The situation in the Middle East continues to deteriorate, oil prices rise again, and the euro awaits the ECB decision to strengthen.

Huitong Network, July 23 – The ongoing escalation of the Middle East conflict has driven crude oil futures to new highs. Ahead of the European Central Bank's decision, the euro edged higher as hawkish policy expectations intensified. The US dollar showed mixed performance, while the yen remained under pressure. After Alphabet’s earnings report, major tech stocks declined, but the semiconductor sector rose against the trend.

There is no sign of US-Iran tensions easing or either side returning to the negotiating table, as military clashes continued for the twelfth consecutive night. President Trump once again issued a warning to Tehran; meanwhile, the Houthi movement in Yemen attacked a Saudi oil tanker in the Red Sea. The conflict is spreading across the Middle East and extending into the Red Sea area. The Iranian-backed Houthis have taken a tougher stance, implementing a blockade on Saudi vessels passing through the Bab el-Mandeb Strait, threatening oil supply through the region’s second-largest key shipping channel and driving oil prices higher.



This week, Brent crude futures have surged over 10%, and West Texas Intermediate (WTI) crude futures have risen more than 8%, raising concerns about renewed inflationary pressures. There have been repeated attacks and fires involving tankers in the Strait of Hormuz, and following Houthi attacks on two Saudi oil tankers in the Red Sea, the Trump administration is widely expected to intensify action against Iran rather than seeking a ceasefire. On Wednesday, Trump posted on the Truth Social platform, warning Iran: as long as Iranian forces attack ships within the Strait of Hormuz, the US will bomb “a bridge or a power plant” in Iran.

Yesterday, the US Congress cleared the way for Trump's military operations against Iran: the Republican-controlled House launched legislative proceedings for a budget reconciliation bill, proposing $95 billion for related war expenditures.

As inflation risks return to the forefront, global bond markets show mixed sentiment, and US Treasury yields continue their upward trend this month. The yield on 10-year US Treasuries approached the May high of 4.687%; meanwhile, the 10-year French and German government bond yields broke through their May peaks.

The European Central Bank will conclude its two-day monetary policy meeting today and plans to announce its decision at 12:15 GMT. The market consensus broadly expects interest rates to remain unchanged. Before this round of geopolitical escalation, mainstream opinion was that after a rate hike in June, the ECB might pause further increases; however, continued turmoil has completely overturned these expectations.

Current investor pricing shows an over 85% probability that the European Central Bank will raise rates by 25 basis points in September.

Therefore, today's market trend will hinge on how strongly ECB President Lagarde signals policy at the press conference. On Thursday, the euro rose for the second consecutive day, climbing from just below $1.1400 yesterday to break above $1.1420.
The Australian dollar is boosted by employment data, while GBP investors assess Burnham’s new policies

Australia's employment data beat expectations, giving the AUD/USD pair a moderate boost. Following the release of the figures, markets raised expectations that the Reserve Bank of Australia could further tighten monetary policy, although they have not fully priced in a 25 basis point rate hike in December.

The pound has remained relatively weak this week. The new Prime Minister, Eni Burnham, pledged to continue the Labour Party's existing fiscal policies but has yet to win full investor confidence; yesterday's UK CPI data also dampened market expectations for Bank of England rate hikes. Within days of taking office, Burnham has introduced a range of subsidies for residents and businesses, with most funding planned to come from cuts in other areas.

However, today’s newly announced policy—cutting operating taxes by 20% for pubs, clubs, and music venues—has raised concerns, as the stable funding source for this measure is not yet clear.


Diverging expectations for rate hikes among major central banks have resulted in a varied performance for the US dollar this week. Markets have refocused on the possibility of a Federal Reserve rate hike in September, with the US dollar index rising, especially against the yen.

The yen fell to a 40-year low on Tuesday and continued to plunge today, with the exchange rate reaching 163.44 yen per US dollar. Japanese Finance Minister Kaori Katayama made another verbal intervention in the forex market.

Japanese authorities have yet to take substantial action, signaling they are not yet extremely alarmed by the current pace of yen depreciation, but intervention remains possible as the rate approaches the 163.50 mark.

The US dollar’s rebound this week weighed on previously recovering gold prices. Spot gold retreated from Wednesday’s two-week high of $4,166, falling towards the $4,090 area.


In equities, Asian stock markets did not follow Wall Street's overnight declines, with the semiconductor sector leading a rebound. The ongoing oil price rally has made US equity investors cautious; however, small-cap S&P futures indicate the Asian market rally is unlikely to broaden, and European equities are also under pressure today.

In after-hours trading, two of the "Magnificent Seven" US tech giants, Tesla and Alphabet, saw their stock prices fall after earnings reports. Tesla’s earnings per share were much lower than expected, causing the stock to plunge over 5%, though the cash flow decline was not as severe as forecast. Alphabet saw an 82% year-on-year surge in cloud revenues, but this failed to impress investors, prompting the Google parent company to raise its 2026 capital expenditure outlook again.

This earnings season, investors have sharply raised their expectations and lowered their tolerance for disappointment, while the ongoing Middle East conflict has further heightened market uncertainty.

Nonetheless, capital continues to rotate among AI cloud providers and upstream hardware companies. Alphabet’s expanded investment in artificial intelligence benefited South Korea’s two chip giants, SK Hynix and Samsung Electronics; Texas Instruments beat earnings estimates, but lifting its capital expenditure forecast weighed on share performance.

AMD saw its pre-market stock price rise after announcing a strategic partnership with artificial intelligence company Anthropic. Later today, the market is also watching Intel’s earnings closely.