AFS Markets Blog: Midday 07/07/2026

• Meanwhile in markets, both bonds and equities are under pressure today though for very different reasons. For bonds, the focus is back on the Strait of Hormuz, while equities continue to swing with the fortunes of the AI boom/bubble;

• Bund and US Treasury yields across the curve are up by about two basis points today. The 30-year UST yield is now back above the psychological 5.00 percent mark for the first time in a little under a month. Thank higher oil prices for the rise in yields: Brent crude is up around a dollar on the day – briefly touching the $73 per barrel mark. The move comes after a Qatari LNG carrier was struck by a projectile fired by Iran earlier this morning;

• The Qatari vessel was moving through a corridor along the Omani coast as it was trying to exit the Gulf. When this shipping corridor along Oman’s coast was announced two weeks ago Iran's military rejected the move. The Iranians argue that they had not been consulted on the decision and that the memorandum of understanding grants Tehran sole responsibility for overseeing shipping through the Strait of Hormuz. In the days that followed two vessels using the corridor were struck – limiting travel through the Strait;

• The US eventually responded with retaliatory strikes last week, prompting further Iranian attacks before both sides eventually agreed to halt hostilities. According to reports, however, this truce was only set to last one week – expiring on Sunday evening. With no solution found to the impasse in the meantime, Iran appears to have resumed its campaign. Washington has yet to respond to the latest strikes;

• Shifting to equities, the AI trade is increasingly proving that sometimes even your best is no longer good enough. Samsung's Q2 guidance released this morning point to record earnings. Operating profits are expected to increase nearly 20-fold compared to the same quarter a year ago – more than the entire profit for 2025. Yet, punters were unimpressed. Samsung stock fell 10 percent as a result – a reminder of just how high expectations in AI have become;

• AI-related equity indices have recovered from this morning's lows but remain firmly in the red. South Korea's KOSPI is down around five percent – having pared losses after an eight percent plunge earlier in the session triggered circuit breakers. Nasdaq futures have also recovered somewhat and are now down by less than one percent. Our own AI index – which includes the major hyperscalers – has halved its intraday losses and is currently down around 1.25 percent;

• Looking ahead, all eyes are on Paris. At 13:30 CET, Marine Le Pen – in charge of the poll-leading National Rally party – will learn whether an appeals court ruling will bar her from running in next year's presidential election. Should she be sidelined, the party reins will pass to Jordan Bardella. Since Bardella is viewed as more economically right-wing than Le Pen, his ascension could provide some relief for recently widened OAT–Bund spreads;

• Elsewhere, the day's calendar is rounded out by a single ECB-speaker and the start of the NATO summit in Ankara. Tomorrow brings the summit's second (and last) day, further ECB-speak and the release of the June FOMC meeting minutes. There are also interest rate decisions in New Zealand and Poland – with the former expected to hike and the latter to hold.

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