Author: Igor Kuchma

Last week, SpaceX launched Starship’s 13th test flight, the spacecraft designed for future Moon and Mars missions. While the mission was successful, a partial engine failure during the Super Heavy booster landing burn may have damaged the launch pad and did little to help SpaceX shares, which fell to $113.50 on Monday, almost 20% below their $135 IPO price. 

And the stock may not have bottomed yet.

According to Aswath Damodaran, aka the “Dean of Valuation”, SpaceX is worth about $1.3 trillion, or almost $100 per share, assuming the AI market is worth tens of trillions, xAI faces lower margins due to competition and high costs, and SpaceX will need to spend heavily on infrastructure. Now, if the company overestimates the AI market and keeps pouring money into xAI despite weaker economics, the investment case could deteriorate even further.

Another headwind could come from upcoming lockup expirations. About 20% of insider-held shares will become available for sale two days after SpaceX reports its first earnings as a public company, potentially flooding the market with nearly 1 billion shares. For comparison, only 629 million shares were sold in the June 12 IPO. Another wave hits around August 20, when 455.8 million more shares could enter the market.

On top of that, tech sentiment has turned increasingly volatile in recent weeks.

Yet bulls aren’t backing down. Morgan Stanley, for example, said Flight 13 boosted confidence in Starship’s progress, with a successful Flight 14 tower catch seen as the next major catalyst, and kept its Overweight rating with a $300 price target versus Wall Street’s $237 average. 

As for what could drive the stock higher, positive SpaceX catalysts could trigger a short squeeze, forcing bears to cover and pushing shares higher. 

There was a theory that any major escalation between the U.S. and Iran would stay on hold until the FIFA Club World Cup was out of the way. Reality, however, had other plans — already on July 10, Trump declared the ceasefire with Iran effectively dead, and the U.S. has now been striking targets inside Iran for nine straight nights.

Hence, oil prices are back above $85 per barrel, while gold (XAUUSD) is once again trying to hold the $4,000-per-ounce level.

But could it be that things from here will only get worse now that the cup has ended?

Could be the case as over the past week alone, at least three American service members have been killed, while the Pentagon is reportedly preparing to expand its military operations across the region.

But if we look at the oil market, investors still don’t seem convinced that a major escalation is imminent — even amid reports that Yemen’s Houthi rebels have begun imposing a maritime blockade on Saudi Arabia.

Now, if the situation does deteriorate, the world could face another wave of inflation, although temporary, but significant enough to force central banks to keep monetary policy tighter for longer.

Thus, the fact that U.S. CPI fell 0.4% month-over-month in June, versus expectations of -0.1%, doesn’t necessarily mean inflation is getting back under control. July’s data could easily disappoint again. Meanwhile, Kevin Warsh has made it clear that bringing inflation back to 2% remains the Fed’s top priority and that policymakers won’t tolerate persistently elevated inflation.

As for Europe, the ECB is widely expected to leave interest rates unchanged this week. Still, it could hint at a more hawkish stance should tensions continue to rise around one of the world’s key oil shipping routes.

On the bright side, if markets do start getting nervous, we could always see another round of TACO from the U.S. president.

The ceasefire between the US and Iran is showing cracks after the two sides exchanged strikes at least three times over the past week, prompting Iran’s Islamic Revolutionary Guard Corps (IRGC) to declare that the Strait of Hormuz will remain closed until further notice — or, more specifically, until the U.S. retreats from its positions.

Naturally, oil jumped more than 8% over the week.

That renewed pressure on US Treasuries as markets priced in the possibility that the Fed may have to keep rates higher for longer — or even hike again — sending the 10-year Treasury yield up to 4.56% from 4.37% and the 30-year yield to 5.06% from 4.87% over the past two weeks. Gold, meanwhile, slipped around 2.5%.

And yet, the S&P 500 index still ended the week up more than 0.7%, while the Nasdaq added another 0.8%. How?

On the one hand, investors don’t seem convinced that this will lead to a conflict on the scale of what we saw a couple of months ago. On the other hand, there is hope for another “TACO” call from the president, pulling back whenever markets start to wobble.

