Last month's US–Iran Memorandum of Understanding, signed at Versailles, is already unravelling. Lazard Asset Management's Ronald Temple called the breakdown a wake-up call, warning that with strategic reserves drawn to minimum operational levels in places, a return to March-level hostilities could drive a far sharper oil-price surge than markets are braced for. MFS Investment Management reported the ceasefire formally collapsed this week – Iran's Revolutionary Guard damaged multiple vessels in the Strait of Hormuz, Trump declared talks "a waste of time," and both sides traded strikes – yet global equities still rose, led by energy and semiconductors. Edmond de Rothschild Asset Management framed the resumption as catching investors off guard, sending oil close to $80 and gas toward €50/MWh – reviving precisely the energy-driven inflation fears now hanging over the Fed.
📉 A hawkish Fed drowns out cheaper oil
The quarter's defining fixed income puzzle: oil fell ~35% peak-to-trough, yet Treasury yields rose. Federated Hermes' RJ Gallo explained that a hawkish Warsh and a buoyant, AI-fuelled economy outweighed falling energy, lifting 2- and 10-year yields 38 and 15 basis points and holding the Treasury index return to just +0.32% – with credit, munis and high yield all outperforming. The signal to read is one of tone, not action: MFS noted June's FOMC minutes were short and hawkish, but put the odds of a late-July quarter-point hike at only around 25%. Both Edmond de Rothschild and J.P. Morgan Asset Management expect a hold as the base case – JPM sitting more dovish than consensus through 2026 – with a hike the live minority risk should the energy shock feed through. For now, the managers agree, Warsh's reaction function remains the key unknown.
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🌊 "Après-moi, le déluge": can credit absorb the AI supply wall?
The build-out's funding needs are testing the bond market. Janus Henderson Investors's fixed income team argued the market still underestimates tech supply – Big 4 hyperscaler capex estimates have more than doubled since early 2025 to nearly $780bn for 2027, and BBB tech spreads have already gapped wider than industrials. TwentyFour Asset Management LLP's George Curtis saw early indigestion in Amazon's latest $25bn deal, only 1.6x oversubscribed – half its March rate – with a chunky new-issue concession as issuance runs near record tights. Both point to J.P. Morgan's estimate that IG bonds must fund ~$2.1tn of AI capex by 2030. Striking a note on the demand side, Janus Henderson cited Anthropic – founded only in 2021 – nearing its first-ever profitable quarter as evidence the compute crunch underpinning the buildout is real.
📈 A rollercoaster for chips, and 300 stocks beat the Mag7
Aviva Investors captured the whipsaw: the Philadelphia Semiconductor Index swung roughly 6% down then 5%-plus up in days and is still up around 87% this year, with Samsung falling 9% despite a nineteen-fold profit jump – proof that good results no longer suffice when perfection is priced in. Tellingly, more than 300 companies in the S&P 500 have now outperformed the Magnificent Seven this year. Pacific Asset Management saw the same rotation in its own book, with biotech and healthcare tech gaining while its North American Opportunities fund returned 7.1% – though it flagged Korea's slide into a technical bear market and Japanese yields at mid-1990s highs as reminders of the risks beneath the surface.
🌏 EM debt's rebound – and a governance shift worth watching
State Street Investment Management's Sudharsan Balaji reported a broad-based EM debt recovery in Q2, with hard-currency sovereigns returning 4.63% as spreads tightened 53 basis points, led by distressed names like Ukraine, Sri Lanka and Kenya – though Warsh's hawkish tone lifted the dollar and capped the rally. M&G Investments' David Fancourt highlighted a subtler credit signal: for the first time since 2021, "fallen angels" ($101bn downgraded from IG) have outpaced "rising stars" ($77bn upgraded). Rather than a warning, he frames it as opportunity – forced selling at index exit has historically pushed these bonds below fair value before spreads normalise, rewarding active managers willing to look through the dislocation.
The week ahead - economic calendar:
📅 Monday, July 13, 2026
19:00 🇺🇸 US Treasury Budget (Jun)
📅 Tuesday, July 14, 2026
13:30 🇺🇸 US CPI (Jun) — prev YoY 4.2%; Core prev 2.9%
15:00 🇺🇸 Fed Chair Warsh congressional testimony (House Financial Services Committee)
📅 Wednesday, July 15, 2026
03:00 🇨🇳 China GDP (Q2) — YoY 4.5% exp (prev 5.0%); plus Industrial Production & Retail Sales
13:30 🇺🇸 US PPI (Jun)
15:00 🇨🇦 Bank of Canada interest rate decision
15:00 🇺🇸 Fed Chair Warsh testimony (Senate Banking Committee)
📅 Thursday, July 16, 2026
07:00 🇬🇧 UK GDP (May)
13:30 🇺🇸 US Retail Sales (Jun); Initial Jobless Claims
📅 Friday, July 17, 2026
10:00 🇪🇺 Eurozone CPI final (Jun)
13:30 🇺🇸 US Housing Starts
15:00 🇺🇸 Michigan Consumer Sentiment (prelim, Jul)
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Markets Recon editors.
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