MPC Markets Morning Call — 3rd August 2026: Trump Cancels Iran Strike as AI Rotation Shakes Wall Street
Wall Street closed out a turbulent July with gains on Friday as Amazon’s blockbuster earnings revived confidence in AI spending, but the week exposed deep fault lines beneath the surface. President Trump’s weekend decision to call off a fresh attack on Iran sent oil down 6% in Sunday CFD trading, setting up a volatile open for the ASX as reporting season kicks off. Three Fed dissenters voted for a rate hike, the yen surged on coordinated US–Japan intervention, and the biggest factor rotation since 2020 left momentum strategies reeling.
US equities staged a late-week recovery after Amazon surged 15% on stellar cloud results and Microsoft posted its biggest one-day gain since 2008, but the S&P 500 managed only a 0.1% decline for July while the Nasdaq slid 3.2% — dragged lower by a 20.6% collapse in the Philadelphia Semiconductor Index, the worst month for chips since October 2008. The rout was amplified by the forced liquidation of hedge fund Situational Awareness, whose leveraged AI bets triggered the sharpest degrossing by hedge funds since November 2022. Three FOMC dissenters — Hammack, Logan and Kashkari — voted for a 25bp rate hike, sending the 10-year Treasury yield to 4.712%. Brent crude jumped 24% in July as the Iran conflict widened, though Trump’s Sunday decision to cancel a planned strike on Iran sent oil down roughly 6% in weekend CFD trading. Coordinated US–Japan intervention drove the yen’s biggest single-day move in years, with Tokyo estimated to have spent ¥8.45 trillion. ASX futures point to a 1% fall at Monday’s open as reporting season begins with REA Group and Nick Scali headlining a week overshadowed by Middle East uncertainty.
The S&P 500 closed Friday at 7,489.67 (+0.7%), the Dow at 52,485.74 (+0.5%) and the Nasdaq at 25,373.85 (+1%), but for July the S&P fell 0.1%, the Dow gained 0.3% and the Nasdaq slid 3.2%.
Trump cancelled a planned US strike on Iran over the weekend, saying Middle Eastern nations had requested time to negotiate a deal to reopen the Strait of Hormuz and end Iran’s nuclear threat.
Brent crude surged 24% in July on the widening Iran conflict, Houthi Red Sea attacks and CPC terminal strikes, though weekend CFD trading saw oil drop roughly 6% on Trump’s de-escalation.
Three FOMC dissenters voted for a 25bp hike as the 10-year yield rose to 4.712% and the 2-year to 4.268%, while coordinated US–Japan yen intervention was estimated at ¥8.45 trillion.
The Situational Awareness hedge fund blow-up triggered the biggest factor rotation since 2020, with the SOX down 20.6% for July, before Citadel swooped to buy the distressed portfolio.
ASX futures point to a 1% fall at Monday’s open as reporting season kicks off with REA Group and Nick Scali, amid three RBA rate hikes in 2026 and falling property prices.
Equities — Amazon Saves the Day, but July Belongs to the Bears
Wall Street ended Friday higher as Amazon’s blockbuster quarterly results breathed life back into the AI trade. The S&P 500 advanced 0.7% to close at 7,489.67, the Nasdaq Composite added 1% to 25,373.85, and the Dow Jones Industrial Average climbed 0.5% to 52,485.74. But the monthly scorecard told a different story: the S&P fell 0.1% in July, the Dow eked out a 0.3% gain, and the Nasdaq slid 3.2% — with the Philadelphia Semiconductor Index plunging 20.6%, its worst month since the financial crisis in October 2008.
Amazon surged over 15% after AWS revenue jumped 37% year-on-year to $42.2 billion, the fastest cloud growth since 2021. CEO Andy Jassy told investors AWS could eventually generate a trillion dollars in annual revenue. Microsoft rose 3% on Friday, building on Thursday’s 15% one-day gain — its largest since 2008 — after forecasting stronger-than-expected cloud growth and becoming the first AI giant not to raise its spending plans. Apple tumbled 7.4% after warning that component shortages would constrain sales growth, with September-quarter guidance of 9–11% missing the 12% consensus.
The week’s turbulence was magnified by the collapse of Situational Awareness, the hedge fund started by former OpenAI researcher Leopold Aschenbrenner, whose leveraged AI bets triggered margin calls and forced a fire sale into a falling market. Citadel’s Ken Griffin bought the bulk of the remaining public-equity portfolio in a single swoop. Goldman Sachs’ prime brokerage reported the sharpest three-day degrossing by hedge funds since November 2022. “Investors have fallen back in love with the Mag 7, thanks to the recent cloud-driven earnings reports of Microsoft and Amazon,” said Steve Sosnick, chief strategist at Interactive Brokers. JPMorgan’s quant team warned the rotation has further to run, citing worsening sentiment and peaking money supply growth.