Are markets underestimating the risks?

Given that Republicans’ control of the U.S. Senate has weakened following Graham’s death, the White House has every incentive to prevent this conflict from dragging on. A prolonged period of uncertainty in the region would mean higher oil prices, higher gasoline prices, and ultimately angry voters.

But of course, rationality doesn’t always prevail in geopolitics…

All eyes will now be on Kevin Warsh’s appearance before the U.S. Senate on July 15. If he doubles down on his post-Fed meeting comments, that the central bank remains committed to bringing inflation back to 2% and that the inflation outlook has become more challenging, equity indices could also turn red.

The minutes from the Fed’s last meeting are due on Wednesday, and on paper, there’s not much reason to expect any major dovish surprises. The statement, the dot plot, and policymakers’ comments all pointed to inflation still being a concern, and another rate hike remained very much on the table. On top of that, Kevin Warsh mentioned that the Fed shouldn’t let its guard down too soon.

The good news is that a lot has changed since that meeting: geopolitical tensions have eased, oil prices have pulled back, gasoline prices are falling, and inflation expectations have started moving in the right direction, with consumers seeing inflation averaging 4.6% over the next year, down from 4.8% in May, while five-year expectations have fallen from 3.9% to 3.3%. Last but not least, the June jobs report came in weak, with just 57,000 jobs added, far below expectations. 

Yet money markets are still pricing in a 25-basis-point hike by December, and the 10-year Treasury yield rose last Thursday from 4.37% to 4.49%, suggesting the market isn’t expecting a quick shift in Fed rhetoric.

But let’s imagine the next few weeks play out in the Fed’s favor: the situation in the Middle East remains relatively calm, with the Strait of Hormuz half-open but still operating, oil continues to drift lower, and inflation comes in softer than expected, increasing the chances of a shift toward a more dovish stance. Who stands to benefit the most?

Bonds would likely be first in line. If markets become convinced the hiking cycle is over, Treasury yields should fall, pushing bond prices higher. Gold (XAUUSD) and other precious metals, including silver (XAGUSD),  would likely follow. Then there’s Big Tech, as lower discount rates tend to boost the value of future earnings.

But of course, for that to happen the data shouldn’t disappoint, but even with gasoline prices coming down, the impact won’t be immediate. 

While policymakers kept rates unchanged at 3.5% -3.75%, nine of the 18 officials now expect a rate hike, as inflation projections were revised higher from 2.7% in March to 3.6% by the end of 2026, and to 2.3% for 2027 from 2.2%. 

Much of that deterioration came from events in the Middle East, especially disruptions in the Strait of Hormuz, which hit global energy supplies and pushed oil prices higher. Now that things seem to be easing, with shipping resuming and crude back below $75 a barrel, does that mean inflation could cool fast enough for the Fed to cut rates before year-end?

Not according to the CME FedWatch Tool, where the odds of rates being at 3.25%–3.50% by January 1st, 2027 are… 0%. 

And for good reason.

Although headline PCE inflation accelerated to 4.1% year-over-year in May, while core PCE remained elevated at 3.4% and broadly in line with expectations, both are still well above the Fed’s 2% target. Lower energy prices should eventually help, but policymakers know disinflation doesn’t happen overnight.

On top of that, the U.S. economy continues to hold up well. First-quarter GDP was revised higher to 2.1%, and the University of Michigan Consumer Sentiment Index rose to 49.5 in June from 44.8 in May. While confidence remains weak by historical standards, the direction of travel is positive.

Hence, the dollar (DXY) strengthened, while gold extended its decline.

Now all eyes are on this week’s labor market data. Payroll growth is expected to come in at around 115,000 jobs, down from 172,000 previously. If the numbers disappoint, markets could start pricing in a more dovish Fed. If, in turn, employment stays strong, rate-cut expectations will likely fade further. 

Four months into the conflict between the US and Iran, there finally seems to be a light at the end of the tunnel, although it looks more like a flickering flashlight. One day, sides are signing a memorandum of understanding, the next, the Iranian delegation walks out of talks with the US after new threats from Trump.

