Swissquote: Oil back in the driver’s seat

July 9, 2026

What a wonderful world.

The latest turn of events in the Middle East has reversed the short-term bearish outlook for oil prices. US crude has risen as much as 13% since last week's dip and is now testing the $75pb level — and the 200-DMA — to the upside, with an increasing possibility of the barrel reaching and breaching the $80pb mark. Brent crude briefly traded above $80pb yesterday. Both are slightly lower today, but the short-term risks remain tilted to the upside.

But the immediate upside pressure could be less severe than what we saw in the first weeks of the war. First, the market has become accustomed to the tensions and the disruptions in the Strait of Hormuz. The surprise factor is much smaller than it was at the beginning, and the market's overreaction is therefore more limited. Second, a number of ships have already transited through the Strait of Hormuz, delivering oil to key markets. A few days ago, Saudi Arabia significantly cut the price of its oil for Asian buyers to ensure that millions of barrels would be absorbed quickly. Third, we have seen the oil market swing from supply shortages to supply surpluses in the blink of an eye over the past three months, meaning that once tensions de-escalate and traffic through Hormuz is restored, oil will continue to flow. And finally, China seemingly has ample reserves and a relatively high pain threshold, as it waited weeks before beginning to replenish its strategic reserves; it is unlikely to rush in if prices rise again.

On the other hand, if tensions persist beyond a few weeks, it will spell trouble. We don't know how much oil China is sitting on or when the situation could become critical — that's a real suspense. Second, if Iran starts attacking energy infrastructure across neighbouring Gulf countries, the long-term damage could quickly erase the current supply glut by reducing future supply. Third, global oil reserves were drawn down sharply during the first three months of the war, leaving the market with a much thinner cushion.

So we are somewhere close to square one, but this time we have valuable experience of how quickly things can turn around. The fact that the US midterm elections are approaching should encourage Washington to seek a rapid solution to avoid a prolonged conflict. It's not that the US cares about war per se, but the President certainly cares about energy prices heading into the November midterms. US gasoline prices are still 85% higher than they were at the start of the year, while the Federal Reserve (Fed) has made a major U-turn, shifting from expecting a few rate cuts this year to projecting one or more rate hikes. The Fed minutes released yesterday showed nothing but uncertainty among FOMC members. There was no clear policy path; instead, the minutes pointed to a wide range of scenarios for how inflation could evolve — duh. At this point, no one has a crystal ball to predict the complex geopolitics of the Middle East. At the end of the day, the monetary policies will all come down to how quickly the US can restore stability in the region. Good luck.

Global bond yields are reacting to the latest jump in oil prices. The US 2-year yield flirted with its June highs yesterday, above the 4.20% mark, while the benchmark German 10-year yield rose 9bp to 3.08%, and the Japanese 10-year yield is slowly sailing toward the 2.90% mark.

Rising yields are weighing on sentiment. The German DAX and the French CAC 40 tanked more than 2% yesterday, while the Dow Jones Industrial Average fell more than 1% as investors piled into energy stocks for a second consecutive day. The SPDR Energy ETF has rebounded more than 5% over the past two sessions and extended its gains, while the Nasdaq 100 outperformed with a 0.27% advance as investors sought refuge in the technology-heavy index, believing that technology companies are less exposed to rising energy costs. Chipmakers led the gains. Broadcom jumped nearly 5% after announcing a $30bn deal with Apple, while Nvidia rallied 3.65% on reports that China could allow companies to buy a small amount of its H200 chips. Bloomberg pointed out that the company has now become cheaper than many S&P500 constituents, like Hershey’s. Indeed, Nvidia's PE ratio has fallen to 35 and its price-to-sales ratio has slipped below 20 after the stock retreated nearly 20% from mid-May to early June. It is currently down by more than 13%.

As such, the renewed escalation in the Middle East could hinder the ongoing rotation toward the non-technology pockets of the market, the energy sector and some of the laggards of the past few months could attract fresh inflows.

That said, chipmakers still need AI spending to remain robust to fuel another strong rally, and that assumption is increasingly being questioned. First, investors are becoming uncomfortable with the scale of AI spending, and Amazon's latest bond sale served as a warning: demand for its $25bn offering reached just 1.6 times the amount issued, versus around four times on average for US investment-grade corporate bond deals this year. Second, Hedgeye warns that data-centre construction growth is slowing, which would be outright negative for the future revenue outlook of companies involved in building AI infrastructure.

Interestingly, the outflows from US, South Korean and Taiwanese technology stocks have benefited Chinese Big Tech names, which have underperformed their global peers for the past six months or so. Alibaba surged 12% yesterday on reports pointing to improving June-quarter trends.

Could the convergence continue? Possibly. China recently rolled out a $295bn worth plan to fund AI buildout and the Chinese technology stocks are trading with a notable discount to global peers.

The Hang Seng currently trades at a PE ratio of 12.62 and a price-to-sales ratio of just 1.39 — yes, 1.39 — while the Nasdaq 100 trades at a PE ratio near 37, almost three times higher, with a price-to-sales ratio above 6, more than four times that of the Hang Seng.

The question is whether Chinese technology stocks can catch a momentum, again.