Edward Meir’s week in review and thoughts on the week of July 20, 2026

In response, Iran attacked a variety of targets in Kuwait, Bahrain, and Jordan. The attack in Jordan killed two US servicemen. A third is still missing. What is just as concerning is that there are no “off ramps” that could conceivably end the fighting. No talks are scheduled, and no mediation efforts are underway either—at least none that we know of.

Oil prices

Not surprisingly, oil prices pushed higher this past week. They are up roughly 16% on each of the two crude contracts. Brent settled at just over $88 per barrel on Friday, with values now climbing for three weeks in a row. Product prices remained firm as well, with good gains seen in both distillates and gasoline. Crack spreads ended at record highs, hovering around $70/barrel.

What’s more, US oil reserves are getting depleted. And it is only a matter of time before these have to be refilled. China is thought to be in the same predicament.

Meanwhile, transit in and out of the Gulf has shrunk. Just a handful of voyages have been reported over the past few days. Nevertheless, producers are adjusting to the transportation impasse. Reuters reported that Saudi Arabia has now diverted more than 70% of its normal daily crude exports to the Red Sea port of Yanbu, sending 4 million to 5 million barrels per day through this route, up from less than a million at this time last year. However, even Red Sea transit could be in jeopardy at some point if Iranian-backed Houthi rebels decide to join the fighting by blocking shipments. So far, they have stood aside.

US equity markets

On Wall Street, US equity markets were dealing with their own set of disruptions. All three indices lost ground this past week. Selling on NASDAQ was particularly heavy given the sharp setback in AI and semiconductor stocks. For the week, NASDAQ lost 2.9%. The S&P 500 and the Dow each fell by 1.6% and 0.9%, respectively. The Philadelphia Semiconductor index – a key driver behind some commodity-related AI plays like copper – tumbled a whopping 10% on the week on profit-taking and concern about competitive offerings coming out of China.

AI

On the latter point, a Beijing-based startup named Moonshot unveiled an AI platform called Kimi K3 that is giving both Anthropic’s Claude and OpenAI’s ChatGPT a run for their money. (Ironically, the Chinese founder of Moonshot got his PhD from Carnegie Mellon in 2019). Kimi K3 apparently uses much less processing time and is said to be 50% cheaper than open AI’s high-performing GPT-5.6 Sol model, according to Bank of America. An AI evaluation provider tells Reuters the Chinese version could “be the single biggest release of the year.”

Meanwhile, President Xi’s opening address Friday to China’s annual World Artificial Intelligence conference urged countries to seize the “historic opportunity” of China’s open-source AI. “The development of artificial intelligence should not be a solo performance by any single country but rather a symphony of global cooperation,” he said. Perhaps Xi should also acknowledge the impact US-led sales restrictions have had in prompting the Chinese to achieve the surprising progress they have.

Q2 Earnings

On the earnings front, Q2 reports are coming in. Although it is still early days, of the 49 of companies in the S&P 500 that have reported, 90% have delivered better-than-expected results, according to Reuters. Banks have performed particularly well on solid trading results and lucrative investment fees generated by the number of IPOs that have come out. Markets see year-on-year S&P 500 earnings growth of 26% on aggregate. That’s up from the 19% expected in April and just about matches Q1’s stellar advance.

Base metals

In other commodity markets, base metals closed out a mixed week. Copper, aluminum, and nickel were each up by about 0.3%. Zinc and lead were down by 2.5% and 0.7%, respectively. Nickel was the only winner, up by 1.3% on concern that supply of Gulf-produced sulfuric acid (used in HPAL nickel production) could be squeezed once again.

On the whole, though, we were rather surprised the base metals complex held up as well as it did last week, especially given the weeks-long correlation we have been seeing between copper (in particular) and the semiconductor equity space. Although the selling in chip stocks did impact copper prices to some extent on Friday, we expected to see a more significant downside move. Perhaps we will see this coming week if the selling in the chip space continues.

Having said that, copper is enjoying some support from an ongoing decline in LME inventories, which now stand at four-month lows. Shanghai copper stocks have also eroded sharply, particularly over the past two weeks. In addition, there is a degree of nervousness about the copper cathode tariff announcement from the White House. (It’s still not out yet.)