Still, looking at oil prices, the S&P 500, and the Dow Jones indices, markets seem to be leaning toward a more positive outcome. And indeed, reports of a partial easing of the naval blockade on Iranian ports and the reopening of parts of the Strait of Hormuz, along with claims that three fully loaded oil tankers linked to India passed through, seem to back that up.

But what about the delayed demand effect? Shouldn’t that be supporting prices?

In theory, yes. According to Kpler, around 1.15 billion barrels of supply were disrupted during the war. At the same time, countries drew heavily on strategic reserves to avoid buying at peak prices. US crude inventories, for example, fell to 340.3 million barrels, the lowest since 1983.

On the other hand, oil bears argue that some flows may still have been moving covertly along the Omani coast even during the blockade. On top of that, the UAE’s exit from OPEC+ adds long-term supply-side upside pressure, and if sanctions on Iran are lifted, production could ramp up quickly.

And most importantly, even the IEA expects that by 2027 supply will rise by about 8 million barrels per day while demand grows by only around 2 million, implying a potential surplus of more than 5 million barrels per day.

The thing is that OPEC Secretary General Haitham Al Ghais said the IEA’s numbers are not grounded in reality. It is also worth noting that any US-Iran deal could still fall apart.

In the end, time will tell who is right. For now, one should keep in mind that the surge in energy prices from the Hormuz disruption has already fed through the system, forcing central banks to tighten policy, potentially including the Fed. 

SpaceX shares closed 19% above their IPO price of $135 on the first day of trading, and the momentum continued into Monday’s pre-market session, with the stock gaining a further 5%. 

So, the skeptics who predicted the IPO would fail were wrong? 

Time will tell, but for now, the rally seems to be driven less by fundamentals and more by hype around the company and investors hoping to capitalize on the idea that SpaceX stock will soon be added to major indices. For instance, although the S&P 500 has stuck to its standard criteria, the Nasdaq has revised its index inclusion rules to speed up the process, which could end up forcing large passive funds to buy the stock.

At the same time, news that the United States and Iran may be close to reaching an agreement could have contributed to the momentum.

The problem with the latter is that reopening the Strait of Hormuz would not immediately lower global inflation. Moreover, parts of the proposed agreement may be difficult to implement, and even if a memorandum is signed, the U.S. and Iran would still need to agree on the nuclear program and other unresolved issues. Thus, a deal reached this week would not necessarily end the conflict.

As for SpaceX itself, even before the IPO, Morningstar assigned a fair value estimate of just $63 per share.

Today, SpaceX’s market capitalization exceeds that of Taiwan Semiconductor Manufacturing Company, despite the fact that, as of Q1 2026, TSMC reported earnings per share of $3.49 on revenue of $35.9 billion, surpassing analyst expectations, whereas SpaceX had $4.7 billion in revenue in the first quarter of 2026 but a net loss of $4.3 billion.

This does not necessarily mean the stock cannot continue rising in the short term; however, if the hype fades and investor sentiment shifts, the correction could be sharp, and if that occurs after the stock has been included in major indices, the consequences may extend beyond SpaceX itself.

By the end of last week, the Nasdaq plunged more than 4%, the S&P 500 lost 2.6%, and the Dow Jones fell 1.4%. Ironically, it was good news or, more precisely, the fact that the U.S. economy added 172,000 jobs, while payroll figures from previous months were revised upward, that triggered the sell-off, as it gives the Fed more room, if not to tighten monetary policy, at least to keep it unchanged for a longer period.

For instance, according to the CME FedWatch Tool, markets are now pricing in more than a 70% chance of another rate hike. No wonder gold is once again below $4,400.

Yet investors seem to have short memories. U.S. futures opened the new week higher despite rising tensions in the Middle East. Why?

On the geopolitical front, Trump’s Truth Social posts about progress in talks with Tehran appear to have reassured markets once again.

