AFS Markets Blog: Midday 21/07/2026

• Meanwhile in markets, bonds and stocks continue to trade above yesterday's lows. Reports of continued diplomatic talks between the US and Iran have managed to bring crude prices back below the $90 handle – even as attacks in the region have brought ship traffic in the Strait of Hormuz to a standstill;

• Bloomberg data show that oil tanker traffic has fallen sharply since the fighting between the US and Iran resumed in earnest around a week and a half ago. Since last Thursday, however, only one or two (courageous) oil tankers have been making the journey through the Strait each day. That is effectively back to the lows seen at the height of the conflict, yet  Brent crude remains more than $30 below its peak. By comparison, during the lull in fighting under the memorandum of understanding more than 20 tankers transited the Strait each day. Even that was still well below the roughly 60–80 tankers that passed through daily in February;

• Moving on to some market commentary, US Treasury yields are down a basis point or so across the curve this morning, while the decline in Bund yields is more contained. Taking a look at Periphery-Bund spreads, it is clear that some divergence has emerged since the renewed outbreak of fighting between the US and Iran;

• The 10-year Portuguese-Bund spread is below its 50-, 100- and 200-day moving averages at 35bps – essentially in line with its pre-conflict levels. The Spanish Bund spread still sits a couple of basis points above its war lows – reached just over a month ago. At 45bps, Spanish-Bund spreads are currently broadly in line with all its major DMAs. French and Italian spreads are lagging. The Italian spread stands at 80bps – its highest level since May – while the French OAT-Bund spread remains just below that at 79bps. That leaves the OAT-Bund spread close to its war high of 83bps;

• Shifting to equities, where our screens are all green. Stoxx 50 and S&P 500 futures are both up over half a percent this session. After a rough end to last week, the AI trade has found its footing: the Kospi is up over three-and-a-half percent, while Nasdaq futures are up one-and-a-half percent;

• Don't call it an AI revival yet – the Kospi is still stuck in bear market territory, 25 percent below last month's highs. At the same time, the Nasdaq's damage is far more contained, having managed to stay out of correction territory altogether;

• Looking ahead, we'll be keeping a close eye on Iran headlines – there's nothing else of note on the calendar to keep us busy. Tomorrow brings much of the same with a completely empty schedule.

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