Morning Wrap: A New Threat of Conflict in the Middle East (23.07.2026)
The geopolitical landscape in the Middle East has escalated significantly, with the ongoing conflict between the US and Iran entering its twelfth consecutive night. The situation has intensified as both nations exchange strikes, with President Trump issuing a warning that the US will retaliate against Iraqi infrastructure for any attacks on oil tankers in the Strait of Hormuz. In response, Iran has threatened to strike energy facilities and bridges in the region, asserting control over the Strait of Hormuz and declaring it "completely closed" to oil tankers without their permission.
In addition to the US-Iran tensions, the Houthis have extended their blockade to the Red Sea, claiming attacks on Saudi tankers, although only one vessel has been confirmed hit. This has led to a significant number of ships abandoning transit through Bab al-Mandab. The US is responding by deploying special forces and fighter jets to the region, alongside a substantial financial commitment of $73 billion to support military operations against Iran.
Market Reactions
US markets closed lower despite strong corporate earnings, with the Dow down 0.01%, S&P 500 down 0.14%, and Nasdaq Composite down 0.57%. Futures for the following day indicate continued pressure on these indices due to concerns over rising oil prices and AI spending. The yield on 10-year US bonds remains stable at 4.661%, while the 2-year bonds yield 4.304%, suggesting a high probability that the Federal Reserve will maintain current interest rates in their next meeting.
In Asia, markets are showing resilience despite the geopolitical tensions, with the Kospi gaining over 3% for its third consecutive day of gains, and the Nikkei and ASX 200 also posting increases. This growth is attributed to increased spending on AI, with notable gains in tech stocks such as SK Hynix and Samsung following positive forecasts from Google and strong results from Tesla. South Korea's Q2 GDP growth of 0.6% has also contributed to this positive sentiment, although it raises concerns about potential monetary tightening by the Bank of Korea.
Currency and Commodity Movements
The US dollar has weakened slightly against several currencies, including the euro, Canadian dollar, and Australian dollar, while remaining stable against the Japanese yen. Oil prices have surged to six-week highs, with Brent crude rising approximately 2% to nearly $96 per barrel and WTI up around 1.7% to $88.27 per barrel. The future direction of oil prices is contingent on diplomatic efforts to stabilize the situation in the Strait of Hormuz. Interestingly, gold prices have retreated slightly despite the ongoing tensions, which is atypical, although some analysts believe a long-term bull market for gold is just beginning.
Tech Sector Performance
The tech sector has experienced mixed results, particularly with AI spending in focus. Alphabet's shares fell over 4% after it raised its 2026 capital expenditure forecast despite exceeding revenue expectations. Tesla's stock also declined by 3-4% following disappointing earnings per share, although its revenue surpassed forecasts. In contrast, ServiceNow's shares jumped over 2% after reporting better-than-expected results. The overall sentiment in the tech sector remains cautious as companies adjust to changing market dynamics.
Cryptocurrency Market
Cryptocurrencies are facing pressure from a general risk-off sentiment, with Bitcoin trading down approximately 0.67% amid geopolitical risks and a declining appetite for riskier assets.
Upcoming Events
Key events to watch include the European Central Bank's decision, US weekly jobless claims data, and earnings reports from major companies such as American Airlines, Dow, T-Mobile, and Intel. Market futures indicate slight declines in Europe, with ongoing tensions in the Middle East likely to dominate market sentiment.