A US-Iran pause sinks oil as a packed week begins

Good morning. The US and Iran paused their fighting on Sunday, sending oil sharply lower and US stock futures higher. After Brent climbed toward $100 last week and weighed on markets, it was a bit of relief. It is too early to relax, though: on the Kalshi prediction market, the odds that Hormuz returns to normal by next July have fallen from 70% to 47%.

This is being called the busiest week of the summer. The Fed meets Wednesday, and Microsoft, Meta, Apple and Amazon all report in the same stretch, along with core PCE inflation and GDP. The sharp rise in Treasury yields is read as a sign that the market is very worried about inflation, and as a warning to new Fed Chair Warsh.

Views on rates are split. Markets have priced in up to two hikes this year because of energy-driven price pressure, while Wharton's Jeremy Siegel and others argue the Fed should not raise now. Warsh is deliberately keeping his intentions murky, so investors are flying blind until Wednesday.

In big tech, the question is whether strong sales will again be overshadowed by capex and cash-flow disappointment, as with Alphabet and Tesla last week. How much more Microsoft, Meta and Amazon say they will spend on AI is the key.