The Big Three

Equities start the week trading around all-time highs

​Major indices across the globe pushed to record highs to start the week, with markets on both sides of the Atlantic reinforcing what is shaping up to be one of the broadest rallies in years.

On Wall Street, the S&P 500 closed Friday at a fresh all time high of 7,757, surging 3.58% on the week, with the Nasdaq rallying 5.19% and the Dow topping 54,000 for the first time ever. The catalyst was counterintuitive. US payrolls contracted by 23,000 in July, missing forecasts for an 80,000 increase, but softer labour data cooled rate hike fears.

Underpinning the move is an earnings season that has delivered well beyond expectations. With nearly 90% of S&P 500 results in, EPS are up 30% on the year and JPMorgan has revised its S&P 500 price target up to 8,000.

Wednesday's eagerly anticipated CPI print delivered little surprise. Headline inflation cooled slightly to 3.4% year on year in July, down from 3.5% in June, coming in exactly in line with Wall Street consensus. Core CPI, which strips out volatile food and energy prices, eased to 2.5% from 2.6%. Markets took the data in their stride, with stock futures edging higher and Treasury yields ticking down as investors conclude the figures may take the urgency out of any aggressive near-term rate hike.

Geopolitical gridlock over the Strait of Hormuz

If equity markets represent the optimistic face of 2026's global rally, the oil market tells a much more unsettling story, one defined by a structural standoff over the world's most critical energy waterway.

The Islamic Revolutionary Guard Corps announced the closure of the Strait of Hormuz to US and Israel-allied shipping in March 2026, a chokepoint through which roughly 13 million barrels per day of crude passes, representing approximately one fifth of global oil consumption. Despite a partial ceasefire in April, the diplomatic picture remains steeped in uncertainty. Iran indicated over the weekend that a deal with Oman over transit through the Strait was in its final stages, yet stood firm on its conditions, insisting the waterway would only reopen if Washington agreed to compensation, an end to sanctions, and the removal of military threats.

President Trump appeared to play down the urgency of a resolution. Speaking to the media, he said the US is "only semi-negotiating" with Iran, signalling that Washington would lean on its naval blockade rather than pursue fresh strikes to force a breakthrough. With both sides showing little appetite for meaningful concession, Brent crude settled up 4.99% at $87.72 a barrel and WTI closed 5.05% higher at $82.13 as markets priced in a prolonged impasse.

The consequences extend directly into the rate debate. As Jefferies senior European economist Mohit Kumar noted, the direction of oil is now as important as any data print this week. "If oil prices remain contained and move lower from the current levels, that would prevent the need for the Fed to hike rates“, Kumar said. Until a durable deal is reached in the Gulf, a geopolitical risk premium remains hardwired into the commodity.

Europe's structural engine

While global attention has been fixed on Wall Street's record run, Europe has been quietly staging one of its most impressive bull markets in years, and for reasons that go far deeper than a simple catch-up trade.

The pan-European STOXX 600 notched its fourth consecutive record close on Friday, with Germany's DAX 40, France's CAC 40, UK's FTSE 100, and Italy's FTSE MIB all posting gains, reflecting a resilience in the European economic landscape that has surprised many analysts. The DAX broke above 26,100 for the first time, the CAC 40 climbed to a record 8,700, and the broader STOXX 600 has now gained roughly 10% since the start of 2026.

What makes this rally structurally significant is who is leading it. Luxury groups are nowhere to be seen. Neither are the pharmaceutical giants that have traditionally anchored European portfolios. Instead, the biggest winners of 2026 are the companies building the infrastructure behind the artificial intelligence boom. Germany's composite PMI also rebounded above 50 in July, a sign of genuine economic re-expansion underpinning the move rather than purely financial momentum. Europe is carving out its own structural role as the hardware and industrial backbone of the global AI economy, and the rally reflects it.

Sources: Reuters 10/08/2026, CNBC, 05/08/2026, U.S. Bureau of Labour Statistics, 12/08/2026