioning Chinese financial institutions, which would of course risk a broader breakdown in the relationship between the two superpowers and pose major problems for financial markets. _(Neil in the margin: A secondary sanction: penalising a third country’s banks for doing business with the sanctioned state, usually by cutting them off from the dollar system. It is the most powerful instrument the US Treasury has, and the one with the greatest capacity to escalate, which is why it is so rarely aimed at a major economy.)_

## The oil is getting through

_[Embedded media](https://www.bloomberg.com/news/articles/2026-08-27/kuwait-and-qatar-add-to-growing-oil-flows-getting-through-hormuz)_

Relatedly, there were some interesting reports from the Gulf states this week about the amount of oil and gas that is finding a way through the Strait of Hormuz choke point. Earlier in the week, [Bloomberg published a story](https://www.bloomberg.com/news/articles/2026-08-27/kuwait-and-qatar-add-to-growing-oil-flows-getting-through-hormuz) suggesting that Kuwait and Qatar are sending more crude through the Strait, such that the two countries have managed to get shipments back to 70% of the pre-conflict levels. The article also suggested that around 7-8 million barrels of oil a day are now exiting the Persian Gulf via this route. (Prior to the conflict, 20-21mn bpd of crude oil, condensate and refined products exited through this route.)

Interestingly, the article went on to suggest that this (7-8mn bpd) was about 75% of pre-war levels. It also added that Vortexa, a UK-based market intelligence company focused on global energy and freight markets, had suggested that the seven-day average of oil flows through the waterway was close to 10mn bpd.  _(Neil in the margin: Tanker flows are lumpy day to day, so analysts smooth them over a rolling week to strip out the noise of individual departures. It gives a cleaner read on the underlying trend than any single day's figure.)_

When you add these volumes to the oil bypassing the Strait via pipelines in the UAE and Saudi Arabia, it is clear why pressure on crude prices eased this week. I first wrote about this [a few weeks ago](https://www.noisecancelling.co/read/perception-reality-and-a-record-high), but once again it appears as if [the point of maximum Iranian leverage](https://www.noisecancelling.co/read/the-weapon-that-wins-wars) on global energy markets has passed. If this trend continues I would expect oil prices to remain well below recent distressed peak levels, easing pressure on inflation across the world. _(Neil in the margin: The spike in crude during the conflict was a fear premium — a price reflecting the risk of supply being cut, not an actual shortage. Once tankers keep sailing, that premium bleeds out and prices fall back regardless of headline tension.)_

## Nvidia, and the numbers that keep being upgraded

[Nvidia’s results](https://www.cnbc.com/2026/08/26/nvidia-nvda-earnings-report-q2-2027-live-updates.html), released midweek, attracted the attention a $5.5trn company deserves. (The entire UK stock market’s market value is $5.9trn.) 

Importantly, Q2 results beat expectations on both revenue and net earnings, and, crucially, medium-term guidance also beat expectations, with a forecast of 70% revenue growth in 2028. 

Apart from the fact that this sort of growth is astonishing for a $5.5trn company, it also reassured investors that the AI industrial revolution was alive and kicking and, if anything, gaining momentum. Although expectations for Nvidia remain elevated, these results pleased the market, and the shares rose on the day. _(Neil in the margin: When a stock is priced for perfection, merely beating forecasts can disappoint — the bar is already sky-high. That Nvidia's shares rose anyway tells you the beat was large enough to clear even inflated expectations.)_

Clearly there are growing concerns about the level of expectation now embedded in the share prices of businesses exposed to AI, and indeed about whether future returns will ever justify the giant levels of investment in AI infrastructure, but for the time being this particular industrial revolution seems to be gathering pace, and is best reflected in the following chart:

_[Embedded media](https://x.com/ISABELNET_SA/status/2091810824599801973)_

One cautionary observation I would make about this astonishing chart, though, is that the rate of change in hyperscaler capex is forecast to slow significantly after next year. That slowdown in the rate of growth of investment, if it happens, will I believe be an interesting obstacle for this increasingly dominant industry to navigate. _(Neil in the margin: The capital spending of the handful of companies that own the world’s largest cloud data-centre estates – here Microsoft, Alphabet, Amazon, Meta and Oracle. Each line on the chart is the consensus estimate for a single calendar year, tracked as it was revised; the lines rise because the estimates kept being upgraded.)_

_The infrastructure thesis:_ [The AI boom's picks and shovels](https://www.noisecancelling.co/read/ai-boom-picks-and-shovels) — Before the software wins, someone has to build the infrastructure. Understanding where the money actually flows in an AI boom, and why compute, power and physical infrastructure come first, is the prerequisite for reading the investment theses that follow.

## The water myth

Whilst on the subject of hyperscaler capex, I thought I might use this opportunity to show a chart which I think contextualises, possibly undermines, one of [the popular myths](https://www.noisecancelling.co/read/deficits-gilts-and-the-cost-of-living) confronting this sector. It concerns datacentre water usage, for cooling, which has been used across the US by politicians as a stick with which to bash the industry.

![Data centre water use is a rounding error compared to almond production.](https://r4at4qm6kmohrtvq.public.blob.vercel-storage.com/charts/chart-weekly-27aug26-datacentre-water-3297b332819e-light.png)

_Direct, on-site water: about 31 billion gallons a year for every data centre in America put together, against 1,590 billion for Californian almonds, 665 billion for pistachios and 530 billion for golf courses. Count the water evaporated at the power stations behind them, roughly twelve times the on-site figure, and data centres land in the same range as golf. Still nowhere near the almonds._

Perhaps some of the golf-playing, almond-milk-drinking politicians who have jumped on this particular bandwagon in recent months might be well served by paying attention to the facts.

## What to look out for next week

I will report back on the central bankers’ Jackson Hole jamboree next week. Aside from that there is not that much going on, apart from UK house price and mortgage approval data, a speech from Andrew Bailey, and a lot of labour market and wage data from the US. The corporate calendar, thankfully, is also very quiet.