Daily Market Analysis: Geopolitical Escalation, AI Capex Under Scrutiny & Rate Hike Expectations

Thursday, July 23, 2026 | Daily briefing on dual strait tensions, tech capex scrutiny, surging yields, and crypto pressure.

Daily Summary

Two straits came under threat simultaneously, pushing oil to its highest level since June 8. The Revolutionary Guards declared that Hormuz is under their control and “completely closed,” warning that the southern route has been mined; one tanker caught fire following an explosion, while two others turned back. Meanwhile, the Houthis announced targeting two Saudi tankers in the Red Sea and turning back nearly 10 vessels. Brent rose to $96.27 and WTI climbed to $88.48.

AI capital expenditure came under the microscope, and both initial test subjects failed. Alphabet raised its capex target for this year from $180–190 billion to $195–205 billion; free cash flow turned to negative $5.9 billion (compared to positive $25 billion a year ago), and despite an 82% surge in cloud revenue, the stock fell 3% post-market. Tesla’s cash flow also turned negative by $1.1 billion, profit missed expectations, and its stock slipped 4%.

Conversely, Asian chip stocks interpreted this spending as good news. The KOSPI surged 3.5%, led by SK Hynix and Samsung, while the Nikkei gained 0.7%. Strong cloud growth validates high capital expenditure, signaling that the spending cycle still has room to run.

Inflation fears tightened the bond market. The US 2-year yield rose to 4.31%, its highest since February 2025, while the 10-year yield reached 4.66%, the highest since May. A rate hike in September is now fully priced in, with total expectations for the year standing at 42 basis points. The ECB is expected to hold rates steady today but keep the door open for September.

Hopes for the Clarity Act waned. Republicans released a new draft featuring an ethics clause endorsed by the White House, with Senator Moreno calling it “the strongest ethics text in US history.” However, seven key Democrats whose votes are decisive issued a joint statement calling the draft “insufficient,” asserting that provisions on ethics, consumer protection, illicit finance, and conflicts of interest must be strengthened.

Bitcoin pulled back to $65,640. Reversing from yesterday’s peak of $66,900, the drop coincided with rising oil, surging yields, and the Clarity news. On its balance sheet, Tesla revealed it held its position of 11,509 bitcoins unchanged for the fourth consecutive year, taking a $112 million impairment charge for the quarter. Additionally, AMD announced a strategic partnership with Anthropic, stating it could invest up to $5 billion in the company over time.

Main Agenda

Two Straits at Once: Hormuz “Completely Closed,” Tankers Struck in the Red Sea

The scenario warned about for months has materialized, and the market is now pricing in not one, but two simultaneous chokepoint disruptions. Iran’s Revolutionary Guards announced that the Strait of Hormuz is under their control and “completely closed,” stating that as long as US operations continue, no tanker will be allowed to enter or exit without Iranian coordination, and warned that the southern route of the strait is mined. According to the Guards, a tanker attempting to navigate this route caught fire after an explosion, and two other vessels turned back. On the same day, the Houthis in Yemen officially opened a new front, announcing an operation targeting two Saudi oil tankers. The Houthis also claimed to have turned back roughly 10 ships after warning them against proceeding to Saudi ports. A disruption in the Red Sea passage could impact up to 5 million barrels per day of supply, as it is the primary bypass route for Gulf oil avoiding Hormuz. Military escalation continues: the US military struck Iran for the 12th consecutive night, and Trump stated that every time Iran fires on a ship in Hormuz, the US will destroy an Iranian bridge or power plant. According to Axios, B-1 long-range bombers were used in Tuesday’s strikes against Revolutionary Guard targets, signaling preparations for a broader campaign beyond recent limited operations.

Alphabet and Tesla: Good Numbers, Negative Cash Flow, Stocks Slide

Tech earnings season kicked off with a single dominant theme: AI spending is under scrutiny. Both Alphabet and Tesla reported revenue above expectations, both closed the quarter with negative free cash flow, and both told investors to prepare for even higher spending—resulting in post-market drops of 4% for Tesla and 3% for Alphabet. Alphabet’s metrics were particularly striking. The company raised its annual capex target from $180–190 billion to $195–205 billion and warned of even higher figures for 2027; at the upper bound, it could become the highest-spending tech company of the year. The bulk of its $44.9 billion Q2 capex went to AI infrastructure, swinging free cash flow from roughly positive $25 billion a year ago to negative $5.9 billion. CFO Ashkenazi noted that cash flow will remain under pressure due to technical infrastructure investments. On the flip side, cloud revenue surged 82%, far outstripping expectations, margins expanded, and Gemini adoption accelerated; Mizuho analysts noted that the spending hike was already anticipated, calling the underlying story positive and expecting the stock to recover the following day.

