by Patrick Fearon-Hernandez, CFA, and Thomas Wash

[Posted: 9:30 AM ET] | PDF

Our Comment opens with our thoughts on Anthropic’s latest AI model and provides an update on the war in Iran. Next, we examine the growing tensions between China and Japan, discuss the expanding uses for humanoid robots, and analyze how renewable energy has made Europe more resilient to energy shocks. As always, we include an overview of recent domestic and international economic data.

New AI Tools: Anthropic just released its latest AI model, Opus 4.7, which is an upgrade from its previous model but still trails its more advanced, yet controversial and unreleased, Mythos model. The new model is designed to handle more complex software engineering tasks that require less human supervision. The development of this AI tool is likely to further establish Anthropic as one of the top AI companies while also pushing the limits of AI’s overall capabilities — and potentially its risks.

• Opus 4.7 has outperformed its competitors in key benchmarks. According to Anthropic’s internal research, the new model beat out peers such as Gemini and ChatGPT in areas including agentic coding, visual reasoning, agentic financial analysis, and cybersecurity reproduction.
• Anthropic’s AI tools are starting to find their way back into the government. Despite an ongoing lawsuit with the Pentagon over Anthropic’s “supply chain risk” designation that the company alleges was unlawful retaliation (the White House had decided to cut ties after a dispute over using Anthropic’s tools for military purposes), the White House recently allowed federal agencies to use the Mythos tool as a way to address cybersecurity risks.
• Anthropic’s new tools seem to foreshadow the growing trend toward AI adoption. Although it is not yet clear what impact the adoption of these technologies will have on the market, it is becoming evident that several industries may be at risk of being disrupted. This is likely to cause significant upheaval, as some companies’ business models may be jeopardized. On the bright side, the new technology should lower barriers to entry for many industries, which could pave the way for more competition.
• New AI models are becoming more widely available and are likely to be incorporated into business models. We believe that firms best able to adapt to the technology will be best positioned to profit from the AI transition compared to those that do not. We also suspect that software companies with their own proprietary data are likely to emerge as potential winners in the transition.

Iran Impact: The White House announced that progress is being made to end the US-Israeli war with Iran, but it is still not clear when it will end. On Thursday, President Trump announced that Israel and Lebanon had reached a 10-day ceasefire agreement. Additionally, there were reports that Iran and the US were looking to extend their own ceasefire agreement by another two weeks. However, while the president has implied that Iran has already made key concessions that could potentially end the conflict “fairly soon,” it still appears that the two sides remain far apart.

• Outside of the US, there does not seem to be much optimism that a deal will be reached imminently. Officials representing countries from the Persian Gulf and Europe suggested that an agreement could take up to six months. The disagreement is largely driven by whether Iran will be allowed to enrich uranium, with factions within the Iranian regime still showing an unwillingness to give it up permanently, while the White House has entertained halting production for a set number of years.
• The delay in reopening the strait is likely to weigh on global growth. German officials have already reduced their growth outlook for the year by half, from an expected 1.0% to 0.5%, leaving the country facing yet another period of stagnant growth. Meanwhile, Asian economies are also feeling the pressure. The IMF has stated that energy shocks are presenting challenges in the Asia-Pacific region, and may need to revise its growth expectations down by 1–2% cumulatively over two years, from 4.4% in 2026 and 4.2% in 2027, if the situation were to become severe.
• That said, the involved countries are working on the best way to keep the strait open once a peace deal is finally reached. The European Union is assembling a coalition — one that may or may not include the United States — to help ensure that the strait remains open afterward. So far, officials have outlined a three-step plan: first, political and diplomatic cooperation; second, logistical support for those trapped in the strait; and third, military assurances to guarantee freedom of navigation.
• While there is some pessimism that slower growth could hurt market performance, this view may be a “glass half full” situation. For one, securing the strait after the conflict is likely to prompt other countries to develop their military capabilities as they prepare to assume greater global security risk, which should boost defense stocks. Second, the energy shock should benefit publicly traded commodity companies. Therefore, there is still a significant opportunity abroad, even in the face of these headwinds.

China-Japan Tensions: Beijing has accused Japan of a “provocative” act after a Maritime Self-Defense Force vessel transited the Taiwan Strait. This marks at least the second such passage since 2024 and is likely to add strain to relations between two of the largest Indo‑Pacific economies. The deployment appears aimed at pushing back against China’s increasingly assertive posture toward Taiwan and signaling Tokyo’s readiness to play a more active security role in the event of a crisis involving the self‑governing island.

AI Robots: In a sign that AI is becoming increasingly common, Poland released a video of its humanoid robot chasing away boars. While the robot was made in China, its use for everyday work signals that the threat from AI models may extend beyond software and high-skilled service work. The use of these robots is likely to increase in manufacturing; however, political resistance could grow if it leads to job displacement.

Renewable Backup: Power futures for Europe are now trading below their pre-war levels, as the region’s renewable energy generation has helped ease the burden. The region has particularly benefited from solar power, which has helped supplement energy needs, especially for products that rely on gas generation. While the EU is still likely to depend on oil and gas for energy, its use of renewables suggests that the region may be more resilient to energy shocks than it has been in the past.

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