Stocks Slump After Trump Threatens to Hit Iran Hard: July 29, 2026

Stocks are slumping on Fed Day after President Trump threatened to hit Iran hard following another round of failed negotiations. The commander in chief’s statement followed ballistic missiles being fired at US troops in the Middle East. This constant back-and-forth in rhetoric and military actions of the past few months is emblematic of how distant both nations are from achieving a longer-term truce, especially as Tehran remains unwavering regarding its influence over the Strait of Hormuz, which is its most significant point of leverage. The disagreements have sent oil prices and yields surging, as an extended conflict bodes poorly for the inflation picture just as Chair Warsh is gearing up to approach the podium. The cyclical rotation and equity market broadening we’ve seen in recent sessions is unraveling, as elevated fuel costs and heavier interest expenses disable the Dow Jones Industrial and Russell 2000 benchmarks from offsetting ongoing weakness in the AI-heavy Nasdaq 100, which is now 11% off its all-time high. Still, robust results from 4 of the Mag7 names that report today and tomorrow subsequent to the closing bell could certainly turn the tide and drive some dip buying in beat up tech and chip shares. Meanwhile, put option premiums are rising on defensive demand amidst 9 of the 11 major sectors dropping. On a positive note, energy and consumer staples are bucking the decline. Similarly, commodities are also retreating broadly due to risk-off sentiments and a stronger greenback with the exception of crude and natural gas. Elsewhere, cryptocurrencies are bifurcated as Bitcoin advances but Ethereum goes the other way, and prediction markets are experiencing engagement specifically as it relates to this afternoon’s rate decision.

A Hawkish Warsh Could Worsen Volatility

Stocks were already having a hard time managing waning tech enthusiasm resulting from capital return uncertainties, lofty valuations, round-tripping worries and Beijing competition, and a hawkish Warsh this afternoon would worsen volatility. Furthermore, the lift in oil costs and Treasury yields are preventing the cyclical areas of the market from countering the weakness in the AI theme, which has been instrumental in keeping the benchmarks supported in recent sessions. Meanwhile, the Fed Chair may want to get ahead of heightening geopolitical tensions by restricting financial conditions in an effort to curb the spread of heavier fuel charges to the overall economy. He could tighten the landscape by delivering a rate hike or by reiterating his unwavering commitment to defeat price pressures irrespective of what’s going on globally.

International Roundup

Dip in Financing Costs Boosts UK Mortgage Volume

A short-lived drop in interest rates contributed to the number of mortgages issued in the UK climbing from a two-year low in May of 57,100 to 58,200 last month, according to the Bank of England. Nevertheless, mortgage volumes are still depressed with June’s result falling substantially below the six-month average of 61,400. In early June, the average UK mortgage rate dipped in early June on news of the short-lived US-Iran ceasefire but then climbed to 4.35%. It was 4.22% in the preceding month.

But Consumer Credits Returns to Six-Month Average

Net borrowing of consumer credit in the UK climbed from £1.7 billion in May to £1.8 billion last month, which matched the six-month average. While credit card debt expanded, personal loans and car dealership issuance decreased from £1.1 billion in May to £0.9 billion last month.

Inflation Eases But Still Exceeds Reserve Bank of Australia’s Target

Inflation cooled modestly in Australia last month but remained considerably higher than the central bank’s target rang to 2% to 3% with housing, food, non-alcoholic beverages and the category of recreation and culture experiencing the strong price pressures, according to the Bureau of Statistics. For the 12-month period that ended in June, the Consumer Price Index (CPU) was up 3.8% following May’s 4% climb. Housing grew 6.8% more expensive followed by 3.3% increases for both the food and non-alcoholic beverages category and the recreation and culture classification. Economists anticipated that the headline would climb 4%. 

On a month-over-month basis, the gauge sank 0.1%, largely due to easing energy costs that pushed down prices in the transport category by 2.6%. Additionally, the recreation and culture category became 0.3% cheaper.

Categories that became most costly and the extent of price changes were as follows:

• Clothing and footwear, 0.8%
• Housing, 0.5%
• Food and non-alcoholic beverages, 04%
• Education, 0.4%
• Health, 0.3%
• Insurance and financial services, 0.2%
• Communication, 0.2%
• Alcohol and tobacco, 0.1%
• Furnishings, household equipment and services, 0.1%

The trimmed mean CPI, which excludes items with the largest increases and decreases, was up 3.6% year-over-year (y/y).

In a presentation yesterday, Reserve Bank of Australia Governor Michele Bullock said additional rate hikes are still an option with capacity pressures fueling excessively high inflation. The organization has lifted its benchmark cost of capital three times this year to 4.35%.