Global equity markets were firmly on the back foot last week as weakness across the artificial intelligence (AI) value chain weighed heavily on sentiment. AI related companies have effectively dominated market leadership this year, with exceptional gains among semiconductor, memory and infrastructure providers helping propel US and Asian equity markets, particularly Japan and Korea, to record highs. However, that strong performance has been accompanied by expanding valuations, and investor attention shifted back towards that risk as geopolitical tensions in the Middle East intensified once again. The pullback was notable given that the underlying fundamentals remain supportive. Industry heavyweights ASML and TSMC both reported solid results¹, reinforcing the strength of demand for advanced semiconductor technologies and AI related infrastructure. Nevertheless, investors appeared more inclined to lock in profits than reward further earnings upgrades, raising questions about how much positive news is already reflected in share prices. That said, similar periods of sharp weakness have occurred several times over the past year, only for AI linked stocks to regain momentum once sentiment stabilised. Whether this proves to be another temporary setback or the start of a broader reassessment of valuations remains to be seen.

Selling pressure was particularly pronounced across Asian equity markets, where technology stocks once again bore the brunt of the weakness. The Shanghai Composite and Nikkei 225 fell -5.8% and -6.4% respectively (both in local currency terms), with semiconductor and broader technology shares leading the declines. In Japan, the retreat was compounded by the sharp rise in oil prices, a particular headwind for an economy that remains heavily reliant on imported energy. Weakness was also evident in the US, where the Nasdaq declined -2.9% and the broader S&P 500 fell -1.6% (both in dollar terms). Performance was highly bifurcated, however, with the energy sector outperforming amid rising crude prices. Across the Atlantic, losses were more contained. The MSCI Europe ex‑UK index slipped just -0.4% (in euro terms), while the FTSE 100 advanced +1.0%. In a rare reversal of recent trends, the UK market benefited from its relatively limited exposure to technology stocks, while its larger weighting to energy and defensive sectors proved supportive.

Moving to commodities and as already alluded to, energy prices continued to push higher last week as military escalation between the US and Iran intensified across the Persian Gulf. Brent crude surged +16.0% to $88 a barrel, its strongest weekly advance since April, as investors reassessed the risk of supply disruption and the potential impact on global energy markets. The fallout was felt at the consumer level, with US gasoline prices moving back above $4 per gallon once again. Gold moved in the opposite direction, falling -2.2% to $4,000 an ounce. The decline reflected growing concerns that higher energy prices could reignite inflationary pressures, increasing the likelihood that central banks keep interest rates elevated for longer.

¹ T. Rowe Price – Global Markets Weekly Update, 17/07/2026

SJP Approved: 20/07/2026

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