Public Markets 3 Days

Last updated: August 6, 2026, 10:27 PM ET

Global Markets Whipsaw on Hormuz Diplomacy and AI Spending

Global equities have been caught in a volatile tug-of-war between hopes for a diplomatic resolution in the Middle East and jitters over the scale of corporate AI spending. U.S. stocks finished mixed as optimism about the reopening of the Strait of Hormuz was offset by renewed volatility in artificial-intelligence wagers. The Dow industrials broke its winning streak, falling 460 points, as oil prices gained amid persistent uncertainty over talks to reopen the critical waterway. Wall Street's blistering run took a breather, with traders digesting recent stock gains and monitoring any hints of progress toward a deal to revive the Strait of Hormuz. European stocks, however extended their rally, hitting a record high on upbeat earnings, a mining rally, and optimism that a Middle East truce will be reached soon. The S&P 500 had earlier hit a record high, rising 1.8% to push past its previous peak as worries about Iran and AI eased.

Oil and Commodities React to Geopolitical Crosscurrents

Oil prices have been the primary conduit for geopolitical risk, swinging sharply on headlines from the Strait of Hormuz. Crude futures fell to a three-week low after Treasury Secretary Scott Bessent said the U.S. could be close to an agreement with Iran to reopen the Strait of Hormuz. Stocks rallied and oil fell sharply on the same diplomatic hopes, with Bessent suggesting a deal could be reached "today or tomorrow." Prices extended gains again on reports that Iran attacked "hostile targets" in the Strait of Hormuz, with Tehran seeking to bar US ships from the critical waterway. The dollar notched its best day in two weeks as oil prices advanced amid fading optimism over easing tensions in the Middle East. In a historic shift, US imports of Saudi Arabian oil dropped to zero in July, the first time that's happened for an entire month since 1985. Saudi Aramco reported a 33% profit surge despite the war's disruption, using pipelines to work around chokepoint issues.

Yen Intervention and Central Bank Policy in Focus

The dramatic U.S.-led intervention to support the yen has been a dominant force in currency markets, with far-reaching implications. The yen has surrendered nearly half of its intervention-driven gains, fueling speculation among traders that authorities may step into the market again. The Federal Reserve's Fima repo facility went unused for an eighth straight week, suggesting Japan didn't use the tool in its latest effort to support the yen. Bank of America revised its expectations, now seeing the yen gaining about 6% against the dollar by year-end following the coordinated intervention. Citigroup noted that Japan has alternative tools to defend the yen without liquidating its more than $1.1 trillion US Treasury portfolio. The intervention has also raised questions about the Fed's independence, with some commentators worrying the central bank is being roped into easing monetary conditions. Treasury yields rose ahead of Friday's payrolls report, as job-cut plans remained calm in July alongside low weekly jobless-claims figures. The US Treasury retained its previous guidance for future debt issuance, signaling no change in auction sizes well into 2027.

Corporate Earnings: AI, Consumer, and Finance

The corporate earnings season has been a key driver of market sentiment, with AI-related spending and consumer health taking center stage. SpaceX, in its first earnings release following its IPO, reported soaring AI spending, with capital expenditures jumping nearly seven times from a year ago. The company's shares slumped on the news, as investors balked at the $15.8 billion spent on AI projects in the second quarter. Alphabet received about $115 billion of orders for its latest jumbo bond sale, signaling renewed investor appetite for debt tied to the AI boom. In the consumer sector, Burger King's turnaround gained steam, powering Restaurant Brands International's profit and bucking a trend of slowing fast-food demand. McDonald's U.S. sales slowed as diners spent more cautiously, leading the company to replace its president of U.S. operations. DraftKings posted a loss of $67.6 million for the second quarter, hurt by promotions and missing expectations amid a prediction-market blitz. HSBC posted sharply higher quarterly profit of $10.1bn and resumed share buybacks, planning a $1 billion repurchase. SoftBank reported a smaller-than-expected decline in quarterly net income, helped by a rally in its chip-stock holdings and an $8bn gain on its Intel stake.

Asian Markets and Corporate Moves

Asian markets have been mixed, with Japanese stocks dragged by chip-related losses and concerns over energy costs. The Nikkei fell 0.7% in early trade, while Fujifilm shares tumbled by a record after first-quarter results fell short of expectations. Honda raised its profit outlook by 30% as a weak yen and US demand for hybrids lifted quarterly results to a record. Toyota raised its annual earnings forecasts and announced a more than $6 billion buyback, citing a weaker yen. Airtel announced plans to list its $10bn Africa finance business in London, adding to a spate of takeovers of London-listed companies. Segro accepted a £14bn takeover offer from US rival Prologis. India expanded its LIC share sale to $3.3 billion on strong demand, while also raising $40bn from its diaspora to support the rupee. China's central bank is stockpiling more gold in Hong Kong to support the city's push to become a major bullion-trading hub.

Rates, Credit, and Fund Flows

In credit markets, there are signs of stress and opportunity. Oracle Corp. and Stellantis NV are among high-grade companies with debt that has recently traded close to junk levels, putting the bond market on watch for a new era of fallen angels. Ares Management is leading a $2.2 billion direct loan to help finance a healthcare services acquisition, in one of the biggest deals since the private credit market was roiled by record redemptions. Blackstone's publicly traded private credit fund saw profit drop 94% in the second quarter, though loan performance steadied. Nielsen agreed to buy Double Verify in a deal with an enterprise value of about $2.15 billion. In fund flows traders can't get enough of options betting on more gains in the S&P 500 Index. European bonds are emerging as a safer choice for fund managers as they try to navigate an increasingly fraught global backdrop. A spate of well-known hedge funds reported steep losses in July as AI shares tumbled, with Whale Rock Capital's flagship fund dropping 21.7%.