Oil nears $95 and markets pause before big tech earnings

Good morning. Markets took a step back yesterday to wait for the week's biggest test. Alphabet, Tesla and IBM report after the close, and Alphabet's second quarter has been called the market's biggest test since the Iran war began. Nasdaq futures slipped for the second day on chip weakness, a sign of nerves.

The core question is whether all the money poured into AI is starting to pay off. Big cloud companies are expected to spend about $750 billion on capex this year, pushing their free cash flow to a multi-year low. Others argue the AI selloff may actually save the bull market by letting some air out of valuations.

Oil moved markets even more. After Secretary of State Rubio said Iran was not serious about peace talks and the US struck for an 11th night, crude jumped nearly 4% toward $95, a six-week high. With Hormuz, the Red Sea and the Black Sea all under pressure, one analysis warns that a quarter of the world's oil is at risk.

Oil bleeds into rates. Treasury yields are approaching their highest since the war began, bringing talk of a Fed hike back to life, and the 30-year yield has sat above 5% for an unusually long stretch. President Trump also said generic drugs will face a 100% tariff from 2028, and shares of generic makers in Europe and Asia fell.