Tesla’s picture is more challenging: EPS came in at $0.33 versus $0.55 expected, revenue topped expectations at $28.2 billion, gross margin stood at 16.8%, and free cash flow turned negative by $1.1 billion. Quarterly capex jumped 142% to $5.79 billion; the company projects full-year spending to exceed $25 billion—nearly a 200% increase. Musk framed the strategy as follows: as long as it doesn’t reach wasteful levels, we should spend as fast as we can, and being slightly less capital-efficient is fine if it helps finish things earlier. The company’s factories are being reconfigured for the two-seater driverless Cybercab and Optimus robots, while preparations are underway for an AI chip factory in Texas. Market commentators are divided: one group argues that profitability at Tesla is being sacrificed for infrastructure—much like Amazon and Netflix did in the past—and that this will pay off handsomely within 12 to 36 months. Others point out that Google’s core business remains strong, search is not dead, and cloud investment remains a solid bet. The real test comes next week, with Meta and Microsoft reporting on Wednesday, followed by Amazon and Apple on Thursday.

Asian Chip Stocks See Orders, Not Bills

Wall Street’s discomfort over high capex met the exact opposite reaction in Asia, as a significant portion of that spending flows directly into the coffers of regional manufacturers. The KOSPI surged 3.5% today, led by SK Hynix and Samsung; the Nikkei gained 0.7%, and MSCI’s Asia-Pacific ex-Japan index is on track to snap a two-week losing streak with a 3% weekly gain. For Asian chipmakers, the real silver lining is that robust cloud growth justifies elevated AI investments, indicating that the megacap cloud spending cycle is far from over. AMD announced a strategic partnership with Anthropic and plans to invest up to $5 billion over time; its stock rose another 1.5% yesterday to $552, bringing its weekly gain to 4.4%. Meanwhile, Samsung introduced its new foldable phones at higher price points, citing soaring memory chip costs driven by AI demand and supply shortages—a detail illustrating how the spending debate directly trickles down to consumers. In contrast, IBM’s results served as a reminder of sector divergence: despite issuing a profit warning last week, the company delivered below-consensus results and lowered its 2026 outlook.

Clarity Act: Ethics Provision Added, Seven Democrats Say “Insufficient”

It was an active midweek for crypto regulation, but momentum turned negative. Senate Republicans released a new draft of the Clarity Act on Wednesday, featuring an ethics clause agreed upon by the White House and Trump. Senator Bernie Moreno, a key proponent, touted it as “the strongest ethics text in US history” and urged colleagues to ignore Democratic objections. However, on the same day, a joint statement was issued by the core negotiating group of Democrats whose support is essential for Senate passage. The senators stated that the current text remains “insufficient,” emphasizing that rules regarding ethics for elected officials, consumer protection, anti-illicit finance, conflict of interest, and market integrity must be bolstered. This group holds substantial weight: Alsobrooks and Gallego were the only two Democrats to vote yes in committee, while the others had previously signaled potential support. Prediction markets responded immediately, with Polymarket dropping the probability of the bill being signed this year from 46% to 38%. The bill requires 60 votes to advance—meaning up to 10 Democratic votes—and the Senate enters summer recess on August 7 with several other items on its agenda.

Macro Framework

Rate Expectations Hardened: September Hike Fully Priced In

Oil climbing toward $96 reopened inflation calculations, which the bond market priced in rapidly. The US 2-year yield rose to 4.31%, its highest level since February 2025, while the 10-year yield reached 4.66%, the highest since May. Futures now fully price in a September rate hike, pushing total expectations for the year to 42 basis points. Without a overwhelming flow of earnings to distract them, investor focus pivoted back to the war; those who believed oil had peaked are now forced to rework their inflation math, making pricing power more critical than ever for corporate bottom lines. Macquarie’s Thierry Wizman highlights the growth side, noting that concerns over global growth are well-founded; nearly five months of war have depleted global stockpiles, and the simultaneous closure of two straits will affect more than a quarter of world oil and gas transit. The ECB is expected to hold rates at 2.25% today; the main focus will be the messaging, as the fresh spike in energy prices is expected to force the bank to keep the door open for a September hike. On the yen front, the vigil continues at 163.06; Bloomberg reports that Bank of Japan officials are open to faster rate hikes offered slight support to the currency, but failed to drive a lasting reversal.

Gold Holds at $4,130, Wheat Nears Peak

Despite elevated yields, precious metals are holding up due to a war premium. Gold trades slightly lower at $4,130, though it maintains a 3.6% weekly gain; silver decouples with a 7.6% weekly gain at $60.15, while palladium sits at $1,307. Copper trades at $6.53, just 1.8% shy of its 52-week high and reflecting a 6.4% monthly gain, confirming robust industrial demand. In grains, wheat stands out at $703.75, merely 0.7% below its 52-week high with a 20% monthly gain. The war’s impact on food supply chains is now fully reflected in pricing, raising the risk of a technical correction at these levels. Cocoa continues its descent with a 7% weekly drop, while coffee fell to $316. Energy equities continued to hit record highs: Exxon rose to $154.45 and Chevron to $192.98, both posting 11% monthly gains as the most consistent corporate winners of the conflict.

