Global Markets Overview: August 2026

July provided another reminder that headline market performance does not always tell the full story. While there were significant movements beneath the surface in individual company stock prices, investment styles and regional markets, broad global and U.S. equity indices remained relatively resilient. Strong company earnings helped support overall market performance despite the increased company volatility.

Company volatility and differences in stock performance were driven by two main factors:

1. Renewed tensions between the U.S. and Iran led to heightened volatility in oil prices
2. Investors weighing the balance between high company investment spending on artificial intelligence (AI) and their likely returns on this investment

Together, these factors created a more volatile underlying environment.

U.S.-Iran tensions return

July began with cautious optimism that the interim agreement reached between the U.S. and Iran in June might lead to a more lasting reduction in tensions. Shipping through the Strait of Hormuz (SoH), one of the world's most important energy routes, had started to recover. However, renewed hostilities and restrictions on Iranian oil exports caused shipping activity through the SoH to fall sharply, pushing oil prices higher and increasing volatility. Towards the end of the month, a pause in military strikes offered some relief, although no formal settlement had been agreed and shipping remained well below normal levels.

Strong earnings offset AI-related volatility

Reported U.S. earnings growth for the second-quarter was particularly strong. Nevertheless, there were sharp moves – down and up – in some of the companies and markets that had previously benefited most from enthusiasm around AI. This volatility reflects several related dynamics: many AI-related shares entered July after exceptionally strong gains, leaving them sensitive to even modest changes in expectations; investors are constantly trying to assess how quickly heavy spending on AI infrastructure will translate into profits; and concerns around increasing competition within parts of the semiconductor industry, alongside questions about future AI-related demand, added to pressure on some major Asian companies. The sharp moves under the surface illustrate that major technological transitions rarely progress in a straight line and that the eventual winners can change as a technology develops. Despite these large moves beneath the surface, broader global and U.S. equity indices were considerably more stable, reinforcing the potential benefits from diversification.