The market stayed quiet on Friday, but the fighting didn’t: The earliest re-pricing on Monday may not be about chips

If you only look at Friday’s close, AI is still the star of the market.

The Philadelphia Semiconductor Index has fallen more than 20% from its peak, while Taiwan stocks, Japan stocks, and U.S. tech shares all dropped together. Everyone is asking when semiconductors will finally stabilize.

But this weekend, the center of risk shifted one step further toward the Middle East.

The U.S. military said Sunday it carried out another airstrike on Iran. Before the action, Iran attacked a U.S. military base in Jordan, killing 2 U.S. service members, with 1 missing; another 4 required hospitalization.

Even more important for the market, U.S. Central Command directly explained that one goal of this round of operations is to weaken Iran’s ability to restrict oil tankers from transiting the Strait of Hormuz.

That sentence effectively ties the conflict even more tightly to energy supply.

Before the war began, the Strait of Hormuz accounted for about 20% of the world’s oil supply. After fighting started at the end of February, Iran has already effectively shut down shipping through the strait. Now, as both sides keep trading attacks and defenses around this waterway, oil prices will be hard to reflect purely by normal supply-and-demand data.

One thing needs to be made crystal clear.

Brent crude closed on Friday at $88.10 per barrel, but that was just the last price before the market took a break—not the real-time quote after the new airstrikes over the weekend.

In other words, the news has moved forward, while prices are still stuck at Friday.

This is exactly where the largest price gap is most likely to appear on Monday.

But that doesn’t mean oil prices necessarily need to gap up.

What the market will watch next is the actual volume of tanker traffic—whether any new infrastructure has been damaged—and whether diplomatic mediation has restarted. If the weekend only increases military talking pressure, and shipping conditions don’t further deteriorate, the oil price reaction could be smaller than the headlines suggest.

On the other hand, if cargo volumes fall again, and insurance and freight rates continue to rise, the impact won’t stay confined to energy stocks.

Rising oil prices will push inflation expectations higher again, shrinking the room for rate cuts. Costs will also increase across aviation, shipping, chemicals, and manufacturing. For tech stocks that are still adjusting valuations, this means risk appetite has not been repaired—and there’s another layer of rate pressure.

So next week really has two exam papers.

The first is the war.

It determines whether oil prices, inflation-and-interest-rate risks need to move higher again.

The second is earnings.

Alphabet, Tesla, Intel, and Texas Instruments will all report results. What the market wants to confirm is not only whether profits beat expectations, but whether guidance on AI capital expenditures, orders, and gross margin is loosening.

If companies keep expanding AI investment, the recent drop in semiconductors will look more like a correction of overvaluation and crowded positioning.

If big tech companies start slowing spending, then this correction would move from a pricing issue to a demand issue.

Also, the European Central Bank will meet this week. Once oil prices are rising again, even if the central bank sees the economy slowing, it will be hard to completely ignore inflation risk.

So on Monday, don’t rush to focus only on whether TSMC can rebound.

Earlier to look, instead, is how crude oil opens, tanker traffic looks, and how FX and the bond market digest the weekend news.

Semiconductor stocks are still important, but the first price factor that will likely determine market sentiment next week probably won’t be chips.

Five other things this morning

1｜U.S. military strikes Iran again

The U.S. military said Sunday it launched a new round of airstrikes. Earlier, Iran attacked a U.S. military base in Jordan, killing 2 people, with 1 missing and 4 hospitalized. The U.S. said the operation’s purposes include weakening Iran’s ability to limit oil tanker passage through the Strait of Hormuz.

2｜The Strait of Hormuz remains the core of oil prices

Before the war, the Strait of Hormuz accounted for about 20% of global oil supply. Brent closed Friday at $88.10 per barrel, but this level hasn’t yet reflected the latest airstrikes over the weekend; the first round of market pricing will be visible when trading opens on Monday.

3｜Japan’s stock market closed on Monday

The Tokyo Stock Exchange is closed on July 20 for Marine Day. Japanese investors won’t be able to digest the weekend war developments and overseas market changes until Tuesday, so the first round of price signals in Asia will miss one key market.

4｜AI trading moves into earnings verification

Alphabet will release earnings on Wednesday; Tesla has also confirmed it will post second-quarter results after the close of trading in the U.S. on July 22. Intel and Texas Instruments are scheduled for this week as well. The market will particularly check guidance on AI capital expenditures and chip demand.

5｜ECB meeting this week

The European Central Bank will hold a monetary policy meeting from July 22 to 23. The decision will be released and a press conference held on July 23. After oil prices rise, the market will pay even closer attention to how the central bank balances economic growth and inflation risk.

Data cutoff: 2026-07-19 11:45 (Singapore time)