Oil and Iran
Crude climbed on renewed tension around the Strait of Hormuz, reviving fears of disruption to global energy supplies. Reports that vessels were attacked near the critical shipping route pushed prices up. The trigger for the move: the U.S. is revoking the license that permitted production, delivery, and sale of Iranian oil through August 21st. Washington and Tehran signed a memorandum of understanding last month to end their nearly four-month war, but U.S. officials describe that MOU as entirely performance-based. Both U.S. crude and Brent rose about 5%. Markets going into the day had mostly priced in peace, so the open question is whether these attacks and the response signal a broader threat.
The AI Debt Wave
Amazon brought a massive new bond deal to market, and the size of the issuance is pressuring the broader corporate bond market as investors clear room for the new supply. Traders are selling existing technology bonds to free up capital, which exposes the growing competition for investor demand as big tech floods credit markets to fund AI infrastructure. Amazon, Meta, and Alphabet have each borrowed tens of billions of dollars. That volume of tech debt could push yields higher and force issuers into more attractive terms. The concern: whether this AI-related borrowing reflects confidence in future growth or begins to stress corporate credit.
Samsung and "Memory Exhaustion"
One view holds that the market is suffering from "memory exhaustion" following Samsung's overnight report. Samsung estimated a 19-fold jump in Q2 operating profit to 58.4 billion, exceeding all its earnings combined over the past three years and beating expectations. A fuller report comes later this month, but the initial numbers played out as a sell-the-news event with ripple effects into U.S. markets. The stock dropped over 10% intraday in Seoul and finished down about 7%; the South Korean ETF, EWY, closed down 4.5%.
Trade Deficit
The U.S. trade deficit widened sharply in May. The gap rose 42% to 77.6 billion dollars from 54.6 billion in April, the biggest jump in over a year. Imports grew 3.3%, the highest since March of last year when companies were front-loading ahead of Trump's tariffs, adding heavy distortion to the trade data. Exports moved the opposite way, dropping 3.2%. Both will feed into GDP.
What's Ahead
Asked what to watch tomorrow, the answer is the FOMC minutes at 2:00 Eastern. Investors want fresh clues on the rate path, watching how policymakers weigh sticky inflation risk, including higher energy prices, against a softening labor market. Traders are split on whether the next move is a hike, a cut (as Paul Schatz expects), or a longer stretch of restrictive policy. The minutes may also reveal how much internal debate occurred and whether officials grew more confident that inflation is falling or stayed worried it could persist. Also on deck: mortgage applications as a read on housing, and a 10-year note auction. Yields ticked up late in the session as oil rose, with the 10-year at 4.54, up about seven basis points, so demand at that auction bears watching.