Another metal behaving somewhat surprisingly is aluminum. We have seen this complex correlate quite well with oil prices since the Iran war started. But there has been a noticeable disconnect between the two over the past few weeks. Markets are perhaps perceiving nearby supply not to be that tight as physical premiums continue to erode.

Precious metals

In the precious metal space, gold ended on Friday with its biggest weekly loss in more than six weeks as a steady dollar and rising oil prices weighed on the complex. August futures ended down about $90 per ounce on the week, settling at $4,018.80/ounce. There was a more substantial 4% decline in silver, which ended at $56.22/ounce. We saw more modest declines in platinum and palladium.

Currency markets

In the currency markets, the general dollar index finished higher last week despite US treasury yields coming off. The two-year yield settled down four basis points on the week at 4.17%. The 10-year lost three basis points, ending at 4.54%. The relative resilience in the dollar might be attributable to investors assuming US rates cannot fall much from here, especially given elevated crude oil prices. Indeed, the odds for a rate hike in September have been consistently hovering between 50%-75% ever since the latest round of fighting started.

Trade policy news

In trade news, the Trump administration announced 25% duties on imports from Brazil. But it also expanded the list of exemptions. The new tariffs – due to take effect this week – were imposed under Section 301 of US trade law, a provision that authorizes duties on account of unfair trade practices.

“Extensive negotiations with Brazil over the past year have not resolved … issues, but we remain open to continuing negotiation… to bring about long-needed changes to the problems identified in this investigation,” US Trade Representative Jamieson Greer said in a statement.

The Brazilian tariffs would apply to sugar, agricultural machinery, apparel, electrical machinery, paper, and steel. But they would exempt non-pharmaceutical products, pig iron, beef, rare earths, energy, aircraft and aircraft parts, along with coffee. The new duty would bring the total tariff on nonexempt Brazilian goods to 37.5%.

More concerning are developments regarding Canada. President Trump has threatened to impose new tariffs on Canada after hundreds of wildfires have blanketed much of the northern US in toxic smoke. “The United States is being unnecessarily invaded by filthy, polluted, and unhealthy air,” Trump said, alleging “willful negligence” from Canada. As of Saturday, there were about 955 fires actively burning in Canada, with most out of control.

South of the US border, negotiators from the US and Mexico will convene in Mexico City for a third round of talks aimed at fine-tuning the United States-Mexico-Canada (USMCA) agreement. Discussions this time will be centered on steel, automotive, agriculture, and electronic payment systems.

Macro readings and other news from the past week:

• We had relatively decent numbers on the US inflation front this past week. June CPI fell 0.4% month over month (m/m), the largest monthly decline since April 2020. The year-over-year (y/y) rate fell to 3.5% from 4.2%. Core CPI was unchanged on the month and eased to 2.6% y/y. June producer prices showed a decrease of 0.3% m/m in June, below the 0.1% expected. But they remained 5.5% higher y/y. Producer gasoline prices fell 12% and were the main downside driver. Investors are nevertheless wary about inflation. Why? Because the latest up move in crude prices could undo a good portion of the inflation progress made in June. 

• June retail sales increased marginally, pressured by falling gasoline prices. Sales were up by a scant 0.2% last month after a 1% increase in May. Excluding auto/gasoline and other services, sales were up by 0.5%, following a 0.8% increase in May. 

• US housing starts jumped 19% in June to a 1.427 million annual rate. But the increase was concentrated in multifamily. Single-family starts slipped 0.2%, while total permits fell by 3%. Builder confidence also dropped to 34 from 36 in July. It has remained below 40 for 15 consecutive months. Separately, pending home sales decreased by 5.4%, well below the 0.4% expected.  Meanwhile, bipartisan housing affordability legislation was passed by Congress last week. The measure (unsigned by President Trump) should waive or speed up environmental reviews for construction projects.

• US regional manufacturing surveys strengthened sharply in July. The Empire State index rose to 15.6 from 5.7. The Philadelphia Fed index climbed to 41.4 from 10.3, its highest reading since November 2021.

