U.S.-Iran deal outlook dims, tech giants decline, chip stocks rally
Article by: Tide Research
The window for U.S.-Iran negotiations has closed, with prospects for a long-term agreement dimming; U.S. stock indices fell for a second consecutive day, with the Dow Jones hitting its lowest level in two weeks. The S&P 500 declined 0.52% to 7,745.06, the Dow Jones dropped 0.51% to 53,459.78, and the Nasdaq fell 0.32% to 26,644.911. The VIX stood at 17.42, up 6.48%. All seven major tech stocks closed lower, with Meta leading the decline at 3.5%. However, memory chip and optical communications stocks rose against the trend, as the Philadelphia Semiconductor Index rebounded 1.6% and re-entered bull market territory. Geopolitical risks in the Middle East pushed U.S. Treasury yields higher, with the 30-year yield reaching its highest level since 2007. Prospects of a U.S.-Iran deal supported crude oil prices, with Brent crude rising above $90 per barrel for the first time in three weeks. Gold closed at its highest level in over two months. The U.S. dollar index fell for a third straight day, while the offshore renminbi surged past 6.74 during trading, hitting its highest level in over three years. The market’s main theme is clear: rising geopolitical risks are boosting oil prices and safe-haven assets, while demand fundamentals for AI chips remain strong, driving continued capital inflows into memory and optical communications sectors.
The window for U.S.-Iran negotiations has closed, with little prospect for a long-term agreement, pushing oil prices above $90.
The most critical macro variable on Monday was geopolitics. The window for the memorandum of understanding between the U.S. and Iran expired without an extension agreement being reached. Trump stated he is not in a hurry to end the war with Iran, does not seek to extend the U.S.-Iran memorandum of understanding, and claimed that Iran “will not reach an agreement of the kind I deem necessary,” warning that if Oman obstructs negotiations, it will face “heavy bombing.” Iran has responded with equal firmness, ruling out any extension of the memorandum and stating it has set a final deadline for U.S. compliance.
There was no sign of narrowing differences between the two sides’ positions, prompting a sharp rise in oil prices. The WTI September crude oil futures contract rose 2.55% to close at $84.50 per barrel, hitting a monthly high; the Brent October crude oil futures contract climbed 2.65% to close at $90.87 per barrel, marking its first closing above the $90 mark in three weeks.
Oil-producing countries in the Middle East continue to conduct covert “dark voyages” by turning off transponders to secretly transport crude oil through the Strait of Hormuz, with reported daily volumes exceeding 4 million barrels; however, this hidden supply chain has not fully offset the geopolitical risk premium. Short-term upward pressure on oil prices still stems from political factors rather than fundamental supply and demand dynamics.
The 30-year U.S. Treasury yield hit a 2007 high, as the sell-off in U.S. Treasuries continues.
U.S. Treasury yields continue to rise. The 30-year U.S. Treasury yield briefly surpassed 5.31%, reaching a new high since 2007. The 10-year U.S. Treasury yield is around 4.72%, up approximately 3 basis points on the day; the 2-year U.S. Treasury yield is around 4.18%, up approximately 1 basis point on the day.
The primary factor driving long-term yields higher is supply pressure. Corporations are issuing bonds on a massive scale to fund the AI boom, with U.S. investment-grade bond issuance reaching $145.2 billion in August, surpassing the previous monthly record of $136 billion set in August 2020. At the same time, the U.S. government’s annual fiscal deficit of nearly $2 trillion continues to increase the supply of Treasuries.
Major overseas holders are also reducing their positions. According to U.S. Treasury data, in June, China and Japan led the overseas sell-off of U.S. Treasuries, with China, Japan, and the UK all cutting their holdings. China’s stake declined by $25.9 billion month-over-month to $633.4 billion following a rebound in May, reaching its lowest level since 2008.
In his latest research report, Bank of America’s Hartnett stated that U.S. Treasuries are nearing the $40 trillion mark, while the AI financing boom has driven corporate bond issuance up 61% year-over-year, structurally crowding out Treasury buyers, with debt interest payments now reaching $1.4 trillion. Hartnett believes that going long gold is the optimal hedge against dollar depreciation, bond market collapse, and political risk.
The chip index has reentered a bull market, with memory and optical communication stocks leading the rally despite broader market weakness.
Rising U.S. Treasury yields weighed on the Magnificent Seven, but the semiconductor sector, driven by independent AI chip demand, strengthened against the trend. The Philadelphia Semiconductor Index rebounded 1.6%, with this bear market lasting only 21 days—the shortest since March 2020.
Memory chip stocks performed the strongest. SanDisk rose nearly 9%, Western Digital gained over 5%, and Micron climbed 17.5% over five days. The market believes that the strong financial results recently disclosed by Anthropic and OpenAI are the most important catalyst for current chip stocks, as visibility into AI chip demand has improved.
Optical communication stocks rose in tandem. Coherent gained nearly 8%, while Lumentum rose 4.6%. Demand for high-speed optical interconnects in AI data centers continues to be validated, with capital flowing further into the more certain AI hardware subsector amid macroeconomic uncertainty.
SpaceX rebounded more than 4%. After facing sustained pressure due to concerns over capital expenditures, Monday’s rebound indicates that the market still has confidence in the long-term rationale for investing in AI infrastructure.
The Seven Giants all closed lower, with chip stocks further diverging from the Seven Giants’ performance.
The “Big Seven” tech stocks all closed lower on Monday, dragging down the broader market. Meta led the decline with a 3.5% drop, while the other six posted relatively milder losses.
The simultaneous weakness of the Seven Giants stems from the sustained rise in U.S. Treasury yields. Higher long-term interest rates exert pressure on the discount rates used to value high-valuation growth stocks, prompting capital to temporarily rotate out of major tech stocks amid macroeconomic uncertainty.
However, the withdrawal of funds does not represent a systemic exit; the strength of the chip index indicates that capital is merely shifting within the technology sector, moving from the Big Seven to AI hardware segments with higher certainty.
The U.S. dollar falls for three consecutive days, the renminbi reaches a three-year high, and gold rises to a two-month high driven by safe-haven demand.
The U.S. Dollar Index fell for a third consecutive day, hitting its lowest level in over two months. The offshore renminbi rose intraday above 6.74, reaching its highest level in more than three years. Gold closed at a more than two-month high, rising over 1% during the session; the COMEX August gold futures contract settled up 0.85% at $4,417.8 per ounce. While rising U.S. Treasury yields typically pressure gold, heightened geopolitical risks fueled safe-haven demand that outweighed the impact of interest rates.
Bitcoin rose above $64,000 intraday, up 3% from its daily low. Digital assets gained support amid a weaker U.S. dollar. COMEX August silver futures closed up 1.74% at $66.121 per ounce.
Today’s Focus
The market’s focus on Tuesday was in two directions.
First, the subsequent developments in the U.S.-Iran situation. Whether the two sides will engage in new negotiations or experience escalated tensions after the memorandum of understanding expires will directly impact oil prices and the performance of risk assets. Trump’s statement that he is “not in a hurry to end the Iran war” suggests that the geopolitical risk premium is unlikely to dissipate in the short term.
Second, Baidu’s earnings report and earnings call. The impact of AI large models on cloud business and the recovery pace of advertising business are the key highlights. Against the backdrop of the Jinlong Index underperforming continuously, Baidu’s earnings report will test whether global capital’s sentiment toward Chinese listed stocks has shown any marginal shift.
