Written by: Trend Research

Iran officially ordered a complete ban on navigation in the Strait of Hormuz last Friday. Commercial shipping monitoring shows that only 11 vessels passed through the strait in the last 24 hours, reaching a historical low in shipping volume. Brent crude oil accumulated a 5.39% increase over the week, ending a four-week decline and recording the first weekly gain in five months. The market's panic over the geopolitical conflict has noticeably eased following Trump's willingness to negotiate on Friday. However, U.S. stock futures in Asia dipped slightly on Monday, as the market awaits intensive earnings reports and data this week for directional pricing. The five major Wall Street banks are set to report on Tuesday, and Federal Reserve Chairman Waller will testify in Congress for the first time; the performance of TSMC and ASML will directly assess the true demand for AI.

Market Performance

The S&P 500 rose 0.42% to 7575.39 points, accumulating a 1.23% increase for the week, marking a new high in over a month. The Dow Jones increased 0.29% to 52637.01 points, with a total weekly drop of 0.50%, marking its first weekly decline in five weeks. The Nasdaq rose 0.29% to 26281.607 points, with an accumulated weekly increase of 1.74%, marking a two-week rise and completing three consecutive days of gains.

SK Hynix made a strong debut on the U.S. stock market, rising over 10%, reaching a new high since its IPO. Meta rose 6%, reaching a new high since May 29, with a weekly increase of nearly 15%, experiencing two consecutive days of gains after releasing its paid large model. Nvidia led the chip giants with a 4% increase. Circle, the first stablecoin stock, rose 5%.

WTI August crude futures accumulated a 3.96% increase for the week, priced at $71.41 per barrel. Brent September crude futures accumulated a 5.39% increase, priced at $76.01 per barrel, with a brief rise of over 3% after the announcement of the closure of the Strait of Hormuz. Spot gold edged down 0.21% for the week, priced at $4104.1 per ounce. Bitcoin briefly surged above $64,000, reaching a new high in over two weeks; the offshore RMB briefly broke above 6.78 for the first time in over two weeks. The U.S. dollar index turned slightly lower during Friday's trading.

The yield on the ten-year U.S. Treasury bond rose about 8 basis points to 4.56% over the week, while the two-year yield rose about 7 basis points to 4.21% for the week.

Macroeconomics and Outlook

Iran announced last Friday the closure of the Strait of Hormuz, prohibiting all ships from passing until the U.S. stops interfering. Commercial shipping data shows that only 11 vessels passed in 24 hours, with both tankers and cargo ships significantly dropping. The U.S. Central Command then stated that the strait remains open for vessels passing legally, but commercial shipping data indicates that actual traffic has nearly stagnated. Iran's Supreme Leader Mujtaba announced retaliation against the U.S. and Israel, while Trump responded that 1,000 missiles are aimed at Iran. The escalating geopolitical situation pushed oil prices to record their first weekly rise in five weeks.

The market's pricing logic regarding the geopolitical conflict is changing. Trump's willingness to continue negotiating with Iran on Friday caused the yield on the ten-year U.S. Treasury to hit an intraday high before retreating, indicating that the market's expectations for escalating conflict are converging. Oil prices spiked after the announcement of the closure of the Strait of Hormuz, but by Friday's close, the gains had narrowed considerably, suggesting that the market is gradually digesting this event, leaning towards the belief that the conflict is controllable in the short term rather than a full-scale war.

This week marks the opening of earnings season, becoming the core focus of the market. The five major Wall Street banks—JPMorgan, Bank of America, Wells Fargo, Goldman Sachs, and Citigroup—are set to report on Tuesday, making it a very busy trading day. ASML is scheduled to release its second-quarter report on Tuesday, and TSMC will release its complete earnings report on Wednesday. The performances of the three will directly verify the true health of global AI chip demand. Analysts expect the S&P 500's earnings per share to grow 24% year-over-year in the second quarter, with technology companies contributing most of the increase. Currently, the dynamic price-to-earnings ratio is about 20 times, with valuations nearing reasonable levels, but whether companies can fulfill this growth expectation will be the biggest suspense for the next two weeks.

Federal Reserve Chairman Waller will testify on Tuesday and Wednesday before the House Financial Services Committee and the Senate Banking Committee, explaining the FOMC monetary policy report. U.S. June CPI and PPI data will be released simultaneously, which will directly influence market expectations for the Fed's next policy path. Currently, the market's implied probability of a rate hike in July is only 24%, but if inflation data unexpectedly strengthens, combined with any hawkish statements from Waller, it will directly pressure U.S. Treasury yields and affect stock market valuations.

SK Hynix's stock listing subscription has been hot, reflecting strong market expectations for the demand for memory chips. Long-term agreements are gradually locking in global HBM supply, and it is expected that by 2027, about half of global DRAM capacity will be unable to serve smaller buyers, creating structural advantages on the supply side.

Trends Perspective

Asian futures slipped slightly on Monday, reflecting the market's wait-and-see sentiment between geopolitical shocks and the start of earnings season. The escalation of the geopolitical conflict poses short-term pressure, but the market is digesting it as a controllable standoff rather than a full-scale war, as evidenced by oil prices retreating from their highs. The core variable that will truly determine the direction for next week remains the data from the earnings season.

If the five major banks and the earnings of TSMC and ASML confirm a 24% profit growth and the continuation of AI demand, the market is likely to break through geopolitical pressures and regain momentum. If the earnings reports show that companies begin to be frugal with their AI spending, the current optimistic assumptions regarding the sustainability of AI investments will be pierced. The strong buying momentum of SK Hynix may only be a week-long emotional pulse, and the real test will be the subsequent tangible capital commitments from companies.

Next week is packed with events; every earnings report, every data point, and every statement from Waller could become the trigger for market repricing. Geopolitics provide volatility, earnings reports provide direction, this week may set the tone for the U.S. stock market's direction in the second half of the year.