Brent crude rose above $94 after an 11th straight night of U.S. strikes on Iran. Alphabet beat expectations with 82% cloud growth. Tesla missed profit estimates as AI spending pushed free cash flow negative. The Senate moved the Clarity Act one step closer to a vote.
The market waited for earnings. Oil stole the headlines.
The S&P 500 finished little changed. The Nasdaq slipped 0.3%. The Dow added about 35 points.
Higher oil capped risk appetite.
Brent crude climbed more than 3% to settle at $94.07 after briefly trading above $95. WTI gained 3% to $86.83 as the U.S. carried out an 11th straight night of strikes on Iran.
Secretary of State Marco Rubio said Iran is "not serious" about negotiations and pledged the U.S. would continue protecting shipping through the Strait of Hormuz.
AI remained the other driver.
Super Micro Computer (SMCI) surged more than 20% after forecasting stronger margins and announcing more than $60 billion in new orders.
After the close, Alphabet (GOOGL) and Tesla (TSLA) answered the market's biggest questions.
The Signal
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Oil is becoming the market's inflation trade again.
Brent settled at $94.07 and WTI at $86.83. Oil is now up more than 20% this month as the war threatens both the Strait of Hormuz and Red Sea shipping.
President Trump warned the U.S. would destroy an Iranian bridge or power plant every time Tehran attacks a ship in Hormuz.
Iran answered by threatening U.S.-linked energy infrastructure across the region.
The Houthis also maintained their embargo on ships serving Saudi ports, keeping pressure on Red Sea exports.
The market is now pricing a longer disruption instead of a short conflict.
Energy Signal
The war is no longer just about Hormuz. The market is pricing risk across multiple energy routes.
Oil is bringing rate fears back.
The 10-year Treasury yield climbed to 4.659%. The two-year reached 4.304%.
Fed expectations shifted sharply.
Markets now price about a 34% chance of a July rate hike, up from 10% a week ago, and roughly a 78% chance of at least one hike by September.
Tariff risks also remain in focus after the administration announced new 50% tariffs on selected Canadian goods.
Markets are also watching AI regulation.
Federal officials reportedly warned banks about Anthropic's Mythos Preview model while waiting months for access to evaluate it, highlighting how quickly AI development is moving ahead of oversight.
Macro Signal
Oil, tariffs, and AI regulation are all pushing the Fed toward caution just days before next week's meeting.
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Alphabet passed the test.
Revenue climbed 24% to $119.8 billion, beating expectations. Google Cloud revenue surged 82% to $24.8 billion while cloud backlog reached $514 billion.
The company also reported a $99 billion gain on equity investments, including stakes in Anthropic and SpaceX (SPCX).
The cost of AI keeps rising.
Alphabet doubled capital spending to $44.9 billion as it continued expanding data centers.
Tesla told the opposite story.
Revenue beat expectations at $28.24 billion, but adjusted earnings missed forecasts. Gross margin fell to 16.8%, and free cash flow turned negative by $1.1 billion for the first time in more than two years.
Tesla plans to spend more than $25 billion this year on AI, robotics, robotaxis, batteries, and manufacturing.
SpaceX gained about 3% after announcing its first earnings report on Aug. 4, though the market is already watching an Aug. 6 lock-up expiration that could release at least 20% of locked shares.
Capital Signal
AI demand is real. So is the cost. Investors are rewarding growth while becoming less willing to ignore spending.
Washington and Wall Street both moved crypto forward.
The Senate released a new 616-page version of the Clarity Act.
The bill adds ethics rules that would stop presidents, members of Congress, and other federal officials from issuing or sponsoring digital assets while in office while still allowing them to invest. Those rules expire in 2029.
The legislation also protects non-custodial software developers by clarifying they are not money transmitters.
Coinbase (COIN) scored another regulatory win.
The SEC agreed to settle the company's FOIA lawsuit, pay $150,000, and improve record-retention policies. Regulators are preparing more crypto-friendly rules, including possible blockchain-based securities.
The competition is changing.
Analysts now expect Robinhood's (HOOD) prediction-market business to generate more revenue than crypto trading as early as the second quarter. Bernstein projects prediction markets could produce $1.7 billion in annual revenue by 2028.
Bitcoin briefly reached a one-month high before pulling back as oil and Treasury yields climbed.
ETF inflows remain strong, exchange balances sit at their lowest level since 2017, and long-term holders now control about 79% of supply.
The Verdict
Crypto has stronger fundamentals than it did a month ago. The next breakout still depends on oil, rates, and Washington.
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Wednesday produced two different markets.
Oil climbed above $94 and pushed rate expectations higher.
Alphabet showed AI demand is still accelerating.
Tesla showed the bill for that growth is getting larger.
Crypto also moved closer to regulatory clarity while prediction markets became a larger story than crypto trading itself.
The market now has its answer.
AI demand is not the problem.
Paying for it may be.