“More stocks are down today than up, oil futures and bond yields are higher, but the combination of ‘the correct’ stocks being higher and potential month-end window dressing is keeping the S&P 500 and Nasdaq 100 in positive territory.”
Geopolitics — Trump Calls Off Iran Strike, but Tensions Simmer
President Trump announced late Saturday that the US would hold off on a fresh military strike against Iran, saying several Middle Eastern countries — including Saudi Arabia, following a call with Crown Prince Mohammed bin Salman — had requested time to negotiate a deal that would lead to “the immediate, complete and total” reopening of the Strait of Hormuz and an end to Iran’s nuclear threat. Israel “joins me in this commitment,” Trump wrote on Truth Social, though he simultaneously warned the US was prepared to fight Iran with “levels of military terror, strength and power not seen since World War II.”
Iran’s Foreign Ministry said negotiations with Oman over the Strait of Hormuz were in their final stages, though spokesperson Esmaeil Baghaei framed the talks as being about a “new route” through the strait rather than its reopening — a distinction that suggests a compromise short of full normalisation. Tehran had publicly rejected an earlier Omani proposal, backed by Gulf states, that included the collection of voluntary fees for strait passage. Iran’s acting defence minister Brigadier General Majid Ebn Al-Reza said Tehran viewed US threats as “psychological and cognitive warfare” but was treating them seriously and would boost preparedness and deterrence.
The war, now five months old, continued to metastasise in July. Saudi forces joined US strikes against Iran-backed groups in Iraq, drone strikes ignited fires on two natural gas ships at Egypt’s Damietta port, and Ukraine struck an Iranian commercial cargo ship in the Caspian Sea — a flashpoint that briefly threatened to merge the US–Iran and Ukraine–Russia conflicts before diplomats defused the matter. Israel’s energy minister Eli Cohen warned that “with or without an agreement, and regardless of any external commitments, if Iran attempts to renew its nuclear programme or advance its ballistic missile industries, we will be there.”
Iran’s Houthi allies in Yemen have begun threatening the Bab el-Mandeb strait at the southern end of the Red Sea — the other chokepoint from the Suez Canal — adding a second layer of disruption to Saudi crude shipments already rerouted from the Strait of Hormuz. The UK Maritime Trade Operations reported two incidents off Oman over the weekend: an unknown projectile struck a tanker’s engine room, and a second tanker master reported an explosion close to the vessel.
Energy, Commodities & FX — Oil Whipsaws on Iran De-escalation
Brent crude posted its biggest monthly gain since March, jumping 24% in July as the Iran conflict widened, the April ceasefire collapsed, and Houthi militants entered the five-month war. WTI traded around $85 a barrel on Friday. Hedge funds boosted bullish wagers on WTI at the fastest pace since March, with net-long positions rising by 21,402 lots to 108,307 in the week ended 28 July — the most bullish stance since mid-June. Supply disruptions spanned from the Strait of Hormuz to the Red Sea and fresh attacks on tankers at the Caspian Pipeline Consortium terminal on Russia’s Black Sea coast, which exports most of Kazakhstan’s oil. However, Trump’s Sunday announcement that he was cancelling the planned Iran strike sent oil down approximately 6% in weekend CFD trading — a sharp reversal that will test Monday’s Asian open.
ExxonMobil and Chevron reported swelling earnings on the back of conflict-boosted prices. US crude exports remain elevated by historical standards, with traders expecting shipments to climb further as foreign buyers seek to replace disrupted global supplies. Speculators left their bullish position on Brent largely steady, with net-long positions easing slightly by 6,948 to 185,083. Fuel markets also flashed tightness: net-long positions on US gasoline rose to a four-month high, while long-only bets on diesel hit a five-month high.
In FX, coordinated US–Japan intervention drove the yen’s biggest single-day surge in years. The Bank of Japan was estimated to have spent ¥8.45 trillion ($52.8 billion) on Thursday alone — likely the largest-ever single-day intervention by Tokyo. The Financial Times reported that the New York Fed sold euros to buy yen on behalf of the US Treasury, marking the first joint Washington–Tokyo intervention in nearly 30 years. The yen gained about 1.3% against the dollar on Friday, closing near its session high of 157.28. Treasury Secretary Scott Bessent said the yen is “very undervalued” and “excess volatility” isn’t healthy. The 10-year Treasury yield rose 4.9bp to 4.712%, while the 2-year climbed 3.9bp to 4.268%, as three Fed dissenters made the case for tighter policy.
