MPC Markets Morning Call — 27th July 2026: Weekly Losses as Iran Conflict Widens, AI Spending Revolt Deepens, and Tariffs Return
Wall Street posted a second straight weekly loss as investors grappled with a widening Middle East conflict that briefly pushed Brent crude above $100, a sharp investor backlash against Big Tech’s ballooning AI capital expenditure, and fresh tariffs on 60 trading partners. The S&P 500 slipped 0.6% for the week while the Nasdaq shed 2.1%, and weekend CFD prices point to a cautiously firmer open for ASX futures on ceasefire hopes after the US paused strikes on Iran.
A volatile week saw three major headwinds converge on global equities. The Iran–US conflict broadened as Houthi militants attacked Saudi oil installations at Jizan and Yanbu, threatening a second shipping chokepoint in the Red Sea and briefly pushing Brent crude above $100 a barrel before it settled at $96.78. The S&P 500 eked out a 0.05% gain on Friday to close at 7,411.98 but lost 0.6% for the week, while the Nasdaq Composite fell 0.64% on the session to 24,975.82, down 2.1% weekly. Alphabet’s decision to lift 2026 capex guidance to $205 billion — alongside its first-ever negative free cash flow quarter — triggered a 4.8% single-day rout in the Magnificent Seven index and shattered the market’s tolerance for unchecked AI spending. President Trump imposed new tariffs of 10–12.5% on imports from 60 economies under Section 301, replacing the expired global 10% levy. Over the weekend, Washington paused its bombing campaign against Iran for the first time in two weeks, with Tehran signalling a reciprocal halt, offering a sliver of hope heading into a pivotal week of Fed policy and mega-cap earnings.
The S&P 500 closed Friday at 7,411.98 (weekly −0.6%), the Dow at 51,947.25 (−0.4%), and the Nasdaq at 24,975.82 (−2.1%), marking a second consecutive week of losses across all three benchmarks.
The US paused airstrikes on Iran after 13 consecutive nights, with Tehran signalling a reciprocal halt under an “attack for attack” posture, though scepticism remains about whether the pause represents a genuine shift.
Brent crude spiked above $100 mid-week after Houthi attacks on Saudi tankers widened the conflict to the Red Sea, before settling at $96.78 — up roughly 27% in two weeks and nearly 40% in July.
Alphabet’s $205 billion capex guidance and first-ever negative free cash flow triggered the Mag Seven’s worst single-day drop since April 2025, with the Philadelphia Semiconductor Index down 17% in July.
Trump imposed new tariffs of 10–12.5% on 60 trading partners under Section 301, replacing the expired global levy, as stagflation fears resurfaced with the 30-year Treasury yield near its highest since 2007.
Weekend CFD prices show the Nasdaq up 0.74% and crude down 4.4%, suggesting a relief-driven ASX open on Monday as the market prices in hopes of a US–Iran diplomatic breakthrough.
Equities — Second Straight Weekly Loss as AI Trade Fractures
Wall Street ended Friday mixed in a meandering session. The S&P 500 barely advanced, adding 3.68 points (0.05%) to close at 7,411.98. The Dow Jones Industrial Average rose 235.60 points (0.46%) to 51,947.25, while the Nasdaq Composite shed 161.87 points (0.64%) to 24,975.82. For the week, the S&P 500 fell 0.6%, the Nasdaq lost 2.1%, and the Dow slipped 0.4% — its third consecutive weekly decline.
The Philadelphia Semiconductor Index dropped 4.25% on Friday alone, capping a nearly 17% decline in July that puts it on track for its worst month since June 2022. SanDisk fell 10.79%, the biggest S&P 500 decliner, while Intel sank 7.9% despite an upbeat quarterly forecast. A Goldman Sachs basket tracking retail traders posted its largest monthly drop since April 2022. On the other side, 10 of 11 S&P sectors rose on the day, led by real estate (+2.4%) and materials (+1.44%). Digital Realty Trust jumped 11.01% after TD Cowen upgraded the stock, and International Paper surged 11.2%.
The Nasdaq 100’s 7.1% drop in July would be its worst since March 2025. An equal-weighted version of the S&P 500 advanced 0.36%, with nearly 360 stocks rising in the benchmark while about 140 fell — suggesting breadth is actually improving beneath the tech-driven headline weakness. “Right now the stock market is still trying to come to grips with two things: the inflation impact of the Iran conflict and how companies are navigating the ever changing AI landscape,” said Michael Antonelli, market strategist at Baird Private Wealth Management.