As for monetary policy concerns, attention seems to be shifting toward the upcoming SpaceX (SPCX) IPO, reportedly targeting up to $75 billion, making it one of the largest public offerings in history. The concern is that, despite generating more than $18.5 billion in revenue in 2025, SpaceX lost nearly $5 billion and is still targeting a valuation of roughly $1.77 trillion. The bet appears to be that SpaceX could become another meme stock like Tesla, growing regardless of fundamentals.

Now, if negotiations with Iran stall, if inflation remains stubbornly high, or if economic data continues to undermine hopes for Fed rate cuts, optimism around the SpaceX IPO could eventually turn into an “entire market trap,” as AI-linked companies already account for an outsized share of gains, leaving downside risks elevated. That risk could only increase further once OpenAI and Anthropic go public.

Legalities didn’t stop the U.S. campaign against Iran. Trump simply declared that a ceasefire between the two countries had been in place since April 7, 2026, effectively arguing that no Congressional authorization is needed to continue military operations.

Following the same logic, recent strikes on Iranian radar installations and drone command centers in Goruk and on Qeshm Island shouldn’t reset the clock simply by being justified as retaliation for Iran’s “aggressive actions,” including the downing of a U.S. MQ-1 drone over international waters.

What matters is that the Strait of Hormuz remains closed, and while investors celebrate record highs in the S&P 500 and Nasdaq, the economic costs of the conflict continue to accumulate.

Starting with inflation, headline PCE inflation accelerated to 3.8% year-over-year in April from 3.5% previously, while core PCE remained stuck at 3.3% — still far above the Federal Reserve’s 2% target. Thus, even with Kevin Warsh leading the Fed, hopes for meaningful rate cuts look increasingly misplaced.

Could the good news, then, be that the growth picture is also weakening, as the weaker the employment figures are this week, the stronger the case for eventual monetary easing in the name of preserving full employment becomes?

Under normal circumstances, yes. The problem now is that if the conflict drags on and the Strait of Hormuz remains blocked, oil prices could move dramatically higher. Strategic petroleum reserves are finite, spare production capacity is limited, and there is still no realistic substitute for oil at the scale required by the global economy.

Should that happen, inflationary pressures could intensify further, forcing regulators to raise interest rates — something financial markets would find much harder to ignore. And with reports that Iran has suspended talks with the U.S. amid the escalation of hostilities in Lebanon, this no longer appears to be an unlikely scenario.

Futures on the Dow Jones, Nasdaq, and S&P 500 opened the week in the green, while oil prices slipped on hopes that Washington and Tehran may finally reach an agreement after Trump said, “the final aspects of the deal are being discussed and will be announced shortly.”

Although Iran’s Foreign Ministry spokesperson, echoing some of the U.S. president’s rhetoric, noted a “trend toward rapprochement,” he stressed that this does not necessarily mean both sides will reach an agreement on the key issues.

In particular, the draft reportedly requires Tehran to permanently abandon its nuclear weapons program and dismantle all enriched uranium stockpiles, conditions Iran has previously rejected. There is also still little clarity on how control and security in the Strait of Hormuz would be managed.

If talks fail again, bond yields could rise, and stocks may turn more nervous as prolonged uncertainty around the Strait of Hormuz adds pressure to the economy through higher oil prices.

Meanwhile, inflation expectations continue to drift higher, with the one-year measure rising from 4.7% to 4.8% and the long-term gauge climbing from 3.5% to 3.9%, largely driven by independent and Republican voters. 

At the same time, consumer confidence in the U.S. continues to deteriorate. According to the University of Michigan, the consumer sentiment index fell to 44.8 in May, another record low. Assessments of current conditions dropped from 52.5 to 45.8, while the expectations index declined from 48.1 to 44.1, reaching historically depressed levels for the first time since 1973.

Markets are not yet pricing in that risk, but weaker consumer demand could eventually weigh on corporate profits. At the same time, the minutes from the latest Federal Reserve meeting showed that a rate hike may be necessary if inflation remains above the 2% target.

Now, even if an agreement is signed, it would likely be temporary rather than a full resolution to the broader conflict, so any rally could also be short-lived.