July saw tensions flare once again in the Middle East. Markets questioned the feasibility of returning to a ceasefire, pushing Brent oil prices back towards $100. Previously, prices had fallen to pre-war levels due to effective rerouting efforts and a reassessment of supply risks.

At the same time, an undercurrent of market rotations has been reshaping global equity markets. The move out of crowded trades has picked up as the market rebalances towards defensives, financials and industrials. As sector-specific drivers become more influential, performance has become more dispersed, reflected in low cross-sector correlation. In bond markets, yields rose to high levels, with initial scrutiny on fiscal space putting pressure on the long-end. 

While investor sentiment remains supported by expectations for another strong earnings season, there is little room for disappointment, which could trigger faster rotations if results or guidance fall short. Liquidity remains supportive but may wane during the summer period; leverage in some tech names and crowded trades could also amplify market movements. 

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