Daily Market Outlook, July 13, 2026

Patrick Munnelly, Partner: Market Strategy, Tickmill Group

Munnelly’s Macro Minute — Strikes Shift Sentiment, Crude Cranks Higher

Oil is back on the boil, bonds are back under pressure, and the AI rally has run straight into another geopolitical wall. US strikes on Iran and Iranian counterstrikes across the region have pushed markets into a classic inflation-shock posture: crude higher, equities lower, the Dollar firmer, and rate-cut hopes pushed further out of reach.

The immediate market reaction is ugly. The MSCI Asia Pacific Index fell 1.8%, with South Korea again bearing the brunt as the Kospi plunged 8%. Tech led the damage. SK Hynix dropped 13% in Seoul, reversing sharply despite a strong debut for its US-listed ADRs, which had rallied 13% on their first trading day last Friday. Nasdaq 100 futures fell 1.3%, while European equities are set to open around 1% lower. This is not just profit-taking. It is a positioning problem colliding with a macro shock. Semiconductors remain the highest-beta expression of the AI trade, but they are also the first place investors cut when oil spikes, real yields rise and geopolitical risk clouds the discount-rate outlook. Brent crude jumped 4.3% to $79.25/bbl, up more than 5% since Friday’s close, as conflicting reports around the Strait of Hormuz reignited fears of supply disruption. The US military confirmed strikes on Iran on Sunday, aimed at reducing Tehran’s capacity to attack civilian vessels navigating Hormuz. The operation followed recent Iranian drone and missile attacks on US allies including Kuwait, Jordan and Qatar. Hormuz is the market’s pressure point. Shipping volumes had not recovered to pre-conflict levels even before the latest escalation, so the issue is not whether the strait is fully open or fully closed. The issue is that control looks far from settled. In energy markets, uncertainty around the world’s most important transit route is enough to keep a persistent risk premium in crude. Still, perspective matters. Brent around $79/bbl is well below the roughly $95/bbl average seen since the conflict began at the end of February. It is also far below the levels above $100/bbl seen in May. That matters for the bond-market interpretation. If 10-year Treasury yields just north of 4.5% were consistent with oil above $100, they are not obviously too low with oil near $79, especially with some firmer US employment signals still in the mix.

Government bonds sold off globally. The policy-sensitive 2-year Treasury yield rose 2bps to 4.23%, its highest since February 2025, while the 10-year yield rose only modestly from Friday’s 4.56% close. Japan and Australia also saw bonds weaken. The fixed-income message is clear but nuanced: markets are not pricing a runaway inflation shock; they are pricing a Fed that has less room to cut and a greater chance of tightening again.

The composition of the Treasury move matters. The rise in yields has been driven more by real yields than by a surge in breakeven inflation. In plain English, markets are not simply marking up future inflation. They are removing rate cuts, adding the possibility of hikes, and demanding a higher real return to hold duration. Around 1.5 x 25bp hikes are now implied by year-end. That is why precious metals are struggling despite the geopolitical backdrop. Gold fell 1.6% to around $4,055/oz, while silver dropped nearly 3% to about $58.20/oz. A cleaner geopolitical shock might have supported bullion. This one is coming through the rates channel. Higher expected policy rates reduce the appeal of non-yielding assets.

The Dollar is catching the classic haven bid. A broad measure of the US currency rose 0.1%, while the Dollar gained against all major peers. Bitcoin offered no refuge, dropping more than 2% to roughly $62,700, dragging broader crypto lower. Once again, crypto is trading like high-beta risk, not a crisis hedge.

The week ahead now becomes critical because the market needs to know whether the oil shock is feeding into the inflation data or simply tightening financial conditions through sentiment. US CPI on Tuesday is the main event. The headline rate should moderate, reflecting June’s decline in oil, gasoline and associated costs. But the Fed will care far more about the core print, which is expected to rise 0.3% m/m, even as headline CPI is seen falling 0.1%. That split is the whole policy debate. Energy can be volatile and backward-looking. Core inflation is stickier and harder to dismiss. Survey data already show firms passing on higher costs, so Wednesday’s PPI will be watched for evidence of pipeline pressure. Import and export prices on Friday also matter, particularly where the AI investment boom is leaving fingerprints in capital goods and technology inputs.

The survey calendar will help fill in the inflation psychology. NFIB small business optimism lands Tuesday, Empire manufacturing Wednesday, Philly Fed Thursday and Michigan sentiment Friday. Markets will be especially sensitive to price expectations, wage plans and any sign that higher energy prices are affecting consumer inflation expectations.

Warsh’s testimony to the House Financial Services Committee on Tuesday is the other major US event. The market already knows the first Warsh-led Fed meeting had a hawkish tilt. What it needs now is a clearer sense of reaction function. Does the Fed treat this as a supply shock to look through, or as another reason to lean against inflation expectations? That distinction matters enormously for equities, gold and the front end of the Treasury curve. The UK is reading the energy shock differently. More attention is falling on activity than inflation. The latest BDO business trends survey is likely to reinforce that view, with the output index dropping sharply in June while the inflation index rose only modestly. That supports the idea that the BoE’s “look through” approach will continue, especially relative to the ECB’s more activist stance.

The ECB looks more exposed to the hawkish repricing. Expectations of a September hike are likely to firm further if oil stays elevated. Unlike the BoE, the ECB has leaned harder into inflation credibility, and the June hike gives it a platform to argue that it is staying ahead of renewed energy risk. Eurozone data this week — industrial production Wednesday, trade Thursday and final CPI Friday — are unlikely to shift that story unless inflation revisions surprise.

