Investing.com -- Barclays strategist Emmanuel Cau was cautious on equities in a note Wednesday, despite markets hitting fresh highs, warning that a further rally is difficult to justify while energy risks remain elevated and the global economy approaches what he describes as a critical inflection point.

"A further melt-up in equities is hard to justify unless energy risks ease meaningfully, particularly as the rally is reliant on narrow Tech leadership," Cau wrote in the bank's May chart pack.

Buoyant equity markets look "increasingly disconnected from signals coming from the rates and oil markets — something has to give," he added.

Barclays acknowledged the powerful forces keeping the bull market intact, including AI-driven earnings momentum, supportive liquidity conditions, still-loose fiscal policy across the U.S., Germany, and Japan, and a first-quarter earnings season tracking well.

The bank also noted that fear of missing out remains a potent force, with systematic investors still holding dry powder.

However, Cau warned that the energy buffer is shrinking. "An aggressive inventory rundown has cushioned the energy shock so far, but we are near crunch time," he wrote, adding that "for every day that Hormuz is shut, the growth-policy trade-off deteriorates, particularly in Europe."

Barclays maintained its overweight on U.S. versus European equities, citing lower energy dependence and stronger tech tailwinds.

Within Europe, the bank favored industrials, materials, tech and utilities, while staying underweight consumer sectors. Barclays also kept its overweight on banks, though Cau acknowledged "rising macro risks" to that call.