In 30 seconds: An ongoing Iran war has triggered sharp commodity price increases—Brent crude near $95 per barrel, up ~30%—while Chinese oil imports have fallen ~50% below pre-war levels and tanker traffic through key straits remains disrupted. Early Q2 2026 earnings results show 83% of companies beating EPS estimates and financials near 52-week highs, but beneath the surface index gains, six of nine rallying sectors show negative breadth and AI/software names are selling off sharply. Luke Gromen argues the US must end post-1971 USD reserve status in favor of Hamiltonian economics—high tariffs, gold-settled trade, and capital controls—to counter China's rise and avoid the fiscal and geopolitical decline that prolonged Middle East wars accelerate. Market-implied odds of a Fed rate hike at the upcoming July meeting have jumped to ~31-36%, as persistent inflation concerns, rising bond term premiums, and a long-bond sell-off signal that the Fed may be forced to tighten despite a challenging macro backdrop.
Brent closed at $93.69 on 2026-07-22, up 2.94% on the day. WTI settled at $86.37, gaining 1.72%. Since the start of the conflict, Brent is up 29% and WTI 30%. One week alone added roughly 10 dollars per barrel to Brent. The commodity shock extends well beyond crude: Sulfur is up 142%, European Natural Gas 97%, Heating Oil 62%, Jet Fuel 44%, Diesel 38%, Gasoline 36%. Even agricultural commodities are catching the updraft: Rice 36%, Cotton 23%, Wheat 18%. Chinese crude import demand tells a different story. Chinese seaborne oil imports for July 1-20 are running below the June average, roughly 50% below pre-war levels, with no sign of a pickup yet. Chinese refiners and traders, both private and state-owned, are offering Middle Eastern barrels they bought a few weeks ago for resale as oil prices rise. A higher oil/risk premium is pushing up the neutral rate, and the Fed staying on hold is a de facto easing; they cannot ease in this environment. Gold, the classic wartime hedge, closed at $4,137.00, up 1.62% on the session. The historical parallel being drawn is to 2003: gold and China both did very well from 2003-2011 during Iraq war 2, while the USA fared less well on a relative basis. Sulfur up 142% since start of the Iran war. Diammonium Phosphate is up 25% and Palm Oil up 14% since the start of the war.
83% of reporters have beaten EPS estimates this season, and 84% have beaten sales estimates. Guidance skews positive: 11% of reporters are raising, versus just 3% lowering. The 2Q26 earnings season for financials has been strong thus far, with large-cap bank stocks and the S&P 500 Financials sector both trading near their 52-week highs. Another 22 companies report this week. If you only read the scoreboard, you would think everything is fine. Nine sectors rallied yesterday. That kind of divergence, where the index floats upward on the backs of a few large names while the median stock sinks, has occurred on only 12 days since 1990. It is, statistically speaking, weird. There have been only 12 days since 1990 with six or more sectors having price-vs-breadth daily divergences. SpaceX $SPCX fell 8.8% since 11:30 AM ET yesterday. The market is not selling off. It is rearranging the furniture. Sundar Pichai declared Google an 'AI-first' company back in 2016. Alphabet $GOOG Q2 earnings reports since trading began number 21, and historically the stock has been positive on the reaction day only 50% of the time. future expectations (Philadelphia Fed services survey): 41.9.
Gold closed at $4,137 on 2026-07-22, up 1.62% on the day, and the macro case behind it has a surprisingly coherent spokesperson. To end post-1971 USD reserve status in favor of Hamiltonian economics to win requires high tariffs, capital controls, and gold net settlement — what China has been doing. His prescription: ending post-1971 USD reserve status in favor of Hamiltonian economics requires high tariffs, capital controls, and gold net settlement. The punchline, in his telling: China has been buying gold so that when the debtor tries to harm the creditor — in the manner Keynes described — China wins either way. Checkmate. The policy apparatus may be listening. 25 years of fighting wars in the Mideast while China has grown and overtaken US in a lot of areas would tell an intelligent, self-aware person that wars in the Mideast are a bad idea. Restricting advanced chip exports, he warns, would communicate to the world that USD is no longer good for certain US advanced chips in all cases — chipping away at dollar reserve status just as Russian FX reserve sanctions did. Every weaponization of the dollar's centrality erodes the very privilege being defended. The sequencing matters: first you devalue the debt against gold, then you tighten.
A week ago, the market-implied probability of a Fed rate hike at the July meeting sat at 10.7%. It has since surged to 36%. The argument runs as follows: a higher oil/risk premium is pushing up the neutral rate, and the Fed staying on hold is a de facto easing. In other words, holding rates steady while the neutral rate drifts higher amounts to passive loosening. The same analyst is blunt: they cannot ease in this environment. The bond market is not waiting politely for clarity. Meanwhile, the median expected unit cost change printed at 2.1 percent in July, its lowest since March. Business inflation expectations remain benign. If the Fed takes inflation seriously, bond investors can stay calm. If the Fed wants to continually rationalize that inflation is not a problem, bond investors might panic. The recession scenario, for its part, has been completely abandoned. What remains is a market that is pricing a meaningful probability that the next move is up, not down.
Here is what your portfolio did this session.
S&P 500: 7,498.96, down 0.14% on the day
10-Year Treasury yield: 4.66%, up 3 bp on the day
30-Year Treasury yield: 5.15%, up 2 bp on the day
13-Week T-Bill yield: 3.75%, up 2 bp on the day
Gold: $4,137.00, up 1.62% on the day
Fed funds rate: 3.75, flat 0.00% on the day
Long bonds (TLT): $83.44, down 0.26% on the day