Written by: Tide Research

After initially sending a tough signal at the NATO summit, Trump withdrew his threats, and the market went through a complete emotional cycle within two hours. Oil tanker traffic in the Strait of Hormuz briefly came to a standstill, with Brent crude skyrocketing to 78 dollars, inflation expectations sharply rising, and the Dow dropping 1.09%. The price gap between Brent and WTI widened to 4.5 dollars, setting a near three-month high, which is a quantifiable signal of geopolitical risk premium. However, the Philadelphia Semiconductor Index rose 2.23%, recording an unprecedented influx of funds into the chip sector, with Nvidia increasing by 3.65% and pulling the Nasdaq back into positive territory, while cryptocurrencies followed with a decline, with Bitcoin down 1.69% at 62290 dollars and Ethereum down 1.58% at 1743.54 dollars.

Market Performance

The S&P 500 fell 0.28%, closing at 7482.71 points. The Dow fell 1.09%, closing at 52348.39 points. The Nasdaq rose 0.20%, closing at 25870.652 points. The Nasdaq 100 increased by 0.27%, closing at 29252.562 points. The Russell 2000 dropped 0.88%, closing at 2956.389 points. The VIX rose 4.65%, closing at 16.88.

The Philadelphia Semiconductor Index increased by 2.23%, closing at 12574.967 points. This index is currently just 1.4% away from the 50-day moving average (about 12750 points). If it effectively breaks through, it will confirm the medium-term rebound trend. Nvidia rose 3.65%, Apple rose 0.88%, Amazon dropped 0.96%, Google A fell 1.39%, Microsoft fell 1.41%, Meta fell 2.02%, and Tesla dropped 2.23%. The semiconductor ETF rose 1.99%, attracting 5.4 billion dollars of funds in a single day, four times the historic single-day record. TSMC ADR rose 0.93%, and AMD rose 0.25%.

The technology sector ETF rose more than 1.24%, and the energy sector ETF rose 1.76%. The regional bank ETF dropped 2.30%, and the banking sector ETF fell 2.27%. The global airline industry ETF declined by 2.21%. The interest-sensitive real estate ETF dropped by 1.6%, and the materials sector fell by 2.49%.

WTI crude oil closed up 4.4%, at 73.52 dollars per barrel. Brent crude oil closed up 5.2%, at 78.02 dollars per barrel, briefly breaking through 80 dollars during the day. The price gap between the two widened to 4.5 dollars, reflecting a market more focused on concerns of supply disruptions in the Middle East. Spot gold fell 0.6%. The dollar fluctuated and fell back. The 10-year US Treasury yield increased by 2.6 basis points, while the yield on 10-year inflation-protected securities reached a one-year high. In terms of digital currencies, Bitcoin fell 1.69%, at 62290 dollars; Ethereum fell 1.58%, at 1743.54 dollars.

Macro and Outlook

Trump declared at the NATO summit that the US-Iran ceasefire agreement had ended and hinted that US military forces would launch a new round of strikes. Iran immediately announced a counterattack, and oil tanker traffic in the Strait of Hormuz briefly stalled, causing oil prices to race towards 78 dollars. Trump later claimed that tensions would soon ease, leading to a sharp reversal in market sentiment.

The escalation of geopolitical conflicts drove US Treasury yields and inflation expectations sharply upwards, and the money market subsequently increased bets on the Fed raising interest rates before October, with odds rising from 18% on Monday to 32%, almost doubling. The minutes from the Fed's June meeting were released the same day, revealing that a few officials had proposed reasons for raising interest rates, with officials generally viewing upward inflation risks as the main threat currently, adjusting inflation forecasts for 2026 and 2027 upward from April.

The record inflow of funds into the chip sector reflects the clear judgment of institutional investors: the geopolitical conflict is expected to ease, while the long-term growth logic of AI remains unchanged. The semiconductor ETF has fallen about 16% over the past two weeks, with institutions accumulating significantly near the 50-day moving average. This is not a panic sell-off but a certain entry against a phase correction. Historically, the average return of the semiconductor sector a week after a single day of inflow exceeding 2 billion dollars is +3.6%, with a positive return probability of 78%.

The decline in cryptocurrencies reflects a consistent response of risk assets under geopolitical uncertainty, with Bitcoin and Ethereum not following the rebound in the chip sector. This indicates a discrepancy in expectations regarding geopolitical conflicts between cryptocurrency investors and institutions.

An unexpected increase in US crude oil inventories alleviated the geopolitical risk premium. The average price of gasoline slightly rebounded to 3.80 dollars per gallon. The rise in oil price volatility may be more profound in its suppression of risk appetite than the impact of absolute oil prices.

The IMF has revised down its global economic growth forecast for 2026 to 3.0%, warning that the risks of war in the Middle East, trade fragmentation, and AI expectation adjustments pose sustained risks.

Tide Perspective

This trading day is essentially a differentiation between institutions and retail investors. As oil prices rise, the bond market comes under pressure, and inflation expectations heat up, retail investors are selling off cryptocurrencies and high-beta tech stocks, while institutions are betting heavily on the chip sector with a record 5.4 billion dollars.

The logic of the institutions is clear: the lifecycle of geopolitical conflicts is usually measured in days, while the growth cycle of AI is measured in years. Trump's "retreat from threats" model suggests that this time it won't really escalate to full-scale war. Historically, buying windows often accompany Middle Eastern crises. Referencing the January 2020 Soleimani incident, the S&P 500 dropped 2.1% in the five trading days following the outbreak of conflict, but then rebounded 7.3% in the following 20 trading days; during the early stages of the 2022 Russia-Ukraine conflict, the Nasdaq dropped 6.8% within two weeks, followed by a rebound of 12.4% over the next two months. The "golden buying window" for geopolitical shocks typically appears within 5-10 trading days after panic peaks.

The key lies in the next 48 hours. If the tensions in the Strait of Hormuz do not escalate further this week, the rebound momentum of the chip sector is expected to continue, with the next target being to regain the 50-day moving average (approximately 12750 points). If the situation suddenly heats up, this influx of 5.4 billion dollars may face the risk of being trapped. However, judging from the level of confidence among institutions, they have already bet that the geopolitical risks are short-term.

The oil price breaking above 78 dollars has indeed raised inflation expectations, but this impact is still not enough to shake the valuation logic of the chip and AI sectors. As long as the chip sector can hold the rebound position this week, the market is expected to retest the highs upward next week.