Oil prices fell and bond prices rose as concerns over Middle East energy supply disruptions eased, following the avoidance of further attacks by the United States and Iran.
Brent crude prices fell as much as 7.4%, dropping below $90 a barrel, after the United States suspended airstrikes on Iran for nearly two weeks, before narrowing the decline by about half.
A temporary easing of hostilities set the tone for a crucial week for markets. Traders are focused on whether the Federal Reserve will raise interest rates on Wednesday, following recent oil price surges that have stoked inflation concerns. Meanwhile, investors are also awaiting earnings reports from tech giants, which have faced negative sentiment after making significant investments in artificial intelligence.
After a 13-day military strike on Iran, the United States appeared to halt its operations late Friday evening without providing any explanation, raising questions about President Trump’s next move. On Sunday, Iranian military officials said Tehran had also suspended its military response.
On Sunday, during an appearance on NBC’s “Meet the Press,” U.S. Ambassador to the United Nations Mike Waltz said he “would never go that far” when asked whether Trump had decided not to escalate the situation.
Walz said, “The president has kept all options open. As we’ve seen throughout, what the president is doing now is creating some room for negotiations.” Walz also stated that talks are underway at various levels, ranging from technical discussions to the “highest level” between Iranian and U.S. leaders.
Iranian Foreign Ministry spokesperson Ismail Baqai said on Telegram that the deputy foreign ministers of Iran and Oman held talks in Tehran on Friday and Saturday to discuss maritime navigation in the Strait of Hormuz. He described the discussions as “constructive” and noted “some progress,” though he did not disclose specific details, adding only that consultations are ongoing and traffic conditions in the strait remain unchanged.
The G7 central banks will hold their three-day interest rate meeting on Wednesday, followed by decisions from the Federal Reserve, the Bank of England, and the Bank of Japan. Although no change in monetary policy is expected, officials may emphasize the need to closely monitor the inflation impact of rising energy prices.
We believe the Fed may not raise interest rates, as a rate hike at the July meeting would appear abrupt given the significant cooling in inflation data in June. Moreover, if necessary, a rate increase at the September meeting would be entirely reasonable. Therefore, we expect the Fed to keep interest rates unchanged this week.
Another key focus for the market this week will be tech company earnings reports. Following a sell-off in artificial intelligence-related stocks, concerns have resurfaced about whether billions of dollars in infrastructure investments will deliver commensurate returns. This selloff highlights just how much the sentiment surrounding artificial intelligence and the “Big Seven” tech giants has shifted.
This shift has made this week’s earnings season particularly complex, with Microsoft and Meta Platforms reporting on Wednesday, while Apple and Amazon will release their results on Thursday. In Asia, chipmakers Samsung Electronics and SK Hynix will also report their earnings this week.
Profitability and capital expenditure plans of tech companies will once again be in focus this week, as traders remain somewhat concerned about the scale of committed capital spending, given that returns on investment may take a long time to fully materialize.
Nasdaq 100 index futures rose 1.2%, and S&P 500 index futures gained 0.7%, indicating a rebound in chip stocks after last week’s sell-off.
