It is important to separate risk from fear when looking at the stock market. Risk describes the uncertainty around an investment’s future returns, including the possibility of loss. Fear is the emotional reaction to that uncertainty. While fear can prevent impulsive investments, it can also lead investors to sell assets after prices have already priced in a very pessimistic outlook. Keeping emotions, particularly fear, under control is crucial when investing.
Artificial intelligence has been the dominant source of investor anxiety in recent months. The concern is not only existential scenarios but also the vast sums being poured into the sector and the high valuations of related companies. Many worry about a bubble akin to the dotcom era, though the parallels may be overstated: several leading AI-linked firms are already producing substantial revenues and profits. Nvidia, for example, posted nearly $60 billion in net profit in the quarter ending in July. Still, recent share price declines suggest investors are growing more cautious about some AI-linked companies. With heavy capital expenditure across the sector, selecting firms that can convert investment into rising revenues and profits — and fund growth without excessive debt — matters more, especially as higher interest rates raise the cost of borrowing.
The second major fear is centered on Iran and the Middle East, a concern felt at the petrol pump where Brent crude hovers around $115 a barrel. Price pressure reflects both actual supply constraints and a risk premium for potential further disruption. From the end of February to the end of September, global inventories of crude oil and petroleum products dropped by more than 500 million barrels. That risk premium also increases insurance and shipping costs. Markets are closely watching the US congressional elections on 3 November; Donald Trump has ruled out another strike on Iran before the vote, but reports of military preparations keep the risk of escalation alive after the elections.
These Middle East fears have somewhat overshadowed earlier worries about the war in Ukraine, although those concerns persist intermittently. Winter looms, bringing the prospect of high gas prices. Romania’s gas storage is 88% full versus roughly 75% across the EU, which strengthens supply security but does not guard against rising European market prices. A harsh winter could push gas costs higher; prices are already at their highest since December 2022. Europe faces limited access to Qatari LNG and must compete with Asia for shipments. Romanian households have a guaranteed fixed gas price until March 31st next year, but businesses remain exposed to contract terms and may pass rising costs on to customers.
The third big concern is inflation. Romania recorded the highest inflation in the EU at 6.61% in September, up from 6.17% in August. The future path of inflation will depend on international market developments and government measures to cushion the impact of external shocks on consumers and firms. Higher fuel costs raise transport and production expenses, which can spill into broader price increases. Fears of inflation becoming entrenched are already raising the cost of money: the ECB and the US Federal Reserve have hiked interest rates, and if rising energy prices feed through permanently to other prices, the National Bank of Romania may also be compelled to raise rates.
Despite these economic fears, the outlook is not necessarily bleak. If there are no further strikes on Iran after the elections, some of the risk premium could unwind from oil prices even before any long-term agreement is reached. Cheaper energy would ease inflationary pressures, and a mild winter would reduce stress on gas markets. In a more optimistic scenario, some AI-linked firms could turn their large capital spending into significant revenues. A year from now, some of today’s fears may look less severe in hindsight.
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