Crypto

Bitcoin $65,640: Pressure from Three Fronts

After touching $66,700 yesterday, Bitcoin pulled back to the $65,500–$65,640 range this morning, with daily losses exceeding 1%. Pressure stems from three primary sources:

1. Oil: WTI reaching $88.60—its highest since June 11—reignites the prospect of a new wave of inflation globally and in the US, complicating central bank policy.
2. Yields: The 2-year yield rising to 4.31% increases the opportunity cost of non-yielding assets like Bitcoin and gold, coaxing investors away from speculative positions toward fixed income offering increasingly attractive returns.
3. Regulation: The probability of the Clarity Act passing dropping from 46% to 38% weakens the scenario noted yesterday where passage could trigger a move toward $70,000.

A fourth geopolitical element is the deployment of B-1 bombers, reinforcing views that the military operation is scaling up. The sell-off spread across major altcoins, with Ether, Solana, and XRP all pulling back. Nevertheless, the technical structure remains intact: Bitcoin is still up 2.8% on the week and 4.6% on the month, holding just below the upper Bollinger band broken yesterday. Reclaiming the critical $66,000 level is key; if lost, the buy wall at $63,000 noted yesterday will serve as the first test. The average break-even test around $68,000 remains out of reach for now.

Two corporate notes stand out:

• Tesla disclosed that it kept its position of 11,509 bitcoins unchanged once again. The company has neither bought nor sold since 2022, recording a post-tax impairment charge of $112 million this quarter due to a 14% decline in Bitcoin’s price during the period. Bitcoin opened the quarter near $83,000 and dropped to $58,000 by late June; while current levels are significantly above that trough, accounting standards dictate that impairment reflects intra-period mark-to-market lows.
• Sector Direction: AMD’s planned investment of up to $5 billion in Anthropic serves as another signal that capital continues to flow toward AI model developers rather than crypto. The question raised yesterday remains pertinent throughout this week: Why hold an asset tied to the AI cycle when you can invest directly in the companies at its center?

Commodities

Brent at $96: Six-Week High in Overbought Territory

Oil surged over 3% yesterday to close at $94.07 for Brent, climbing another 2% this morning to hit $96.27—its highest level since June 8. WTI reached $88.48. Brent’s weekly gain stands at 14%, with a monthly gain of 24.5%. Technical indicators reflect market tension: RSI has entered overbought territory at 70, price is hugging the upper Bollinger band, and the ADX at 32 signals growing trend strength. This does not mean the rally is over, but it implies that a single headline pointing toward a ceasefire could trigger a sharp pullback. Two tangible developments are driving prices: tankers struck in the Red Sea and reports of mining in Hormuz. Refining margins are also coming under increased pressure, as escalating conflict threatens the recovery in global refining spreads. Today’s ECB decision and Intel’s earnings tonight will determine which force dominates the oil-yield-equity triangle.

Equities

Indices Flat, Direction Trapped Between Earnings and War

Wall Street closed indecisively on Wednesday: the S&P 500 slipped 0.14%, the Nasdaq 100 fell 0.54%, and the Dow ended virtually flat. Futures are modestly lower this morning as post-market declines in Alphabet and Tesla keep sentiment cautious. Asia diverged, rising on the back of chipmakers. Single-stock action yesterday clearly reflected this divergence: Nvidia rose 2.3% to $212, strengthening its bullish alignment, and AMD climbed to $552. Conversely, Meta fell 2.6% to $627 (extending its weekly loss to 8%), Microsoft dropped 1.9%, and Amazon declined 1.1%. Energy stocks advanced once more.

Before the bell today, Dow, American Airlines, T-Mobile, Union Pacific, and Norfolk Southern report; Intel reports post-market. Weekly jobless claims are also due today. On the corporate front, two developments caught attention: Uber cut 10% of its customer service division—a move coming shortly after its CTO noted that they exceeded their 2026 AI budget in just four months, illustrating where cost pressures are shifting.

Weekly Calendar

Date	Day	Event / Indicator
July 23	Thursday (Today)	ECB Rate Decision — Expected to hold steady at 2.25%, but the door for a September hike will be kept open due to energy prices; Eurozone consumer confidence
July 23	Thursday (Today)	US Weekly Jobless Claims; Earnings: Dow, American Airlines, T-Mobile, Union Pacific, Norfolk Southern (Pre-market), Intel (Post-market)
This Week	—	Clarity Act: New draft published, but seven key Democrats labeled it “insufficient”; Thune plans to bring it to a vote in the coming days
July 28–29	Tue–Wed	FOMC Meeting — No move expected in July, but a September hike is now fully priced in
July 29	Wednesday	Meta & Microsoft Earnings — Act II of the major cloud capex test
July 30	Thursday	Amazon & Apple Earnings; Amazon’s capex target is already above $200 billion
Next Week	—	Bank of Japan Meeting — According to Bloomberg, officials are open to faster rate hikes; yen remains on intervention watch at 163
August 7	Friday	US Senate Summer Recess Begins — The window for the Clarity Act closes