The UK calendar is packed into Thursday, with monthly GDP, industry, services, construction and trade figures all due. The underlying picture is still weak, even if monthly volatility can generate noise. Before that, the BRC retail sales monitor lands Tuesday. Governor Bailey and Chancellor Reeves also deliver the annual Mansion House speeches Tuesday, though any government policy content may be viewed as provisional given a new prime minister is expected next week. China also has a busy week, with retail sales, housing, trade, production and the first estimate of Q2 GDP. The market will be looking for evidence that domestic demand is stabilising and whether industrial momentum can hold up against weaker global risk appetite and elevated energy uncertainty.

Central banks round out the week. The Bank of Canada is expected to keep rates unchanged Wednesday. The ECB enters its formal quiet period Thursday, while the Fed follows on Saturday. That gives Warsh’s testimony even more weight, as it may be the final clean opportunity for markets to hear how the new Fed leadership wants to frame inflation, oil and the AI-productivity debate before the next policy meeting.

Monday’s market message is that the market starts the week in defensive mode. Oil is high enough to matter, Hormuz is unsettled enough to keep risk premium alive, and semiconductors are crowded enough to amplify any macro shock. The AI story has not disappeared, but the bar for risk-taking has risen. This week’s CPI, PPI and Warsh testimony will decide whether Monday’s selloff is another geopolitical air pocket or the start of a broader repricing in rates, equities and the Dollar.

Overnight Headlines

US, Iran Renew Airstrikes Amid Conflict Over The Strait Of Hormuz
Oil Prices Rise As US And Iran Fight For Control Of Strait Of Hormuz
Treasury Two-Year Yield Hits Highest Since 2025 On Oil Rally
Traders Grapple With World That’s Good For Dollar, Bad For Bonds
Dollar Jumps As Renewed Middle East Attacks Fuel Safe-Haven Demand
China Rejects South China Sea Ruling On 10-Year Anniversary
UK Economy Seen Slowing After Iran War Weighed On Growth
UK’s Burnham Weighs Bigger Budget Amid Economic Policy Lobbying
OpenAI, Meta And SpaceXAI Race To Build Cheaper AI Models
TSMC To Build Two Advanced Chip Packaging Plants In Taiwan
SK Hynix Shares Drop In Seoul After Much-Hyped US Trading Debut
Companies Turn To Chinese AI Models To Reduce Costs
China Expands Strategic Mineral Toolkit With New Investment Firm

FX Options Expiries For 10am New York Cut

(1BLN+ represents larger expiries and is more magnetic when trading within the daily ATR.)

EUR/USD: 1.1550 (EU1.1b), 1.1500 (EU970.5m), 1.1400 (EU783.9m)
USD/JPY: 160.50 ($3.52b), 163.00 ($1.77b), 160.00 ($1.26b)
GBP/USD: 1.3410 (GBP314.7m)
AUD/USD: 0.6875 (AUD625.6m), 0.6930 (AUD390.3m), 0.6992 (AUD360m)
USD/BRL: 4.9000 ($510m), 4.7000 ($510m), 5.2250 ($306.6m)
USD/CAD: 1.4100 ($523.7m), 1.3400 ($475m), 1.3670 ($418m)
USD/MXN: 17.10 ($320m), 17.90 ($313.7m)
USD/CNY: 6.7800 ($300m)

CFTC Positions as of July 10

Equity fund speculators raised their net short position in the S&P 500 CME by 4,100 contracts to 352,582, while fund managers decreased their net long position by 7,794 contracts to 971,333.
Speculators also increased their net short positions in various Treasury futures: CBOT US 5-year by 38,606 contracts to 1,359,116, CBOT US 10-year by 5,371 contracts to 814,262, and CBOT US UltraBond by 21,150 contracts to 307,819. They reduced the net short position in CBOT US 2-year futures by 26,573 contracts to 1,261,008 and increased the net short position in Treasury bonds by 52,811 contracts to 143,591.
Bitcoin's net long position stands at 3,500 contracts. The Swiss franc, British pound, euro, and Japanese yen have net short positions of -37,414, -87,903, -16,227, and -123,778 contracts, respectively.

Technical & Trade Views

SP500 - 7500 weekly bull/bear level

Daily VWAP Bullish
Weekly VWAP Bullish
Above 7500 Target 7619
Below 7490 Target 7390

DXY - 100 weekly bull/bear level

Daily VWAP Bullish
Weekly VWAP Bullish
Above 100 Target 102.50
Below 99.40 Target 98.40

EURUSD - 1.15 weekly bull/bear level

Daily VWAP Bearish>Bullish
Weekly VWAP Bearish
Above 1.15 Target 1.1780
Below 1.1490 Target 1.1270

GBPUSD - 1.33 weekly bull/bear level

Daily VWAP Bullish>Bearish
Weekly VWAP Bullish
Above 1.34 Target 1.35
Below 1.33 Target 1.3050

USDJPY - 160.50 weekly bull/bear level

Daily VWAP Bearish>Bullish
Weekly VWAP Bullish
Above 162 Target 163.75
Below 159Target 157.95

XAUUSD - 4100 weekly bull/bear level

Daily VWAP Bearish
Weekly VWAP Bearish
Above 4200 Target 4500
Below 4100 Target 3569

BTCUSD - 60.5 weekly bull/bear level

Daily VWAP Bearish
Weekly VWAP Bearish>Bullish
Above 67.2k Target 70.5k
Below 60.5k Target 52.2k