What to watch in the week ahead

• Progress toward reopening the Strait of Hormuz contributed to a sharp fall in oil prices last week, although Brent recovered on Thursday and Friday as important questions remained unresolved. Investors will assess whether the proposed agreement can provide safe and reliable passage through the waterway.
• Strong corporate profits and softer employment data helped the S&P 500 rise 3.6% last week, the best weekly performance since April. July inflation will be the principal US data test this week, alongside retail sales, consumer sentiment, and Fed commentary.
• Corporate results reinforced the opportunities created by investment in AI infrastructure, electrification, and health care innovation. Results from major power and eye-care companies will provide fresh evidence on demand this week. We continue to favor diversified exposure across ourArtificial intelligence, Power and resources, and Longevity opportunities.

Can diplomacy deliver a durable solution in the Middle East?

Diplomatic efforts to end the US-Iran conflict gained momentum last week. Iran and Oman reached an understanding “in principle” over the Strait of Hormuz, while US President Donald Trump said negotiations were “moving along.” Optimism over progress contributed to a sharp fall in oil prices early in the week. Brent crude subsequently rose 3.8% on Thursday and 1.3% on Friday as investors became more cautious about whether an agreement could be finalized and implemented, although it still ended the week 7.3% lower.

Important obstacles remain. Iranian lawmakers have discussed proposals including restrictions on US- and Israeli-linked shipping, compensation from countries Iran considers hostile, and a fee structure covering services such as insurance and environmental costs. The proposed arrangement was also reported to include Iranian management over vessels entering the Strait, with exits overseen jointly by Iran and Oman. Investors will assess whether the final terms are acceptable to the US, whether Iran’s negotiators can ensure compliance, and whether the arrangement provides safe and reliable passage, reduces the risk of further military action, and allows energy flows to normalize.

A durable agreement could remove more of the geopolitical premium from oil and ease concerns that energy costs will prolong inflation. That would allow investors to focus more fully on economic and earnings fundamentals, supporting our positive view on equities. In addition, we favor a diversified commodity approach, since geopolitical developments can have very different effects across the asset class. An eventual agreement with Iran, our base case, would likely keep pressure on oil prices by allowing more supply to reach global markets. It could support gold by easing inflation concerns and reducing expectations for further central bank rate hikes. Structural demand from electrification, AI infrastructure, and the energy transition supports our positive view on copper, which we forecast at USD 14,500 per metric ton by the end of 2026. We believe broad exposure across energy, industrial metals, agriculture, and gold offers a more resilient approach than relying on a single commodity outcome.

Will strong earnings continue to broaden beyond the US?

The US reporting season has pointed to strong profit growth. As of Friday, with 88% of S&P 500 companies reporting, 86% had exceeded earnings expectations, the highest proportion since 2021, according to FactSet. Companies in the index also reported a record net profit margin. This earnings strength and reduced expectations for near-term Fed tightening helped the S&P 500 gain 3.6%, its strongest week since April and second-best weekly performance of 2026 so far. An improvement in AI sentiment provided an additional tailwind. The Philadelphia Semiconductor Index, which tracks US-listed chip companies, rose 9.2%. Evidence of broadening was also visible in Europe. Companies in the Stoxx Europe 600 are on track to deliver more than 22% year-over-year earnings growth in the second quarter, according to FactSet, the strongest growth since the third quarter of 2022. The index rose 1.7% last week to a record high.

Attention will now turn to whether the improvement can continue. Results from CoreWeave, a provider of AI cloud infrastructure; Cisco, a networking-equipment company; and Applied Materials, a supplier of semiconductor manufacturing equipment, will provide further evidence on demand across the AI supply chain. The economic backdrop will also remain important. Friday’s softer employment report reduced expectations for a September Fed rate increase, with the market-implied probability falling to around 44% from 72% a week earlier. Wednesday’s consumer price report is the next major policy test, followed by retail sales and consumer sentiment on Friday.

Without taking a view on single securities, we expect earnings growth to broaden further across regions and sectors, supporting our Attractive view on global equities. We forecast roughly 25% cumulative earnings-per-share growth for the Eurozone over 2026 and 2027, supported by recovering manufacturing, cost discipline, and rising investment in electrification, automation, and digital infrastructure. Moderating US core inflation alongside a labor market that is not generating significant wage pressure would reduce the need for further Fed tightening. Wide differences in company performance reinforce the importance of diversification across regions, sectors, and return drivers rather than reliance on a small group of AI beneficiaries.

Can power infrastructure and health care sustain their momentum?

Corporate results last week reinforced our view that AI investment is creating opportunities beyond semiconductor and technology companies. Caterpillar raised its annual revenue-growth forecast after reporting a 24% increase in quarterly revenue, with strong demand for construction and power equipment linked to data centers and critical infrastructure. Siemens Energy reported record orders, revenue, and profitability, supported by demand for gas turbines and electricity-grid equipment. Siemens also reported record quarterly industrial profit and orders, with improving demand in its automation business.

The durability of this investment cycle will depend partly on whether AI capital expenditure continues to produce commercial returns. Investors will assess whether strong orders and rising backlogs translate into revenue and earnings. Results this week from RWE, the German power producer, and Alcon, the Swiss eye-care company, will provide further evidence on demand in two areas central to our Power and resources and Longevityopportunities. Electricity supply and grid connections remain significant constraints on data-center development. In health care, investors will look for evidence of resilient demand and expanding patient access.

Without taking a view on single securities, we believe recent results provide further evidence that AI investment is driving demand across power generation, grids, construction, and automation. We project global grid investment of around USD 500bn in 2026, while annual investment across the power sector could reach USD 3tr by 2030. Health care provides another route to participating in transformational innovation, supported by unmet medical needs and expanding access to treatment. We expect the longevity market to expand from USD 5.3tr in 2023 to USD 8tr by 2030. We continue to favor diversified exposure across ourArtifical intelligence, Power and resources, and Longevity Transformational Innovation Opportunities. These provide differentiated return drivers without relying solely on the largest US technology companies.