Markets between war, oil, and technology: Europe in more trouble than the United States

Between July 4th and 10th, financial markets experienced a two-speed week. On the one hand, the renewed escalation between the United States and Iran reignited the risk premium on oil and brought inflation back to the forefront of interest rate expectations. On the other, the strength of technology and semiconductor stocks allowed Wall Street to absorb much of the shock. The result was a mixed market: US equities remained resilient, Europe more fragile, government yields rose, and commodities were torn between geopolitical risk and supply outlook.

Wall Street holds firm, Europe retreats

In the United States, the week ended on an overall positive note. The S&P 500 gained 1.2% and the Nasdaq 1.7% , while the Dow Jones lost 0.5% . The difference was once again determined by sector composition: stocks linked to artificial intelligence, chips, and spending by large technology groups supported the indexes most exposed to growth, offsetting the worsening geopolitical environment.

The movement wasn't linear. Renewed tensions in the Middle East prompted sudden sell-offs, especially in cyclical sectors and stocks most sensitive to energy costs, but buying quickly resumed when oil retraced and favorable expectations for the technology sector resurfaced. Wall Street thus showed greater resilience than other developed markets.

In Europe, the performance was weaker. The STOXX 600 lost 1.8% , ending a four-week positive streak. The continent appeared more exposed to both rising energy prices and the weakness of the European technology sector. Political tensions that emerged during the NATO summit in Turkey, including Donald Trump's trade threats to Spain, also weighed. The European market thus lost ground just as investors were reducing optimism about a rapid normalization of energy supplies.

Oil returns to the center of the market

The real focus of the week was oil. Earlier in the week, OPEC+ approved a production increase of 188,000 barrels per day from August, a decision that was supposed to help rebalance supply. However, the bearish effect was short-lived, as renewed clashes between the United States and Iran brought renewed attention to the Strait of Hormuz, one of the most important gateways for global energy supplies.

Brent crude finished the week up 5.5% , while WTI gained nearly 4% . The increase was driven not only by the risk of lower Iranian exports, but also by fears that new attacks could slow maritime traffic and delay the full reopening of the Strait.

Prices gave back some of their gains on Friday, thanks to the prospect of new talks and hopes that the escalation would not turn into a prolonged supply disruption. However, the message for markets remained clear: geopolitical risk could quickly turn into energy inflation again, with consequences that extend far beyond the oil sector.

Fed more cautious and yields rising

The rebound in crude oil prices also had an immediate impact on the bond market. Federal Reserve minutes revealed a central bank increasingly concerned about persistent inflation. Rates remained in the 3.50%-3.75% range, but nine of eighteen members indicated a higher level by the end of 2026.

The yield on the 10-year Treasury note rose toward 4.6% , as the market further scaled back expectations of cuts and began to consider further hikes plausible later in the year. This is a significant shift: higher oil prices not only penalize consumption and corporate margins, but also make it more difficult for the Fed to ease monetary policy.

Pressure on rates wasn't limited to the United States. In Japan, the 10-year yield reached around 2.9% , a 30-year high, while the yen remained extremely weak before recovering late in the week. The Japanese government considered encouraging large pension funds to invest more domestically, offering temporary support to the currency and the bond market.

Gold weak, industrial metals more resilient

Gold did not benefit from the increase in geopolitical risk. The metal lost about 1.7% over the week. This was due to the prevalence of the monetary channel over the defensive one: higher oil prices mean greater inflation risks, higher rates, and potentially less favorable real yields for a non-coupon-paying asset.

The picture for industrial metals was more solid. Aluminum closed the week up 1.8% , despite the reopening of a refinery in the UAE alleviating some supply concerns. Copper gained about 1% , supported by the 18.3% drop in inventories registered in Shanghai. Adding to the complexity was China's producer price inflation, which rose 4.1% year-on-year: a figure that signals cost pressures but not necessarily equally strong domestic demand.

A week of disagreements

The week of July 4-10 showed a market capable of coping with high risks, but increasingly dependent on a few supportive factors. Technology protected Wall Street, while Europe, bonds, and gold were more impacted by the combination of war, energy, and interest rates.

Oil remains the main channel of transmission between geopolitics and financial markets. As long as the Strait of Hormuz remains vulnerable and the Fed maintains a cautious stance, any new escalation could simultaneously reignite inflation, yields, and volatility. The resilience of US indices therefore does not eliminate risk: it merely demonstrates how much the market continues to trust the growth of artificial intelligence to compensate for a still fragile macroeconomic environment.