US Markets Mixed as Iran Tensions Escalate Amid AI Stock Decline

Shares of computer chip manufacturers and other companies that have benefited from the artificial intelligence boom came under renewed selling pressure, dragging equity markets lower across the world. Micron Technology, a major memory chip producer, dropped 3.2%, though the stock remains up an impressive 206% so far this year, supported by robust demand generated by AI-related investments, according to an AP report. Sandisk fell 5.3% but continues to show a year-to-date gain of 545%, while Western Digital lost 5.1%, though its shares are still up 182% for the year. These companies have faced sustained pressure in recent weeks amid concerns that their valuations have risen too rapidly and that current demand for memory chips and processors may prove difficult to sustain if artificial intelligence fails to deliver the anticipated gains in profitability and productivity. According to The Economic Times, memory-chip makers were among the biggest laggards, with SanDisk, Western Digital, Seagate Technology, and Intel among the largest percentage losers, even after chip demand bellwether TSMC posted a 77% jump in quarterly profit.

Despite the market decline, US economic indicators released on Thursday showed solid core retail sales, a drop in jobless claims and surging manufacturing activity in the Northeast, as reported by The Economic Times. However, the positive economic data was overshadowed by semiconductor weakness and rising oil prices. Among the 11 major sectors in the S&P 500, technology was one of the biggest percentage losers, with semiconductor stocks weighing heavily on the broader market. According to preliminary data, the S&P 500 lost 37.78 points to end at 7,534.62 points, while the Nasdaq Composite lost 383.76 points to 25,885.47. The weakness in chips, even after chip demand bellwether TSMC posted strong results, demonstrated the lofty expectations for a sector that has soared by nearly 70% so far this year. Analysts have set a high bar for second-quarter earnings season, with S&P 500 companies expected to post year-on-year earnings growth of 24.8%, while technology earnings alone are seen jumping 65.5% from the year-ago quarter.

Crude oil prices surged more than 5% for the second consecutive trading session on Tuesday amid another round of attacks from the United States on Iran, with no signs of de-escalation. Brent crude oil futures were trading 4.3% higher at $86.91 per barrel on Tuesday's market, compared to $83.3 per bbl at the previous market close, according to Investing.com data. The energy prices have risen more than 21% in the last two days as investors focused on the rising risk of another supply chain disruption due to the recent escalations. The escalating tensions after over the weekend when Tehran and Washington exchanged airstrikes, with Iran targeting US facilities and announcing the Strait of Hormuz is closed, while Trump rejected these claims. Following Trump's announcement that the US will be the 'GUARDIAN OF THE HORMUZ STRAIT' and will be reimbursed at 20% on all cargo shipped, Brent crude oil jumped 1% to $84.13 per barrel and West Texas Intermediate gained 1.57% to $79.39 a barrel. The sharp rebound in crude oil prices has heightened inflation concerns at a time when consumer prices in several major economies are already running above central bank targets.

Despite Thursday's mixed performance, investor attention is rapidly shifting to second-quarter earnings, which begin in earnest with major banks reporting results. Goldman Sachs Group Inc. and JPMorgan Chase & Co. are due to report Tuesday, providing crucial insights into corporate performance and market sentiment. The results will mark the first major test of whether corporate earnings can justify a rally fueled by optimism over artificial intelligence. As per LiveMint, the data could play a crucial role in determining whether the Federal Reserve keeps interest rates unchanged or considers another rate hike later this year. Federal Reserve Chair Kevin Warsh is scheduled to testify before Congress as part of the central bank's semiannual monetary policy report, presenting the central bank's Monetary Policy Report to the US House Financial Services Committee at around 10 am (ET). The market volatility has been particularly pronounced in Asia, where stocks fell 2.1% in Shanghai and Japan's Nikkei 225 dropped 1.9%, with South Korea's Kospi index dropping 8.9% including a 15.4% plunge for SK Hynix's stock in Seoul, the worst since it began trading in 1997.

The renewed military strikes by the US and Iran in the Gulf region have raised significant concerns about the disinflationary pulse that emerged in the June CPI report. International Energy Agency (IEA) Executive Director Fatih Birol warned that "if the Strait of Hormuz remains closed, we may again have some difficulty for global economies, including those in the region, developing nations, and Asia." Birol emphasized that "It is not months, it is weeks" before major economic challenges return, as tanker traffic through Hormuz has fallen and abruptly halted a brief recovery that followed the fragile ceasefire. The US benchmark for crude oil (WTI) has rebounded in recent days to just under $80 a barrel, though it remains far below earlier war levels. The U.S. Bureau of Labour Statistics is set to announce the CPI inflation data for the 12-month period ended June 2026 on Tuesday, July 14, 2026, with the agency releasing the inflation data at 8:30 am (ET). Despite the hawkish comments from Fed officials this week, the Fed funds futures market is currently estimating a 90% probability of the Fed standing pat at the next FOMC meeting on July 29.