Monthly Market Report – July 2026
July erased in just a few days what had been built during June. On Wednesday, July 8, Trump announced the end of the provisional agreement with Iran following a wave of Iranian attacks on vessels in the Strait of Hormuz and the subsequent U.S. military response. Tensions persisted throughout the month, with nine consecutive nights of U.S. airstrikes on Iranian territory and the Houthis entering the conflict in the Red Sea. The Strait of Hormuz, through which more than 20% of the world's oil passes, became virtually blocked, with shipping traffic reduced to 10% of its normal level.
The impact on oil prices was immediate. Brent crude, which had fallen to around $70 per barrel at the beginning of July, posted three consecutive weeks of strong gains, climbing above $100 per barrel. Mediation by Oman and a pause in the attacks allowed prices to ease in the final days of the month, but Brent closed July at $90.12 per barrel, approximately 24% higher than at the end of June and marking the largest monthly increase since March.
The two major central banks opted to remain on hold, although with a clearly more hawkish tone. The ECB kept interest rates unchanged at 2.25%. Lagarde warned that higher energy prices could eventually spill over into broader prices and wages and left the door open to further rate hikes. The Federal Reserve also kept rates unchanged at 3.50%–3.75%, although this time without unanimous support: three members voted in favor of a 25 basis point (+0.25%) increase. By month-end, markets were assigning roughly a 65% probability of a Fed rate hike in September and close to a 90% probability of an ECB rate hike.
The U.S. labor market showed a meaningful slowdown. In June, only 57,000 jobs were created compared with the 110,000 expected, while previous figures were revised lower: May from 172,000 to 129,000, and April from 179,000 to 148,000. The unemployment rate fell to 4.2% from 4.3%, although this reflected a decline in labor force participation rather than stronger hiring. Despite this cooling, U.S. government bonds continued to come under pressure: the 10-year Treasury yield reached 4.74%, its highest level since January 2025, while the 30-year Treasury yield climbed to around 5.20%, a level not seen since April 2004.
On the positive side, U.S. inflation surprised to the downside. Headline inflation for June eased to 3.5% year-on-year, down from 4.2%, while core inflation, which excludes food and energy, moderated to 2.6% from 2.9%. July's Purchasing Managers' Index (PMI) readings also came in above expectations, suggesting that, for now, the conflict is affecting the U.S. economy more through higher prices than through weaker growth.
The euro strengthened against the dollar, reaching around 1.15 EUR/USD, up from 1.1413 at the end of June. A U.S. economy guided by an ambiguous Federal Reserve, compared with an ECB appearing more willing to raise rates, helps explain the stronger performance of the European currency.
Equity markets once again delivered mixed performances, although with the roles reversed compared with June. European markets held up remarkably well despite higher oil prices: the Euro Stoxx 50 gained approximately 0.47%, while Spain's Ibex 35 rose 1.60%, ending the month just below the 20,000-point mark. In the United States, the heavy weighting of technology stocks once again weighed on performance: the S&P 500 ended virtually unchanged at 7,489.72 points (-0.1% for the month), while the Nasdaq declined 6.6%.
The month's main focus was the semiconductor sector, which at one point fell by more than 20% from its late-June highs. The decline was driven by the sharp sell-off in memory chip manufacturers and growing doubts about the profitability of the massive investments being made in artificial intelligence, reinforced by the emergence of much cheaper Chinese models such as KIMI. The earnings season confirmed this shift in investor sentiment: the market no longer rewards companies simply for announcing AI investment, but for proving that those investments generate revenue.
Among the month's notable developments, SK Hynix debuted on the Nasdaq, raising $26.5 billion, the largest offering of its kind to date, while SpaceX fell by approximately 36% following its June stock market debut. On the trade front, on July 23, the United States imposed new tariffs ranging from 10% to 12.5% on 60 trading partners, including the European Union and Spain.
"The collapse of the U.S.–Iran agreement, the blockade of the Strait of Hormuz that pushed oil prices 24% higher, and the sharp correction in semiconductor stocks were the defining events of July."