Wall Street ended lower on Tuesday as oil prices climbed following an Iranian official’s statement that the Strait of Hormuz would remain shut until Tehran’s conditions were met. The S&P 500 declined 0.32% to 7,728.20, the Nasdaq dropped 0.6% to 26,445.45, and the Dow slipped 0.34% to 53,791.85. Notably, the sell-off lacked conviction — advancing issues on the NYSE outnumbered decliners by a 1.2-to-1 ratio, with the S&P 500 posting 22 new highs against just one new low.

“Stocks seem to be reflecting some disappointment about the lack of tangible progress in the Persian Gulf after exuberantly reacting to promises of an imminent deal last week,” said Steve Sosnick, chief strategist at Interactive Brokers. “But it’s hardly a broad-based selloff. More NYSE stocks and SPX components are rising than falling, but the declines in several large tech stocks (AAPL, AMZN, GOOGL, MSFT, AVGO) are weighing down key indices.”

The earnings backdrop continues to provide a powerful undercurrent of support. Of the 436 S&P 500 companies that have reported so far, 85.1% have beaten analyst expectations, compared to the long-term average of 67%. Jefferies noted that large-cap blended earnings growth is at its highest since 2021. “Earnings have been an absolute freight train driving this market higher since the March lows,” said Dennis Follmer, chief investment officer at Montis Financial.

Global Stock Indices — Day and 5-Day Performance. Asian markets mixed with Hang Seng −1.10%, while Euro Stoxx led Europe higher at +0.31% on the day.

The Strait of Hormuz remains the dominant macro risk, with no breakthrough in sight despite multiple diplomatic channels. Iran has demanded the US meet conditions outlined in a collapsed June interim peace deal — including lifting the naval blockade, removing sanctions, and compensation for war damage. President Trump responded on Monday with compensation demands of his own.

“Every time the enemy breaches its commitments and resorts to war again, it will face harsher conditions and greater resilience than before. The Strait of Hormuz will not be opened until Iran’s conditions are met,” said Mohammad Mokhber, advisor to Iran’s Supreme Leader, on social media on Tuesday.

Traffic through the strait has slowed to a trickle. Kpler data showed confirmed vessel crossings fell from 15 on Friday to 11 on Saturday and just six on Sunday. Oil transported through the waterway averaged just 4.9 million barrels per day in Q2 2026, a catastrophic decline from 21.6 million bpd in Q4 2025 before the conflict began. The US military on Tuesday said it had used missiles to disable a Panama-flagged cargo ship that ignored warnings to stop violating the naval blockade on Iranian ports — CENTCOM has now redirected 55 commercial vessels, disabled 3, and boarded 2.

Pakistan’s defence minister said the US and Iran were nearing “some sort of an arrangement,” with Iran-Oman talks described as at a critical crossroads. Qatar confirmed negotiations were in an advanced stage. But Deutsche Bank’s Henry Allen cautioned: “Markets remain confident in some kind of deal that reopens the Strait of Hormuz, even as we’ve persistently not seen that happen.”

Brent crude futures rose 1.7% to $89.20 a barrel, hovering below their session high of $90.03, while WTI added 1.6% to $83.48. Oil prices have gained more than 11% over the past five trading days as the Hormuz deadlock persists. “We’re in a position where anticipation for some kind of deal is helping to contain oil prices,” said Deutsche Bank’s Henry Allen. “12-month Brent futures are still over $10 per barrel beneath the front-end future — but the actual Strait is still blocked.”

Spot gold slipped 0.5% to $4,370.43 an ounce but remained well above $4,300. Silver fell 1.63% on the day but was up 4.07% over five days. Copper dipped 0.06%, platinum fell 0.53%, and iron ore gained 1%. Bitcoin declined 0.68% on the day but was up 5.29% over five sessions. The Australian dollar was largely unchanged at 0.11%, while the US dollar index edged up 0.13%.

Commodities, Energy & FX — Daily and 5-Day Performance. Crude leads with +1.57% daily and +11.06% over five days as Hormuz disruption intensifies.

In currencies, the Japanese yen weakened toward the psychologically critical 160 per dollar level, slipping as much as 0.1% to 159.39 before settling around 159.24. The yen has now wiped out nearly half of its gains from the July 31 coordinated US-Japan intervention. Mizuho Bank’s Masayuki Nakajima warned: “If USD/JPY were to break decisively above 160, concerns about intervention could intensify further.” The euro was unchanged at $1.1543 and the British pound held at $1.3508.

USD/JPY — The yen has given up nearly half of its gains from July’s coordinated intervention operation, approaching the 160 level. Source: Bloomberg

A growing structural risk lies in the leveraged and inverse ETF complex, which now holds around $250 billion in global assets. While modest against the $22 trillion total ETF market, these products punch well above their weight in trading volume — 30-day average trading value tripled from January’s low to a June peak near $70 billion, with bullish products dominating at roughly $200 billion in AUM versus $20 billion in inverse funds.

The real shift is concentration. AI-related exposure has risen from 26% of total bullish leveraged equity ETF exposure in 2022 to 58% by mid-2026, with notional exposure quadrupling over that period. Just ten companies now account for two-thirds of the AI slice, led by Nvidia, SK Hynix, Micron, TSMC, and AMD. Nomura estimated at peak that the entire leveraged equity ETF complex needs to buy or sell roughly $10 billion of securities for every 1% move in the underlyings.

South Korea provided a live stress test earlier this year. After regulators allowed domestic leveraged ETFs on Samsung and SK Hynix, inflows exceeded $9 billion in two months. When the AI rally stumbled, combined trading of leveraged funds and their two underlying stocks reached about 70% of all Seoul market volume. Kospi volatility surged from 28.9 at end-2025 to an all-time high of 96.9 — higher than Bitcoin — and the exchange’s circuit breaker was triggered a record four times.

S&P 500 Components So Far in 2026 — Technology sector shows widest dispersion with Dell and SanDisk as standout outliers. Real Estate and Utilities lead sector performance.