A fresh week of trading begins with investors once again focused on developments in the Middle East after the United States revived diplomatic efforts with Iran. Alongside geopolitical headlines, markets will be watching a series of important U.S. economic reports, including the July employment figures and the latest manufacturing and services data. Corporate earnings will also remain in focus, with SpaceX (NASDAQ:SPCX) scheduled to publish its first quarterly results since its landmark stock market debut and Advanced Micro Devices (NASDAQ:AMD) expected to provide further insight into demand for artificial intelligence infrastructure.
1. Renewed U.S.-Iran Diplomacy Takes Centre Stage
Market attention has shifted back to the Middle East after U.S. President Donald Trump announced over the weekend that he had cancelled a planned military strike against Iran in favour of resuming diplomatic negotiations.
The latest development follows several months of alternating military escalation and diplomatic efforts in a conflict that began after U.S. and Israeli operations against Iran earlier this year. Although tensions have periodically eased, concerns remain that the conflict could spread further across the region.
In a post on Truth Social, Trump said the decision to pause military action came after Iran and several Middle Eastern countries requested additional time to pursue negotiations. He added that the “perimeters” of an agreement designed to reopen the Strait of Hormuz had already been established.
The Strait of Hormuz remains one of the world’s most important energy shipping routes, and its closure over recent months has been a major source of volatility for global energy markets.
Reports from Saudi Arabia also suggested that Crown Prince Mohammed bin Salman encouraged Washington to prioritise diplomacy, stressing the “necessity of prioritizing dialogue” in order to prevent the conflict from escalating further.
Despite the renewed optimism, analysts remain cautious. Researchers at Vital Knowledge noted that similar diplomatic progress has occurred before, only to collapse shortly afterwards. A ceasefire framework agreed in June briefly reopened shipping through the Strait of Hormuz before it unraveled following renewed Iranian attacks on commercial vessels.
Oil markets immediately reacted to the latest developments. Brent crude futures fell sharply on Monday but remained comfortably above the levels seen before the conflict began earlier this year.
2. July Employment Report Could Influence Federal Reserve Policy
The U.S. labour market will be another major focus this week as investors await the July nonfarm payrolls report, one of the most closely watched indicators for Federal Reserve policy.
Economists currently expect the U.S. economy to have created approximately 88,000 jobs during July, an improvement from the 57,000 positions added in June. Such an outcome would reinforce the view that the labour market remains resilient despite slower hiring activity.
The unemployment rate is expected to remain unchanged at 4.2%.
Although hiring has moderated over recent months, layoffs have also remained relatively limited, helping support overall employment conditions.
However, several structural changes continue to affect labour market dynamics. The Trump administration’s tougher immigration policies, together with an increasing number of Baby Boomer retirements, have reduced the available workforce. Between May and June alone, the labour force declined by approximately 720,000 people.
Meanwhile, the labour force participation rate fell to 61.5% in June, marking its lowest reading since March 2021 during the COVID-19 pandemic.
Despite these developments, Thomas Ryan, Senior North America Economist at Capital Economics, believes underlying demand across the U.S. economy continues to strengthen.
The employment report could therefore play an important role in shaping expectations for future Federal Reserve interest rate decisions. Policymakers continue to balance the need to contain inflation against the risk that tighter monetary policy could weaken employment and economic growth.
3. Manufacturing and Services Data to Provide Fresh Economic Signals
In addition to employment data, investors will closely monitor new reports from the Institute for Supply Management (ISM), covering both manufacturing and services activity.
The ISM Manufacturing Purchasing Managers’ Index is expected to rise to 54.0 in July from 53.3 in June.
A reading above 50 indicates that manufacturing activity is expanding. Although manufacturing represents just over 9% of the U.S. economy, the sector remains an important indicator of business confidence and industrial demand.
June’s moderation may have reflected reduced order front-loading by companies after earlier concerns about supply chain disruptions linked to the conflict involving Iran.
Attention will also turn to the ISM Services Index.
Activity in the services sector slowed during June, although employment within the industry recovered after contracting for three consecutive months.
Because services account for more than two-thirds of total U.S. economic output, the report will provide another important measure of overall economic momentum heading into the second half of the year.
4. SpaceX Prepares to Release Its First Results Since Going Public
Corporate earnings will also attract considerable attention, particularly SpaceX (NASDAQ:SPCX), which will publish its first quarterly results since completing one of the most closely watched initial public offerings in recent history.
Since its market debut in June, SpaceX shares have fallen 19.7%.
The stock initially surged after listing, climbing from its IPO price of $135 to above $200 before reversing sharply. The decline has erased approximately $1.2 trillion in market capitalisation.
Much of the enthusiasm surrounding the IPO was driven by expectations for continued expansion of the company’s Starlink satellite internet network, future space exploration projects and the possibility of launching artificial intelligence data centres into orbit.
Those ambitions rely heavily on the successful development of the company’s 400-foot Starship rocket, making investors particularly interested in updates following the delayed test launch announced last month.
When SpaceX reports after the U.S. market closes on Tuesday, investors will be looking for additional information regarding Starlink’s growth strategy, AI-related investment plans and progress on future launch schedules.
5. AMD Earnings Expected to Offer AI Spending Clues
Advanced Micro Devices (NASDAQ:AMD) will also be closely watched this week as investors continue evaluating demand across the artificial intelligence semiconductor industry.
As one of Nvidia’s primary competitors in AI chip development, AMD has become an important indicator of spending on the hardware powering next-generation artificial intelligence applications.
Several of the world’s largest technology companies have announced substantial long-term investment plans for AI infrastructure, including advanced processors and new data centres.
According to Bloomberg News, Alphabet, Meta Platforms, Microsoft and Amazon have collectively committed nearly $2.4 trillion to AI-related investment over the coming years.
During its previous earnings update in May, AMD forecast second-quarter revenue of approximately $11.2 billion, plus or minus $300 million, compared with first-quarter revenue of $10.25 billion.
Semiconductor shares recovered during the past week after experiencing several weeks of pressure driven by concerns about whether the industry’s enormous AI spending cycle can ultimately generate sufficient returns.
AMD shares have declined more than 8% over the past month, although the stock has still more than doubled in value since the beginning of the year.
Other Major Earnings to Watch
The earnings calendar remains busy beyond SpaceX and AMD.
Palantir (NASDAQ:PLTR) will report results on Monday, followed on Tuesday by Caterpillar (NYSE:CAT) and McDonald’s (NYSE:MCD).
On Wednesday, investors will turn their attention to Eli Lilly (NYSE:LLY), along with digital storage companies Sandisk (NASDAQ:SNDK) and Western Digital (NASDAQ:WDC), as earnings season continues across multiple sectors.
Advanced Micro Devices stock price