Fresh tensions across the Persian Gulf dominated markets last week, with renewed military action by both the US and Iran effectively bringing the already fragile Memorandum of Understanding close to collapse. While breaches of the agreement had become increasingly common since its signing a month ago, last week’s escalation marked a clear deterioration in relations. Iran’s attack on a commercial vessel in the Strait of Hormuz was followed by a series of US strikes on targets within Iran, alongside increasingly hostile rhetoric from President Trump towards the Iranian leadership. Unsurprisingly, energy markets reacted sharply. Brent crude rose +5.7% to $76.04 a barrel as traders reassessed the risk of supply disruption and further instability in the region. The move also reverberated through fixed income markets, with sovereign bond yields rising on both sides of the Atlantic as investors weighed the prospect of renewed inflationary pressure and the implications that could have for the path of central bank policy.

Equity markets outside the US also came under pressure last week as deteriorating geopolitical sentiment and rising energy prices weighed on risk appetite. European equities were particularly weak, with the MSCI Europe ex‑UK index falling -1.9% (in euro terms). Germany was among the weakest performers, reflecting the market’s sensitivity to higher energy costs given the importance of the country’s industrial base and export‑orientated manufacturing sector. A similar picture emerged in Japan, where the Nikkei 225 declined -1.7% (in yen terms). Technology shares remained under pressure as investors continued to take profits following a prolonged period of exceptionally strong performance, particularly among semiconductor and AI‑related beneficiaries. Japan’s heavy reliance on imported energy also proved an additional headwind as oil prices moved sharply higher.

Elsewhere, the FTSE 100 matched the decline seen in Japan, falling -1.7%, with index heavyweight AstraZeneca weighing heavily on performance following disappointing clinical trial results¹. In China, the Shanghai Composite retreated -1.2% (in renminbi terms), despite pockets of strength among artificial intelligence and semiconductor stocks. Those same areas of the market helped support US equities, where sentiment improved notably into the end of the week. The S&P 500 and Nasdaq gained +1.2% and +1.7% respectively (both in dollar terms), with growth stocks once again outperforming their value counterparts as investors returned to technology and AI‑linked themes.

¹ AstraZeneca - Update on Cardio‑TTRANSFORM Phase III Trial, 09/07/2026

SJP Approved: 13/07/2026

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