Iran Volatility, Meta’s AI Ambitions and Fed Minutes Drive the Week

Throughout the week, investors balanced renewed Middle East volatility, hawkish Federal Reserve minutes, softer labor-market signals, and a fresh spark in the AI trade from Meta Platforms (META). 

Through Thursday, the S&P 500, Nasdaq and Dow were higher in the past five trading sessions, helped by Thursday’s rebound. However, the Dow remained an underperformer on a five-day basis despite strength in energy, healthcare, and industrials. Russell 2000 was slightly lower, reflecting a market that remained selective rather than broadly risk-on. 

Trading was flat pre-market as traders anticipated the SK Hynix U.S. debut. Overall, the week showed a market still willing to reward AI infrastructure, as well as energy exposure, but less willing to chase every risk asset equally. The Federal Reserve appears hawkish, the Middle East remains unstable, and labor demand is cooling. Yet Meta’s compute strategy gave investors reason to revisit the AI capex story, helping Thursday’s rally feel more durable than a simple short-covering bounce. 

Geopolitics kept commodities volatile. The fragile Middle East ceasefire came under renewed pressure after U.S. strikes on Iran prompted Iranian attacks on Kuwait and Bahrain, briefly sending crude oil sharply higher. By Thursday, crude gave back much of that spike as traders reassessed the probability of a broader regional escalation. Crude remains volatile and is up about 5% this week into Friday’s session. That reversal helped Treasury yields ease and supported Thursday’s equity rebound, but the ceasefire risk remained a key source of macro uncertainty.

The biggest policy headline came from the June FOMC minutes released Wednesday. The minutes confirmed a more hawkish Chairman Kevin “Warsh Fed,” with policymakers removing language that had previously suggested the next policy move would likely be a rate cut. The Fed kept the funds rate unchanged at 3.50% to 3.75% in June, but nine of 18 policymakers projected at least one rate hike by year-end. That shift effectively reinforced the message that rate cuts are off the table for now, and that the committee’s priority remains restoring price stability. 

The economic data supported that cautious policy stance. Markets continued to digest the June employment report published last Friday, which showed nonfarm payrolls rose by just 57,000, well below expectations, while April and May were revised lower. The unemployment rate fell to 4.2%, but the drop reflected a sharp decline in labor-force participation to 61.5%, rather than clear labor-market strength. Weekly jobless claims also remained low, highlighting the “low hire, low fire” narrative. Meanwhile, the June ISM Services PMI slipped to 54.0 from 54.5, still signaling expansion, while services employment returned to growth and prices paid cooled but remained elevated. 

Sector leadership reflected those crosscurrents. Energy was the leading sector for the week, helped by the early oil spike and continued geopolitical risk premium. Financials also performed relatively well as Thursday’s rate action became more favorable for banks. Shorter-term rates, including 90-day benchmarks, fell more than longer-term yields, lowering the market-implied cost of deposits and front-end funding relative to long-term lending rates. That modest steepening dynamic supported the net-interest-margin narrative for banks, especially with credit conditions still stable. 

The biggest corporate catalyst was Meta. Reports suggest that Meta plans to start manufacturing its in-house “Iris” AI chip in September. This contribution to its AI infrastructure could boost its total computing power capacity to 14 gigawatts next year. The chip is being designed with help from Broadcom (AVGO) and manufactured by Taiwan Semiconductor Manufacturing (TSM), giving Meta a path to lower long-term compute costs and reduce dependence on Nvidia (NVDA) and Advanced Micro Devices (AMD). Investors interpreted the news as a potential improvement in return on invested capital, shifting the hyperscaler capex debate from pure spending pressure toward future monetization and efficiency. 

Broadcom also remained in focus after extending its Apple (AAPL) chip partnership through 2031 to shore up its role as a major custom-silicon beneficiary. Microsoft (MSFT), by contrast, remained a reminder that mega-cap tech companies are still trying to offset massive AI spending with margin discipline after announcing another round of job cuts.

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