The week of July 20–24, 2026 was marked by a dual shock of escalating geopolitical tensions and a sharp reset in AI growth expectations. The escalation of the war in the Middle East disrupted the Strait of Hormuz, sending oil prices above USD 100/barrel for the first time since May and reigniting stagflation fears. Simultaneously, massive AI capex guidance from Alphabet triggered broad skepticism about the profit timeline for tech infrastructure, dragging the Nasdaq down 2.1% and the S&P 500 down 0.6% for the week. Treasury yields surged 5bps to multi-month highs, with the 30-year bond holding above 5.00%, while Fed funds futures are pricing in around 50bps of rate hikes through next year.
The highlight in the price action was a rotation into small-caps and defensive sectors, with the Russell 2000 and value stocks outperforming tech and growth names. Corporate credit spreads widened 1–6bps, but remain near multi-year tights, signaling the selloff was more macro and profit-taking-driven than a default-risk or recession-fear event.
The weekend brought a meaningful shift: the U.S. suspended its Iran strike campaign, moving toward a diplomatic approach. Brent crude immediately collapsed over 6% into the low-to-mid USD 90s, while stocks jumped 0.50% on Monday’s opening. The coming week's key events include the Fed rate decision on Wednesday, Q2 GDP, core PCE, and earnings from Microsoft, Apple, Amazon, and Meta.