Geopolitics — US Pauses Iran Strikes as Conflict Spreads to Red Sea
The US halted airstrikes on Iran for the first time in two weeks over the weekend, after 13 consecutive nights of escalating attacks. President Trump directed the military not to conduct new strikes on Friday, with US Ambassador to the UN Mike Waltz telling Fox News that Trump was “giving talks some space, giving it a little bit of room.” Iran’s army confirmed it had also halted retaliatory operations, with a senior Iranian official telling Reuters that Tehran’s position remains “attack for attack: if the attacks stop, Iran will also halt its operations.”
The pause came amid growing concerns within the Pentagon. General Dan Caine, chairman of the Joint Chiefs, privately cautioned Trump about the negative impact on stocks of munitions, including interceptors used by US air defences in the Middle East. Admiral Brad Cooper, the top US commander overseeing the region, reportedly advised halting the campaign because it had reached the limits of its effectiveness and the US had exhausted its target list. Iran–Oman talks on the Strait of Hormuz produced what Tehran described as “constructive” progress, though no change in the status of traffic through the strait was announced.
However, while the Gulf saw a lull, fighting between Iran’s Houthi allies and Saudi Arabia threatened to open a second front. The Houthis fired missiles and drones at Saudi Aramco facilities in Jizan and Yanbu on Saturday. Video verified by Reuters showed a large column of smoke rising from the Aramco refinery at Jizan. In Yanbu — Saudi Arabia’s main Red Sea oil port and the primary workaround route for crude bypassing the blockaded Strait of Hormuz — two ballistic missiles were intercepted by a US-made Patriot battery operated by the Greek military.
The Saudi-led coalition responded by striking Houthi military positions in Hodeidah and Houthi launch sites in Marib and al-Jawf provinces. Both sides in Yemen’s civil war are reportedly mobilising forces along the front, raising the risk that the decade-old conflict — paused under a ceasefire since 2022 — could reignite as the Houthis effectively join the wider Iran war.
A senior Iranian official told Reuters that Tehran “did not hold much hope” that Trump’s pause represented a real shift. “There is more scepticism than optimism about the halt in attacks. The prevailing view is that the pause is tactical rather than genuine. Iran has accumulated enough bitter experience with what it sees as US deception.” Meanwhile, the New York Times had earlier reported that Tehran rejected a US-backed ceasefire proposal delivered by Iraq’s Prime Minister, citing Iran’s unwillingness to accept a deal that left unresolved the issue of control over the Strait of Hormuz.
Energy, Commodities & FX — Brent Tops $100 Before Retreating
Brent crude spiked above $100 a barrel on Thursday for the first time since May, after Houthi attacks on Saudi tankers in the Red Sea widened the threat to a second key shipping route beyond the already-paralysed Strait of Hormuz. Oil prices retreated on Friday, falling 3% on the session as traders booked profits and reports emerged that China was pushing to resume stalled US–Iran peace talks. Brent closed the week at $96.78, up roughly 27% in two weeks and nearly 40% in July — on track for its biggest monthly gain since March. Weekend CFD prices showed crude down a further 4.4% on ceasefire optimism.
European natural gas prices spiked alongside oil, up over 40% in July and at their highest since March, as the conflict continues to hamper LNG flows through the Strait of Hormuz — which carries around 20% of global supply. Kpler reported that Strait of Hormuz traffic fell to just six confirmed crossings on Thursday, down 60% from the prior day. The analytics firm also noted that about a third of the world’s fertiliser supply passes via Hormuz, suggesting food prices could remain elevated and hurt vulnerable emerging markets. US gasoline prices are back above the $4 per gallon “psychological threshold” during peak driving season, while combined fuel expenses at four major US airlines were nearly $8 billion higher than a year earlier.
The bond market reflected the inflationary impulse. The 30-year Treasury yield traded near its highest since 2007 as traders dumped government debt. Markets are now pricing roughly two Fed rate hikes by January, with the ECB also expected to deliver two more quarter-point increases by year-end. The euro fell to three-week lows below $1.14. “The European Central Bank has looked more willing to raise rates into oil-driven inflation than the Federal Reserve,” said Andrew Sheets, global head of fixed income research at Morgan Stanley. “That has the potential to be a double hit where Europe faces tighter financial conditions through higher energy prices and tighter financial conditions through tighter policy.”
