A decisive week for the markets

On Monday, the U.S. imposed secondary sanctions on countries and companies trading with Tehran, targeting its oil, financial, and other key sectors, as Iran refuses to cooperate on ending the war. In response, Iran warned that if the pressure continues, it could tighten control over the Strait of Hormuz.

By Tuesday morning, the rhetoric had changed. According to some reports, the U.S. may have offered to end the economic blockade and lift sanctions in exchange for reopening the strait, pushing oil prices down.

Where is the truth? 

Both sides have a reason to end the conflict soon. 

Iran is facing a severe gasoline shortage due to the U.S. blockade, refinery damage, and import restrictions, which may make Tehran more willing to reach a deal. The White House, meanwhile, enters the midterm elections amid high gas prices and the risk of a Fed rate hike, which voters might not like. 

If a deal is done, this could boost most markets, except, of course, energy. Otherwise, not only could the situation in the Middle East worsen, but relations between China and the U.S. could also suffer from secondary sanctions. 

Then there’s Nvidia’s quarterly report, with Morningstar expecting another beat and higher guidance: 2027 data-center revenue at $361 billion (+86% YoY), while total revenue is expected to grow 80% and data-center revenue to top $500 billion in fiscal 2028. Any disappointment could pressure chip stocks. 

It’s also worth watching China sales, Blackwell and Rubin shipments, and Nvidia’s plans to launch an AI model that competes with DeepSeek and Kimi K3 but could also challenge U.S. AI leaders like OpenAI and Anthropic, potentially putting pressure on the market. 

But the biggest event of the week could be the Jackson Hole symposium on Friday, where markets will look for signals on whether the Fed will keep rates unchanged or raise rates at the September 16 meeting.

On the one hand, inflation is slowing, core inflation has fallen to 2.5%, growth and the labor market are weakening, and 30-year Treasury yields are at their highest since 2007, so it seems the Fed should cut rates. But inflation risks from trade wars and the war in the Middle East haven’t gone away.

Still, there’s a risk of disappointment, as Kevin Warsh will likely remain cautious and won’t reveal how the Fed might react to future data to avoid tying the Committee’s hands.