July was a month of sharp contrasts across global markets. The UK stock market delivered its strongest month since February, with the FTSE 100 reaching new record highs, while US technology shares fell back before staging a powerful recovery in the final days of the month on the back of strong company results. Geopolitical tensions in the Middle East returned to the fore, keeping oil and wider commodity markets volatile, and central banks on both sides of the Atlantic left interest rates unchanged.

United Kingdom: a record-breaking month

The FTSE 100 rose by around 4.5% over the month — its best monthly performance since February — closing at an all-time high of just under 11,000. The UK market's strength reflected its particular make-up: energy companies gained more than 15% over the month as renewed hostilities between the US and Iran raised concerns over fuel supplies, while mining companies were lifted by rising metals prices. Strong first-half results from several large UK companies, including in the banking sector, added further support. The Bank of England held interest rates unchanged at its meeting at the end of the month, although three members of the committee dissented — more than expected — reflecting concern over the potential economic impact of the conflict in the Middle East. Sterling also had its strongest month since April.

United States: technology wobbles, then rebounds

The picture in the US was more mixed. The S&P 500 ended July broadly flat, while the technologyheavy Nasdaq fell by around 3%, weighed down by a sharp sell-off in semiconductor shares midmonth, uncertainty over the conflict with Iran, and a Federal Reserve that struck a more hawkish tone than markets had hoped for under its new chairman. The Fed left rates unchanged at its July meeting. The final days of the month, however, brought a strong reminder of why company fundamentals matter. Better-than-expected results from several of the largest technology companies — driven in particular by continued growth in cloud computing and artificial intelligence spending — sparked a broad rally in technology shares in the US, Europe and Asia. This late recovery pared back much of the earlier weakness and left the S&P 500 on course for roughly 40% earnings growth for the second quarter, an exceptionally strong reporting season.

Asia and emerging markets

Asia and the emerging markets were at the centre of July's volatility. The emerging markets are now dominated by South Korea and Taiwan, which between them account for more than half of the main emerging market index, reflecting their central role in the global semiconductor and artificial intelligence supply chain. This concentration cut both ways during the month. Having risen dramatically over the previous eighteen months, the South Korean market experienced extraordinary swings — falling sharply in the middle of July on concerns over stretched valuations, high levels of borrowing among domestic investors and Chinese competition in memory chips, before staging one of its largest ever one-day recoveries on the final trading day as strong results from the major US technology companies revived confidence in AI-related demand. Underlying trade data remained robust throughout, with Korean and Taiwanese technology exports far higher than a year earlier. Chinese equities were more subdued, having been overtaken by Korea and Taiwan as the largest emerging markets.

Commodities and the Middle East

Having faded in June following the ceasefire, tensions between the US and Iran escalated again during July, threatening oil supplies through the region. Oil prices were volatile as a result, though by the end of the month Brent crude had eased back below $90 a barrel as supply concerns moderated. Gold recovered some ground after its sharp fall in the second quarter, ending the month at around $4,100 an ounce.

Income and fixed interest

For income-focused investors, July was a more comfortable month than the headline technology volatility might suggest. Higher-dividend and value-oriented companies, which typically carry lower exposure to the large technology names, held up relatively well through the mid-month sell-off, and sectors well represented among income payers — such as energy, mining and banks — were among the strongest performers, particularly in the UK. On the fixed interest side, the Bank of England and US Federal Reserve both left interest rates unchanged and signalled that rates are likely to remain higher for longer while inflation risks persist. This kept government bond yields elevated: a headwind for the capital value of longer-dated bonds, but it means the income now available from bonds and cash remains at levels not seen for many years, supporting the income component of diversified portfolios.

What this means for portfolios

July illustrated the value of holding a globally diversified portfolio. Investors concentrated in US technology shares experienced a difficult month until the final few days, while exposure to the UK market, energy, mining and other value-oriented sectors provided meaningful support. Periods like this are a reminder that leadership rotates between regions and sectors, often quickly and unpredictably, and that diversification across asset classes, regions and investment styles remains the most reliable way to manage risk through changing conditions.

Outlook

Markets enter August supported by a very strong corporate earnings season, particularly among the largest global companies, but with several risks in view. The situation in the Middle East remains fragile and could reignite pressure on oil prices and inflation. Central banks continue to signal that interest rates are likely to stay higher for longer while inflation risks persist, and elevated market concentration in a small number of large technology companies means bouts of volatility, such as those seen in July, may well recur. Against this backdrop we continue to favour disciplined, diversified portfolios and would caution against reacting to short-term market movements. As ever, staying invested through periods of volatility has historically been rewarded.

Important information

This update is provided for general information only and does not constitute personal advice or a recommendation to buy, sell or hold any investment. Market and index figures are approximate, sourced from publicly available data as at 31 July 2026, and relate to periods in the past. The value of investments and the income from them can fall as well as rise and is not guaranteed; you may get back less than you invested. Exchange rate movements may affect the value of overseas investments. If you are unsure whether an investment is suitable for you, please speak to your financial planner.