Written by: Chao Xiang Research

On the same afternoon, the U.S. military launched a new round of strikes against Iran, aimed at weakening Iran's ability to threaten commercial shipping in the Strait of Hormuz. Trump also stated on social media that Iran would pay multiple times for each U.S. soldier lost. The three major stock indexes opened high but closed lower, with the Dow Jones down 0.59%, hitting its lowest closing price since June 24, marking the third declining day in the past three trading days. Chip stocks once surged nearly 3% during the day but saw their gains significantly narrow by the close. Chinese concept stocks were one of the few highlights of the day, with the Livermore Leading Index up 1.34% and Alibaba up 4.67%.

Market Performance

The Dow Jones fell 0.59%, closing at 51839.26 points, the lowest closing price since June 24. The S&P 500 fell 0.19%, closing at 7443.28 points. The Nasdaq fell 0.05%, closing at 25508.07 points.

Tech giants had mixed performances, with Microsoft up 2.15%, Broadcom up 1.98%, Google up 1.52%, Amazon up 1.12%, Nvidia up 0.23%, Meta down 0.02%, Apple down 2.14%, Tesla down 2.96%, and SpaceX down 3.34%.

The Philadelphia Semiconductor Index rose 0.6%, the iShares Semiconductor ETF rose 0.45%, and the VanEck Semiconductor ETF rose 0.41%, both of which had briefly risen nearly 3% during the day before falling back significantly. Optical communications stocks performed well, with Credo up 4.63%, MaxLinear up 3.32%, and Coherent up 2.81%.

Most storage concept stocks rose, with SanDisk up 2.67%, Western Digital up 2.14%, Micron up 1.94%, Seagate up 1.88%, and SK Hynix down 1.86%.

The cryptocurrency concept stock IREN surged 19.57%, marking its largest single-day gain since November 2024, as the company raised its 2026 recurring revenue target to over $4 billion and signed a new customer contract worth $2.8 billion. Warner Bros. Discovery fell 3.76%, closing at its lowest price since April 2025, due to a judge halting Paramount's acquisition of it for two weeks.

Chinese concept stocks collectively strengthened, with the Livermore Chinese Concept Stock Leading Index up 1.34% and the Nasdaq China Golden Dragon Index up 0.9%. Kingsoft Cloud rose 5.24%, Alibaba rose 4.67%, Futu Holdings rose 3.34%, JD.com rose 3.31%, Xiaopeng fell 2.51%, and NIO fell 1.43%.

WTI crude oil settled up 0.9%, and Brent crude oil settled up 1.27%. COMEX gold fell 0.15%, while COMEX silver rose 0.66%. Bitcoin was at $64585.85, up 0.20% in 24 hours; Ethereum was at $1901.08, up 1.80% in 24 hours.

Macro and Outlook

The U.S. military's strikes against Iran continue to escalate, with Central Command confirming that this round of airstrikes aims to weaken Iran's ability to disrupt commercial shipping in the Strait of Hormuz. There has been a subtle change in rhetoric from Iran as well, with an official spokesperson admitting at a press conference that a third party had indeed reached out to propose mediation, although they declined to provide details. However, during the same press conference, the spokesperson still directed criticism at the U.S. military, accusing them of impacting local hospitals and bridges with their strikes on civilian infrastructure.

This posture of fighting back while leaving the door open has continued the pattern of the previous few days, and the market remains uncertain about whether the situation can truly de-escalate.

The movements of chip stocks on that day were interpreted by many as a technical recovery and cannot yet be considered a trend reversal. Analysts have warned that the chip and AI industries are undergoing a true stress test, with signs of recent technical weakening indicating that the likelihood of stock prices seeking to test support levels is increasing. While a bounce after such oversold conditions is not surprising, what is truly worrying is that the momentum from the previous sustained rise may have already broken.

Another interpretation comes from a strategist at KBC Securities, who attributed the situation to seasonal factors. He noted that market sentiment tends to weaken during July, making it difficult to see significant buying despite any sharp declines in chip stocks. Statistics from Goldman Sachs’ prime brokerage business have provided a colder signal, indicating that the pace at which hedge funds have exited U.S. tech stocks over the past two months has reached the fastest level on record.

The next suspense for the market is Wednesday's Alphabet earnings report, which, being one of the key drivers behind the S&P 500's rise this year, will directly test whether the major cloud service providers are still willing to maintain their current investment pace in AI infrastructure.

The trajectory of oil prices is stirring up the inflation narrative, which had just begun to ease. Federal Reserve Chairman Waller stated at a meeting in Portugal that the recent risks of price increases have lessened. However, with the Middle East ceasefire arrangements essentially nonexistent and oil prices rising, the interest rate market has begun to reprice the possibility of rate hikes, with estimates suggesting there could be about two more rate hikes by the first quarter of 2027.

One analyst drew a comparison, stating that once oil prices cross the $90 threshold, every additional dollar increase tightens the screws on the Federal Reserve, which has only recently managed to ease inflation and rate hike expectations that could be entirely overturned by a wave of rising oil prices. Asian markets are similarly affected, as financial conditions in energy-importing economies are tightening due to rising bond yields and inflation expectations.

Chao Xiang Perspective

The Dow Jones hit a near one-month low, but this seems more like the continued fermentation of geopolitical noise, with no new cracks in the fundamentals appearing. The market still believes that Trump will not truly push the situation towards an uncontrollable direction, which is the underlying logic for chip stocks being able to rebound nearly 3% during the day.

What is truly worth noting is that professional capital’s attitude is now more cautious than that of retail investors. If the pace of evacuation does not slow down before Alphabet's earnings report, even if the earnings numbers themselves are not bad, the market may continue to adopt the pricing method of "good news already priced in."

Recent reactions to earnings reports from TSMC and Samsung have already set a precedent.

The counterintuitive rise of Chinese concept stocks provides an observational window, as capital finds a relatively unpriced alternative while withdrawing from U.S. tech stocks under dual pressures from geopolitics and technology.

How long this divergence can continue depends on whether the Middle East situation can truly de-escalate and whether rising oil prices will push the Federal Reserve back toward a more hawkish stance. This week's Alphabet earnings report and oil price movements will be the first two variables to provide clues.