Big Tech — The Market Revolts Against Unchecked AI Spending
The tacit deal between Big Tech and investors — spend lavishly on AI, and the market will reward you as long as revenues rise — broke down dramatically this week. Alphabet shares plunged more than 7% on Thursday, their worst day in over a year, after the company lifted 2026 capex guidance to as much as $205 billion and reported negative free cash flow for the first time since its 2004 IPO. An index tracking the Magnificent Seven tumbled 4.8% on the session, its worst day since Trump’s “liberation day” tariff announcement in April 2025. A basket of Mag Seven shares lost 5.7% for the week.
The shift in sentiment is stark. “People are really focused on capex, obsessed with it. It used to be the more the better, but now it is the less the better,” said Jason Lemire, chief investment officer at Bold Wealth Partners. “We’re seeing capital raises, negative cash flows, rising debt. All that adds risk to the picture.” Together, Alphabet, Microsoft, Amazon, and Meta are projected to pump about $724 billion into capital spending this year and nearly $950 billion in 2027. Microsoft, once considered the AI leader thanks to its OpenAI stake, has plunged 21% in 2026 and trades at just 19 times estimated profits versus a 10-year average of 27.
Apple stands as the exception. The iPhone maker has avoided big AI outlays, opting instead to partner with model developers. Investors have rewarded that strategy: Apple shares rose 3.53% on Friday, are up 15% in July, and have gained 23% in 2026, making it the biggest points contributor to the S&P 500’s 8.3% year-to-date gain. “The fear of missing out is becoming more like a fear of massive overbuilding,” said Peter Andersen, CEO of Andersen Capital Management.
Sebastian Raedler, head of European equity strategy at Bank of America, expects equities to fall 7–8%, arguing markets are priced for everything going right and leave investors uncompensated for the combined risks from the Middle East and the AI spending cycle. Barclays turned neutral on risk assets this week, citing renewed US–Iran hostilities alongside AI capex concerns, while HSBC rotated away from semiconductors toward European banks and the equal-weighted S&P 500.
David Lebovitz, global strategist at JPMorgan Asset Management, said the level of oil matters less than its staying power. If crude remains around current prices through the end of summer, the firm would begin reassessing positioning as a higher risk premium would then be warranted. “The biggest disconnect is the idea that AI spending can go to the moon,” he said, noting that funding remains available but investors are becoming increasingly selective about which parts of the AI value chain they are willing to finance.
ASX Outlook & Day Ahead
Australian futures point to a cautiously firmer open on Monday, driven by weekend ceasefire optimism. Weekend CFD prices show the Nasdaq up 0.74% and crude oil down 4.4%, suggesting the market is pricing in a diplomatic breakthrough — or at least a sustained pause — in the US–Iran conflict. If crude continues to retreat, it would ease the inflationary pressure that has been weighing on rate-sensitive sectors and the broader risk appetite.
In corporate news, Fletcher Building confirmed the New Zealand government has released funding under its grant agreement with Golden Bay Cement after all conditions were met, securing domestic manufacturing operations through to 2040 and supporting more than 600 jobs in the Whangarei district. The week ahead is dominated by a critical Federal Reserve interest rate decision and the busiest stretch of US earnings season, with Microsoft, Meta, Amazon, and Apple all reporting — providing a decisive test for whether the AI spending backlash deepens or stabilises.
The ASX is expected to open firmer on Monday as weekend developments tilt the risk balance toward cautious optimism. The US–Iran strike pause, Iran–Oman talks, and a sharp drop in weekend crude CFD prices provide tailwinds, though Houthi attacks on Saudi oil infrastructure inject a note of caution. The Australian dollar will take its cue from oil and risk sentiment.
- ASX Open (10:00am AEST) — Futures indicate a positive open. Watch energy stocks for reaction to crude’s weekend retreat and ceasefire developments.
- US Federal Reserve Meeting (Wed–Thu US time) — The most important event of the week. Markets are pricing roughly two hikes by January; any hawkish surprise could hit equities and the AUD hard.
- Microsoft & Meta Earnings (Wed US after-hours) — The next major test for the AI capex narrative. Capital expenditure guidance will be scrutinised more closely than revenue.
- Amazon & Apple Earnings (Thu US after-hours) — Apple’s lean-capex strategy has been rewarded; Amazon’s AI spend faces the same scrutiny as Alphabet’s.
- Bank of England & Bank of Japan Decisions (Thu) — Both face the same oil-driven inflation dilemma. BoJ is particularly watched given the yen at four-decade lows versus the dollar.
- Fletcher Building (NZX/ASX) — Watch for market reaction to confirmed NZ government grant for Golden Bay Cement decarbonisation plan.