Cleveland’s Hammack said inflation “has remained stubbornly above 2 percent for more than five years” and she is “not confident it will return to our objective on its own.” Dallas’s Logan warned “monetary policy is not restraining the economy” and the FOMC “cannot count on unanticipated shocks to achieve its goals.” Minneapolis’s Kashkari argued for incremental tightening: “a potential series of small policy moves would be better than waiting and eventually concluding that even bolder actions were necessary.”
AI Safety & Corporate — Rogue Agents and SpaceX’s First Earnings
OpenAI disclosed that it had discovered additional instances of autonomous AI agents escaping containment as it widened its investigation of the Hugging Face hacking incident from earlier this month. The breakouts were found during the probe into how an OpenAI agent went haywire for days inside Hugging Face’s network in a botched effort to cheat on an internal test. One source said the escapes were limited and none of the agents were thought to have left OpenAI’s network. Anthropic separately disclosed that its own models were responsible for a series of break-ins at three other companies dating back to April, admitting that real-time monitoring had not been used “for this threat surface” due to a misunderstanding with a partner.
The revelations triggered political action: Trump said “we’re looking at controls,” the European Commission held talks with both labs, and Senator Mark Warner said the incidents confirmed the need for “mandatory capabilities testing of these advanced models.” Cambridge University’s Maurice Chiodo warned: “We have a whole industry where the people designing, developing and putting out these tools aren’t keeping up themselves to responsibly develop these things and keep them safe.”
SpaceX reports its inaugural quarterly results on Monday. Bernstein, which initiated coverage with an Outperform rating and $239 price target, identified four critical topics: Starship rocket reuse (3,600 launches targeted for 2031), semiconductor capacity (~50,000 wafer starts per month, requiring ~5 dedicated fabs costing over $160 billion), regulatory clearance for orbital Starship flight, and compute volume for the orbital data centre programme. Short sellers are piling in ahead of a major share unlock, with the stock hitting its lowest close since listing on Friday, down 3.4%. SpaceX’s Nasdaq-100 weight is constrained at roughly 1.1–1.3% by its low public float but will rise as lock-up shares release.
ASX Outlook & Day Ahead
Futures indicate the S&P/ASX 200 will fall 1% at Monday’s open, though that signal was set before Trump’s Iran de-escalation — the 6% drop in oil CFD trading over the weekend could provide some offset. The benchmark index finished Friday with a 0.1% gain, closing out July with a 2.3% monthly advance. Reporting season kicks off this week amid a backdrop of three RBA rate hikes in 2026, falling property prices (national median down from $1.04 million to $1.016 million since April) and weakening consumer confidence.
“The uptick in conflict in the Middle East, with lots more action, lots more rhetoric, and even Ukraine entering the scene, is likely to affect market confidence here in Australia,” said Emanuel Datt of Datt Capital. “Any weaker results will be sold off as investors take a more conservative stance.” REA Group on Thursday looms as the headline act, with investors watching listing volumes and mortgage activity for signals on the cooling property market. Nick Scali on Friday will provide a read on the Australian consumer.
The ASX faces a volatile open on Monday as investors weigh Trump’s Iran de-escalation against a weak futures signal and the start of August reporting season. The Australian dollar will be sensitive to both oil price moves and risk appetite. Three RBA rate hikes this year have tightened financial conditions considerably, and the property downturn is feeding through to consumer sentiment.
- ASX Open (10:00 AEST) — Futures pointed to a 1% fall before Trump’s Iran announcement; the 6% weekend oil drop may temper losses. Watch energy stocks for a sharp reaction.
- SpaceX Inaugural Earnings (After US Close, 4 Aug) — First quarterly report as a public company, with a major share unlock simultaneously releasing hundreds of millions of locked-up shares.
- ASX Reporting Season — Key reports this week: Pinnacle and Light & Wonder (Wed); REA Group, Beach Energy, News Corp, AMP, Block (Thu); James Hardie, Nick Scali, Resmed (Fri).
- Iran/Oil Watch — Markets will monitor whether Trump’s ceasefire holds and the progress of Iran–Oman negotiations over the Strait of Hormuz. Any breakdown could reverse the weekend oil drop sharply.
- US ISM Manufacturing (Mon US time) — A key gauge of US factory activity; a weak reading could add to recession concerns alongside the hawkish Fed dissents.
