US Earnings and Geopolitics: The Great Divide Between Equities and Oil

Equity

US Indices

The week was punctuated by a technical rebound early on, driven by a recovery in semiconductors after the sharp drop of the previous week, with Alphabet advancing notably on rumors of a server chip integrating Gemini aimed at improving AI efficiency and relieving compute capacity constraints. This surge, however, was short-lived: the publication of Alphabet and Tesla’s quarterly results on Thursday caused the S&P 500 to plunge by 1.21%. Moreover, the Nasdaq was dragged down by a 7% drop in Alphabet and a 14% drop in Tesla following their earnings, in a context where rising oil prices linked to the Middle East escalation also weighed on sentiment. The Dow Jones shed 506.93 points (-0.97%) to 51,711.65.

On Friday, the resumption of hostilities in the Middle East confirmed to investors the lack of an exit ramp for the US-Iran conflict, with oil crossing back above $100 and the bond market sending warning signals on inflation expectations. The week ultimately closed on a negative note, before a rebound at the very start of the following week driven by geopolitical easing: the Dow Jones gained 236 points (+0.46%), lifted by Salesforce, IBM, and Apple, while American Express, Honeywell, and Goldman Sachs were among the biggest losers, and the S&P 500 rose by 0.57%.

The Q2 earnings season was the true catalyst of the week. For Tesla, second-quarter capital expenditures reached $5.8 billion, generating negative free cash flow of $1.1 billion, with Elon Musk calling 2026 a “massive capex year,” a discourse that failed to reassure the market alongside a 12% drop in revenue, the largest decline in a decade. At Alphabet, despite 10% growth in advertising revenue driven by AI, the market focused on the capex trajectory, as Wolfe Research had noted beforehand that the quarter’s capital expenditure amount and guidance for the rest of the year would matter more than the results themselves. IBM disappointed by lowering its annual revenue growth forecast to a 4-5% range, down from 5% previously, penalized by a marked drop in mainframe system sales for data centers.

On the energy side, outperformance was observed over the week, driven by the rise in oil prices, while the “AI infrastructure” narrative continues to deteriorate.

Commodities

Oil

An extremely volatile week for oil, entirely dictated by the US-Iran military escalation. Mid-week, the US conducted a 13th consecutive day of strikes against Iran, while Houthi rebels, backed by Iran, claimed attacks on Saudi Aramco-linked facilities at the Jizan and Yanbu ports in the Red Sea. On the supply side, the Caspian Pipeline Consortium suspended crude loadings at its Black Sea terminal after tanker attacks, disrupting about 80% of Kazakhstan’s oil exports, prompting some Asian buyers to consider bypassing Saudi exports via the Suez Canal.

In this context, Brent crossed the $100 mark for the first time since late May, before ending down below $98 on Friday while still posting a gain of over 12% for the week. The truce announced between Washington and Tehran at the end of the week then led to a sharp deflation of the risk premium: Brent fell back toward $90 the following Monday, erasing a portion of the previous week’s gains, a dynamic confirmed by Trading Economics which noted that while prices retreated, they remained well above their levels prior to the escalation of strikes that disrupted tanker traffic in the Persian Gulf and Red Sea.

Gold

Gold followed an inverse trajectory, fully playing its safe-haven role in the first part of the week before stabilizing with the geopolitical easing. It crossed back above $4,100 an ounce on Monday, as the pause in US-Iran fighting pushed oil prices down and reduced inflation fears ahead of the Fed meeting. The market remains technically constrained, however: gold has been trading in a $4,000 to $4,200 range since late June. A Global X analyst cited by the press pointed out that a significant resolution between Washington and Tehran would be necessary to allow gold to break out of this $4,000-$4,200 corridor, as the persistence of the conflict maintains high yields and inflation expectations that cap any advance. The resumption of strikes mid-week had indeed caused the probability of a Fed rate hike in September to jump to about 82% in fed funds futures, before the pullback observed at the very end of the period.