• Industrial production edged up 0.1% last month after rising by the same margin in May. It was up 1.1% on a y/y basis in June. Among the components of the IP figure, mining production rose 0.4% last month after increasing 1.1% in May. Utilities production rebounded 0.4% as higher temperatures boosted demand for power. Finally, manufacturing output was the third component, and this remained unchanged vs. May. But Q2 manufacturing as a whole was still quite strong, coming in at a 4.7% annualized gain.

• The Fed’s “Beige Book” reports consumer spending edged up in early July. But the report also pointed out that “several districts noted declines in spending on discretionary items or trading down to more affordable varieties.”

• The latest Atlanta Fed model is forecasting US GDP to come in at a 1.3% annualized rate in Q2, following a 2.1% advance in Q1.

• New York became the first state on Tuesday to halt construction of large new data centers, imposing a one-year moratorium. “While technology companies are racing to build new data centers, lawmakers and regulators in dozens of states are weighing measures to limit their effect on electricity grids, utility bills, and local communities,” Reuters reported. The ban will apply to data centers that use 50 megawatts or more of power. Only one in three Americans approve of data-center construction. And most would oppose building one in their own community, a Reuters/Ipsos poll recently found.

• The US Commerce Department set antidumping margins of zero to 2.28% on South Korean cold-rolled coil and countervailing rates of 1.28-5.34% on corrosion-resistant products. This is on top of the existing 50% Section 232 tariffs also imposed on South Korea. Meanwhile, Hyundai Steel plans a $5.8 billion Louisiana-based EAF mill, with POSCO taking a 20% stake. Commercial production is targeted for 2029, with the facility expected to produce 2.7 million tons of automotive steel.

• China’s GDP slowed to 4.3% in Q2, below the 4.5% expected and came in well below the 5% advance seen in Q1. In fact, year-on-year growth in Q2 has declined to its lowest pace since Q2 of 2022, when the country was still in the throes of Covid. Separately, June retail sales grew by 1%, making up for May’s 0.6% decline. The gain made for the strongest showing in some three months, but the government would still like to see a stronger showing. Industrial output rose 5.3% last month from a year earlier, accelerating from 4.5% growth seen in May. Fixed-asset investment, however, shrank by 5.7% in the first six months of 2026, accelerating from the 4.1% decline seen in the January-May period.

• Meanwhile, China’s property sector remains in the doldrums. But it does not seem to be marshaling the same degree of attention it did in the past, perhaps because whatever measures federal and regional authorities have introduced thus far to arrest the decline have generally fallen flat. In fact, overall property investment fell by 18% in the first half of the year versus year-ago levels. Meanwhile, new home prices contracted in June as well. On an annual basis, new home prices are down by about 3.3%.

• Reuters reports that in the first six months of the year, China produced 23.19 million metric tons of aluminum, a rise of 3.8% from the same period last year. At this rate, Chinese production should finish the year above the government’s proposed 45-million-ton cap. Separately, China’s aluminum and product exports climbed to a record high in June, clocking in at 711,000 tons. For the first six months of the year, exports rose 16% from a year earlier, to 3.4 million tons, providing the market with needed metal after the substantial Gulf outages.

• China’s crude steel production declined in the first half of 2026, according to a release from the country’s National Bureau of Statistics. Crude steel output came in at a shade under 500 million tons, a 3% y/y decrease. Part of the falloff was attributable to a decline in exports following more stringent quotas imposed on Chinese products by variety of countries. Case in point: the EU’s new steel import regime kicked in on July 1.

This week’s US macro readings

It will be a light week on the US macro front. Nothing comes out on Monday through Wednesday, apart from June economic indicators (expected at zero, down from last month’s 0.1% increase).

Weekly initial claims are due Thursday (expected at 212,000, last 208,000). On Friday, we get June new-home sales (expected at 600,000, last 580,000). The S&P flash economic indicators for July also come out Friday. Both readings are expected above 50 and still in expansion territory. But any macro numbers will take a back seat to the war in the Gulf as investors eye the unhelpful price increase we are seeing in energy.

We wish all our readers all the best for the upcoming week.