Markets shifted from fear to relief this week as progress toward reopening the Strait of Hormuz drove oil sharply lower and pushed equities to fresh records.

By midweek, the rally began to digest itself, with earnings and labor data taking over as the market's next focus.

The dominant driver this week has been progress toward reopening the Strait of Hormuz.

Iran signaled openness to a deal after President Trump called off a planned strike, with talks centered on quickly restoring shipping flows.

Momentum built through the week.

Qatar drafted a proposal, both sides expressed confidence, and Iran said it reached an agreement with Oman on a proposed shipping route.

• Brent crude fell from around 80 dollars to near 75
• Treasury yields declined
• Risk appetite returned sharply across equities

Markets are pricing resolution rather than escalation, a reversal from recent weeks.

Strong corporate results reinforced the early week advance.

Amazon's market value topped 3 trillion dollars, and megacaps posted their strongest session since March.

Semiconductor stocks recorded their strongest four day rally since 2020.

• SpaceX revenue beat estimates but the stock still fell 14 percent
• AMD traded lower after an uninspiring outlook
• Nvidia rose even as most other megacaps declined

Strength is narrowing again, even inside a record setting rally.

Away from oil and earnings, labor market signals began to matter more.

US manufacturing expanded in July at its fastest pace in over four years, supported by demand, output, and hiring.

Services activity also expanded, though rising input costs continued to pressure businesses and hiring slowed more than expected.

Despite falling energy costs, inflation concerns have not disappeared.

Fed commentary continues to flag risk from both the Iran conflict and ongoing AI investment, and Kashkari said the central bank should begin gradually raising rates.

A softer jobs report Friday could let the Fed stay focused on inflation rather than growth.

Geopolitics → Oil → Inflation → Federal Reserve → Equity leadership

• Oil has fallen from near 90 to around 75 on Hormuz diplomacy
• Equities have added roughly 3.7 trillion dollars in value over the rally
• Labor demand is cooling while manufacturing strengthens
• The Fed remains focused on inflation despite lower energy costs
• Earnings leadership is narrowing even as headline indices hit records

Diplomacy is doing more to shape markets than data this week.

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