July 2026 Monthly Market Update

Australian shares held their ground as a global technology sell-off swept overseas markets, while a renewed conflict in the Middle East sent the oil price sharply higher.

Key Themes

Monthly Performance Snapshot

Geopolitical & Economic Events

A handful of events did most of the work in markets this month, spanning conflict in the Middle East, a wobble in the global AI trade, and closely watched central-bank and inflation updates.

• Early July · Middle East

  US–Iran hostilities resume. Fighting reignited, tankers were attacked in the Strait of Hormuz and shipping was disrupted in the Red Sea. With the Strait carrying a large share of the world's seaborne oil, prices moved quickly — Brent briefly traded above US$100 a barrel.

• Mid July · Global equities

  The AI trade wobbles. Technology and semiconductor stocks were sold down heavily as investors questioned whether the enormous spending on AI infrastructure would earn an acceptable return. The falls were deepest in Asia, with South Korea's KOSPI (−20.57%) and Taiwan's TAIEX (−8.29%) leading declines.

• Through July · Europe & China

  Europe near record highs; Chinese data firms. The STOXX 600 gained 1.55% on strong earnings and firm energy and defence stocks, while better-than-expected industrial data from China lent support to commodity prices and the Australian dollar.

• 29 July · United States

  Federal Reserve holds rates. The Fed left its policy rate unchanged, but three officials dissented in favour of a rise. With oil surging, investors concluded inflation would be harder to tame — long-term US yields climbed, and the 30-year Treasury yield reached its highest level since 2007.

• 29 July · Australia

  June quarter inflation comes in soft. The RBA's preferred trimmed mean measure ran at 3.60% over the year — still above the 2–3% target band, but softer than expected, easing fears of another rate rise. The RBA did not meet during the month, leaving the cash rate at 4.35%.

International Equities

International shares fell 0.88% on an unhedged basis but rose 0.32% on a hedged basis. With the Australian dollar higher over the month, unhedged offshore holdings were worth a little less once translated back into Australian dollars, so hedged investors — who strip out that currency effect — saw a result closer to how the underlying markets actually performed.

Beneath those modest headline numbers, July was a turbulent month. Technology and semiconductor stocks were sold down heavily mid-month as investors questioned whether the vast sums being poured into AI infrastructure would earn an acceptable return. The damage was deepest in Asia, where Japanese and South Korean technology names fell sharply and the US Nasdaq index also declined over the month. Europe provided some offset, with the regional STOXX 600 index gaining 1.55% and trading close to a record high on the back of strong company earnings and firm energy and defence stocks. A rally in the closing days repaired some of the earlier losses.

Australian Equities

Australian shares rose 1.68%, a fourth consecutive monthly gain and a better result than most overseas markets. With very few large technology or semiconductor companies, the local market was largely shielded from the selling that swept the sector worldwide. The gains were concentrated in a handful of areas: energy was comfortably the strongest sector, lifted by the rebound in the oil price and by wider refining margins, while financials — the major banks in particular — performed well as inflation came in below expectations, and healthcare extended the recovery it began in June.

Smaller companies missed out, with the small-company index falling 2.80% as investors favoured larger, more defensive names. Australian listed property was essentially flat at −0.04% and remains the weakest asset class over the past year at −5.03%, as higher long-term interest rates continue to weigh on property valuations. Sentiment improved late in the month after the softer-than-expected June quarter inflation figures reduced the chance of another interest rate rise.

Domestic & International Fixed Income

Australian bonds returned −0.39% in July. The Reserve Bank of Australia did not meet during the month, so the cash rate remained at 4.35%. The dominant influence was the rise in longer-term interest rates, with the yield on the 10-year Australian government bond climbing about 0.23 percentage points to around 4.94%. Because bond prices move in the opposite direction to yields, that lift produced a small negative return that partly offset the income the bonds paid.

International bonds returned −1.12% over the month. The US Federal Reserve left its policy rate unchanged on 29 July, though three of its officials dissented in favour of a rise. With the oil price surging at the same time, investors concluded that inflation would be harder to bring down than previously assumed. Longer-term US yields rose as a result, with the 30-year government bond yield reaching its highest level since 2007 and the 10-year yield ending the month near 4.70%.

Australian Dollar

The Australian dollar rose against the US dollar over July, moving from around US$0.69 at the start of the month to about US$0.70 at month-end — a gain of roughly 1.87%. Three forces were behind the move. The sharp rise in the oil price and firmer commodity prices generally improved Australia's export earnings, which tends to support the currency. Better-than-expected industrial data out of China, Australia's largest export market, added to that support. And with domestic inflation still high enough that investors could not rule out a further RBA rate rise, the local currency drew additional support as the US dollar softened late in the month after the Federal Reserve held rates and offered little guidance on its next move.

Commodities — Gold & Oil

Oil was the standout mover of the month, rising 22.66% and reversing most of the 18.47% fall recorded in June. Fighting between the United States and Iran resumed in early July, tankers transiting the Strait of Hormuz were attacked, and further strikes on shipping in the Red Sea added to the disruption. Brent crude climbed from close to its pre-conflict level to trade briefly above US$100 a barrel late in the month, before settling around US$90 at month-end. Because the Strait of Hormuz carries a large share of the world's seaborne oil, any threat to it moves the price quickly.

Gold returned 0.88%. As this is an unhedged return earned while the Australian dollar rose, the underlying move in the US-dollar gold price was slightly better than the table figure suggests. Expectations that interest rates will stay higher for longer continue to work against gold, because it pays no income, while renewed conflict in the Middle East and continued central-bank buying provided support. Over the past year, gold has still returned 22.54%.