Markets Rally on Iran Pause, But Both Gulf Chokepoints Stay Shut

The Dow Jones Industrial Average closed at a record 53,178.41 on Monday, surging 693.38 points or 1.32%, as Big Tech led a broad rally and oil prices slid after President Donald Trump called off planned military strikes against Iran. The S&P 500 gained 1.48% to 7,600.50 — within 0.3% of its June all-time high — and the Nasdaq Composite jumped 2.13% to 25,913.90.^[1] The rally was real, the de-escalation signal was genuine, and the breadth was impressive. But underneath the headline numbers, the two maritime chokepoints that anchor global energy trade remain effectively closed, tanker traffic is at its lowest since the war began, and a sanctions bill advancing through the Senate threatens to reshape global trade lanes in ways that outlast any ceasefire.

The Rally: Tech Earnings Plus an Oil Relief Bid

Monday’s surge was driven by two forces converging at once. On the earnings front, the second-quarter reporting season is delivering the highest beat rate since 2021 — 77% of S&P 500 companies that have reported have topped estimates, with the index on track for 27% year-over-year earnings growth excluding Alphabet and Amazon, or 45% including them.^[1] Meta Platforms surged 6%, Amazon rose more than 4% to a record $3 trillion market capitalization, Nvidia popped nearly 3%, and Alphabet and Microsoft each climbed close to 5%.^[1]

On the geopolitical front, Trump’s weekend announcement that he had canceled what he described as the largest planned attack since World War II — tabled at the request of Saudi Arabia, the UAE, Qatar, and Iran — sent crude prices plunging.^[1] Brent crude futures fell 4.73% to settle at $83.77 a barrel, having dropped as much as 7.3% to $81.55 intraday.^[1][2] West Texas Intermediate settled down 5.11% at $80.34.^[1] The 10-year Treasury yield slid about 6 basis points to 4.688% as inflation worries dimmed.^[1]

Travel stocks caught the relief bid — Norwegian Cruise Line and Carnival rose 4% and 2%, while American Airlines and United Airlines each gained about 5%.^[1] Energy stocks went the other way: Chevron closed down 1.85% at $193.19 and ExxonMobil slipped 0.25% to $155.05 as of the 16:00 ET close,^[3] after Trump told reporters that Exxon and Chevron had made “too much money” from war-driven oil shortages.^[1] The United States Oil Fund (USO) dropped 5.46% to $122.12.^[3]

The Gap: Both Chokepoints Stay Shut

Here is where the market’s optimism and the physical reality diverge. The Strait of Hormuz, through which roughly 20% of the world’s oil and gas flowed before the war,^[2] remains effectively closed to routine commercial shipping. Only eight ships passed through on Sunday and eleven on Saturday, compared with more than 100 per day before the conflict began, according to ship-tracking firm Kpler.^[2]

The alternative route that Gulf producers had been using — through the Red Sea and the Bab el-Mandeb Strait — is now also under threat. Yemen’s Iran-backed Houthi militia announced a blockade on Saudi Arabia’s Red Sea ports on July 20, and the UK Maritime Trade Operations agency has reported multiple attacks on vessels in the past week.^[2] Only 28 commodity vessels transited the Bab el-Mandeb on Saturday, six of them with transponders switched off to avoid detection.^[2] Ships loading crude for export to Asia through that route have dropped to about four per day — the lowest since the war started.^[2]

Kpler analyst Matthew Wright put it plainly: “In terms of threat to the trade of crude, we’re at the worst period that we’ve been in since this crisis began.”^[2] Intertanko managing director Tim Wilkins described the industry as “facing a broadening, deteriorating, and increasingly complex security situation.”^[2]

Even the diplomatic premise behind the rally is contested. Iran’s foreign ministry spokesperson Esmaeil Baqaei said no deal is imminent and that any agreement would not lift current restrictions while US “aggression” continues.^[2] Trump, for his part, accused Iran’s leadership of being “unbelievably duplicitous” — publicly denying negotiations while privately seeking them — and claimed the US Navy “effectively controls” Hormuz through what he described as a “blockade.”^[1] The gap between “talks will resume Monday” and “nothing gets through unless we want it to” is the gap the market is currently pricing as resolved.

Brent has fallen more than $16 per barrel over eight trading sessions, retreating from the $100 level reached at the height of the latest conflict.^[4] That repricing is real — but it is repricing the probability of imminent escalation, not the probability of a restored shipping lane. Hapag-Lloyd, the global shipping giant, said that even if Hormuz reopened tomorrow, restoring normal cargo flows would “most likely take three to four months.”^[2]

The Graham Act: Sanctions as Trade Architecture

While the market focused on Iran, the Senate advanced legislation that could reshape global trade independently of any ceasefire. On July 29, the Senate cleared a procedural vote 86-12 on the Lindsey O. Graham Sanctioning Russia and Iran Act of 2026,^[5] which would authorize tariffs of up to 100% on the five largest purchasers of Russian crude oil and the five largest purchasers of Russian natural gas.^[5]

China and India, which together absorb more than 80% of Russia’s seaborne crude exports — China roughly 50%, India roughly 40%^[5] — are the bill’s principal targets. Section 113 specifically names India, China, Slovakia, Hungary, and Azerbaijan as countries that could face punitive tariffs.^[5] The legislation also extends to nations enabling sanctions evasion through shadow-fleet tanker operations.^[5]

