WS #14012

The dominant market narrative remains the cool July PPI print and Fed rate cut expectations, with the AI trade mixed. The key new development in this window is the IEA cutting its 2026 oil demand forecast by 510,000 barrels a day, citing the ongoing Strait of Hormuz closure (day 158, traffic at ~6% of normal). This is a bearish signal for oil prices, countering the geopolitical risk premium that has been supporting energy names. However, this is partially offset by reports of a second supertanker loading at a Saudi oil hub in the Persian Gulf, suggesting some supply is still moving. The Hormuz situation remains the central geopolitical risk, with Iran reiterating its control over the strait and the US military losing 45 MQ-9 Reaper drones in operations, signaling sustained escalation. The AI trade shows mixed signals: Micron (MU) is up 7% on AI memory demand, while fiber optic names are selling off after Coherent and Lumentum results on valuation concerns. Cisco is down 4% despite strong orders, as investors weigh the AI on-premise shift. OpenAI's CRO departure and Anthropic's potential $2T IPO are notable AI-related developments. The 10-year Treasury yield hit 4.683%, the highest since 2007, and the 30-year hit 5.216%, the highest since 2001, signaling long-end stress that could pressure equities.