Oil prices — not artificial intelligence — are calling the shots in global markets right now, as investors try to make sense of conflicting signals coming out of the Middle East conflict, which has now stretched into its fifth month.
Brent crude futures pulled back slightly from a one-month peak on Tuesday, as traders held onto cautious optimism that a resolution could be near. However, markets have rallied on similar hopes before, only to be let down, leaving plenty of room for another disappointment.
Adding to the tension, Yemen’s Houthi movement, which is aligned with Iran, announced plans to impose a naval blockade on Saudi Arabia — a development that could send further shockwaves through global oil supplies. Despite that threat, market attention shifted toward reports that Tehran had received a proposal from mediators calling for a 10-day pause in fighting.
The pullback in oil prices improved overall market sentiment, giving traders room to snap up battered chip stocks across Asia. South Korea’s KOSPI index climbed nearly 5% on the day, though it remains down 19% for the month of July. The index is still up 62% in 2026 overall, even as uncertainty around artificial intelligence investments continues to hang over markets ahead of a key earnings period.
Chipmakers and global stocks more broadly have endured sharp swings in recent weeks, with investors worried about stretched valuations, the speed of profit growth, and whether massive spending on AI infrastructure will actually deliver meaningful returns.
European futures pointed 0.3% lower on Tuesday, a sign that confidence remains shaky. The recent surge in Middle East hostilities has reignited concerns about inflation, which has in turn pushed bond yields higher and given the U.S. dollar a firmer footing.
Across the Atlantic, Britain’s Andy Burnham — the country’s seventh prime minister in just ten years — is navigating a difficult start to his tenure, dealing with a slow-moving economy, concerns about government spending discipline, and the broader fallout from the Iran conflict.
On Monday, Burnham stated he intended to honor the fiscal rules set by the previous administration, while leaving the door open to using whatever flexibility those rules allow. That announcement was enough to trigger a sharp decline in the British pound and UK government bonds on Monday.
Key items to watch Tuesday that could move markets include UK wage figures for May, a ZEW economic sentiment survey covering the eurozone and Germany, and earnings reports from Julius Baer and Novartis.