What makes this bill structurally different from the tariff regime the Supreme Court struck down earlier in 2026 is its legal foundation. The Court ruled 6-3 that IEEPA does not authorize the president to impose tariffs; tariffs enacted by an explicit act of Congress cannot be challenged on the same grounds.^[5] If the House passes the bill and the president signs it, there is no IEEPA vulnerability to exploit through litigation.^[5]

The House, currently in summer recess, would need a two-thirds majority under suspension rules — a higher bar, and one where Democratic concerns about the tariff authorities could complicate passage.^[5] But the bill includes a presidential waiver clause,^[5] meaning the 100% tariff ceiling functions as leverage — a statutory hammer that sits on the president’s desk whether or not it is immediately swung. The USTR is directed to review the covered countries every 180 days, ensuring that temporary reductions in Russian oil purchases cannot be used to escape coverage.^[5]

The Yen Intervention: A Signal About Systemic Stress

The same weekend that Trump paused Iran strikes, the US and Japan confirmed a coordinated yen-buying intervention — the first joint US-Japan currency operation since 1998.^[6] The yen had slid to 163.73 per dollar last Thursday, a four-decade low, before rebounding to roughly 157 on Friday.^[6] Japan’s Finance Ministry said it “will not hesitate to conduct further coordinated interventions in the future” and remains in close communication with the US Treasury.^[6]

The intervention is notable not just for its rarity but for what it signals about the underlying stress. Washington joined the operation because of concerns about US Treasury market stability and the risk that a yen selloff and Japanese government bond destabilization could cause global spillovers.^[6] But analysts are skeptical the rally holds. UBS strategists warned that “Japan’s policy mix remains unlikely to generate sustained yen strength,”^[1] and HSBC analysts said a structural shift in Bank of Japan policy would be fundamental to a lasting recovery.^[1] The intervention addresses a symptom — speculative positioning against the yen — without addressing the cause: an interest-rate differential that monetary policy has not closed.

China: The Trade Front That Never Goes Quiet

Separately from the Graham Act, US-China trade friction continues at a lower temperature but with no resolution. China voiced “serious concern” over recent US economic restrictions during a video call on August 1 between Vice-Premier He Lifeng, Treasury Secretary Scott Bessent, and US Trade Representative Jamieson Greer.^[7] China accused the US of “economic coercion” after new forced-labor trade restrictions were announced.^[7] Meanwhile, China has been regaining manufacturing edge as US tariff cuts temper the supply-chain exodus that had been building through 2025 and early 2026.^[7]

The Graham Act, if it becomes law, would stack a new tariff threat on top of the existing bilateral friction — with China facing potential 100% tariffs on its exports to the US for its purchases of Russian energy, separate from any trade-war tariffs already in place.^[5] The tariffs cannot be stacked to 200%,^[5] but the combined effect would be to push effective tariff rates on Chinese goods to their statutory ceiling.

The Real Economy: Manufacturing Surges, Travel Buckles

The ISM Manufacturing PMI posted a 55.6 reading for July, up 2.3 points from June and the best since May 2022 — well above the 54.0 consensus.^[1] New export orders and backlog orders both rose 4.5 points, production jumped to 58.5, and employment climbed to 52.8, its highest since August 2022 and the first expansion in 33 months.^[1] The prices index eased 1.9 points to 71.1.^[1]

But the conflict’s footprint is visible in corporate results. Marriott International reported that international revenue per available room fell 0.5% in the second quarter, with the Middle East suffering a 43% decline.^[1] The hotel giant missed revenue estimates ($7.07 billion vs. $7.2 billion consensus) and its shares dropped more than 4%.^[1] Boeing provided a counterpoint: its shares jumped 7% after the 737 Max 7 received FAA certification to fly after nearly a decade of delays.^[1]

What to Watch Next

1. Whether Iran-US talks actually begin. Iran’s foreign ministry has denied that negotiations are imminent.^[2] If no talks materialize this week, the oil relief bid reverses quickly — Brent’s $16 slide over eight sessions^[4] has room to retrace.

2. House action on the Graham Act. The House is in summer recess. When it returns, the bill needs a two-thirds majority under suspension rules.^[5] Watch for whether Democratic concerns about the tariff authorities block passage — and for how the White House signals it would use or waive the 100% tariff authority.

3. Tanker traffic data. Kpler’s counts — 8-11 ships per day through Hormuz, 28 through Bab el-Mandeb^[2] — are the leading indicator. Any uptick would be the first physical evidence that the chokepoints are reopening. Absent that, the oil-price decline is a sentiment move, not a supply move.

4. Yen defense sustainability. Japan has signaled willingness to intervene again.^[6] But without faster BoJ rate hikes, analysts see the intervention as a temporary floor.^[1] Watch USD/JPY around the 160 level — if it breaks back through, another intervention round becomes likely.

5. US payrolls. The July jobs report lands later this week and will test whether the manufacturing strength visible in the ISM data^[1] is translating into labor-market momentum, or whether the geopolitical drag on travel and energy-sensitive sectors is broadening.

The base case is that the market’s relief rally has legs through the near term — earnings are strong, oil is cheaper, and the Fed’s inflation worry has dimmed. But the structural risks have not been resolved; they have been paused. Two chokepoints are shut, a sanctions bill with constitutional durability is moving through Congress, and the yen is being defended by intervention rather than policy. The market is pricing the pause. The data is pricing the problem.