[Chart courtesy of MarketWatch.com]

1. Moving the market

Stocks moved higher right out of the gate, led by strength in semiconductor shares and aided by a pullback in oil prices, as traders looked past renewed tensions between the U.S. and Iran and focused on the broader market outlook.

According to U.S. Central Command, the U.S. conducted a second consecutive day of strikes against Iranian targets. The latest military action followed Tehran’s attacks on commercial shipping in and around the Strait of Hormuz, a key global trade route where traffic has already been disrupted.

Despite the escalating conflict, crude oil prices moved lower after President Trump indicated that Iran had reached out to negotiate a deal.

That marked a sharp shift in tone from recent comments, which included suggestions that negotiations may no longer be worthwhile and that the previous ceasefire arrangement between Washington and Tehran was effectively over following another round of attacks in the region.

For now, hopes for a quick return to normal export flows through the Persian Gulf appear increasingly uncertain. As a result, geopolitical risks remain elevated and could spark bouts of risk-off trading if tensions continue to escalate.

That said, the market’s attention remains firmly on earnings season and the ongoing AI-driven growth story.

Many traders believe those two factors could continue providing enough fuel to push equities higher, even in the face of geopolitical uncertainty.

Meanwhile, falling bond yields helped support stocks, while a weaker dollar boosted precious metals. Gold rebounded above $4,100, and bitcoin also caught a bid, climbing back toward the $63,000 level.

With investors seemingly shrugging off the latest military strikes and oil prices moving lower instead of higher, are the bulls showing remarkable resilience—or is the market becoming a little too comfortable with rising geopolitical risks?

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[Chart courtesy of MarketWatch.com]

1. Moving the market

Stocks came under pressure early in the session after President Trump told attendees at the NATO summit that the ceasefire with Iran was effectively over, reigniting concerns about escalating tensions in the Middle East.

The comments sent oil prices sharply higher and sparked a risk-off move across much of the market.

Adding to the unease, Trump later suggested that further military action against Iran could be imminent. His remarks came on the heels of what the U.S. described as a series of powerful strikes against Iranian targets in response to attacks on commercial vessels transiting the Strait of Hormuz.

As oil surged, energy stocks moved higher, while consumer-focused companies, which could be hurt by rising fuel costs, lagged. Chip stocks, meanwhile, found their footing after coming under pressure in the previous session.

The renewed geopolitical tensions disrupted what had become a fairly complacent market narrative. After weeks of optimism surrounding a potential de-escalation in the region, traders suddenly found themselves reevaluating geopolitical risks.

Despite the shaky backdrop, the Nasdaq managed to break away from the broader weakness and finish with a modest gain as dip-buyers stepped in to support the tech sector.

Elsewhere, bond yields moved higher as investors priced in the possibility that rising energy costs could reignite inflationary pressures and keep interest rates elevated for longer.

The dollar saw a round-trip session, while gold recovered from an early decline before closing slightly below the $4,100 level. Bitcoin, however, failed to participate in the tech rebound and ended the day lower.

For now, it appears that many traders have already moved past the Iran story, with several of the sectors and stocks most affected by the conflict fully reversing their initial reaction.

But if tensions continue to escalate, could the market be underestimating the risks ahead?

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[Chart courtesy of MarketWatch.com]

1. Moving the market

The Dow pulled back from record highs early on as traders once again rotated out of AI-related stocks and grappled with rising oil prices and higher bond yields.

The selling pressure was especially noticeable in the semiconductor space. Micron dropped 7%, while KLA, Marvell Technology, Broadcom, and AMD also moved lower. The VanEck Semiconductor ETF (SMH) lost more than 5%, highlighting the broad weakness across the chip sector.

Investor sentiment took another hit after reports that Iran attacked a Qatari liquefied natural gas tanker near the Strait of Hormuz. The escalation pushed energy prices higher, with Brent crude climbing more than 2% to trade above $73 a barrel.

The weakness in AI-related stocks actually started overseas. South Korea’s Kospi index tumbled nearly 5%, led by a sharp decline in Samsung Electronics. Despite reporting a strong jump in second-quarter profit, concerns about future spending and demand overshadowed the positive earnings news.

Adding to the uncertainty, reports surfaced that DeepSeek is developing its own AI chip. If successful, that move could reduce its reliance on suppliers such as Nvidia and Samsung, raising fresh concerns about future demand for some of the industry’s biggest chipmakers. Nvidia shares also finished lower on the day.

By the closing bell, markets were struggling to absorb a combination of rising oil prices, higher bond yields, and growing inflation expectations. The dollar spent much of the session drifting sideways before surging into the close.

That late-day dollar strength took much of the momentum out of an early gold rally, sending the precious metal back toward the $4,100 level.

Bitcoin experienced its own rollercoaster session, swinging between $62,500 and $64,500 before finishing little changed.

With geopolitical tensions in the Middle East heating up and traders facing a growing list of macroeconomic headwinds, the big question is whether the upcoming earnings season can provide enough fuel to keep the market’s longer-term uptrend intact.

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[Chart courtesy of MarketWatch.com]

1. Moving the market

The S&P 500 and Nasdaq kept their positive momentum going early in the week, building on the strong gains posted during the previous week as technology stocks continued to attract buyers.

Interestingly, those advances came even as semiconductor stocks—the market’s leadership group for much of the year—remained under pressure.

Traders continued to trim positions in chipmakers and rotate into other areas of the market. The VanEck Semiconductor ETF (SMH) fell 3.2%, marking its second consecutive weekly decline.

That rotation may actually be a healthy development for the broader market. Financials, Healthcare, and Industrials all closed the week at fresh all-time highs, more than compensating for the recent consolidation in semiconductor stocks.

While the weakness in semis appears to be a short-term headwind, it has done little to derail the broader market’s advance.

Traders will also be paying close attention to the Federal Reserve this week, with minutes from the June meeting—the first chaired by Kevin Warsh—scheduled for release on Wednesday. Any clues about the future path of interest rates could influence market sentiment.

By day’s end, the major indexes delivered another impressive performance. The Dow shook off an early selloff and rallied to a new record high, surpassing the 53,000 mark for the first time.

Elsewhere, crude oil was little changed as shipping traffic through the Strait of Hormuz continued to recover, although volumes remain below historical norms.

Bond yields finished mixed, and the dollar was essentially unchanged. Gold continued its climb toward the $4,200 level, while bitcoin rebounded sharply from an early dip after receiving a boost from President Trump’s renewed support for cryptocurrencies.

Historically, the market is entering one of its strongest seasonal periods of the year. The big question, however, is whether this year’s rally still has enough fuel left to follow the usual seasonal script—or will we be in for a surprise?

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