Key Takeaways
- The U.S. House narrowly passed a $95 billion budget blueprint (216-214) that allocates $73 billion for Iran war operations, setting the stage for a filibuster-proof reconciliation bill.
- Tesla (TSLA) shares fell over 3% in after-hours trading after missing Q2 profit estimates and reporting its first negative free cash flow ($1.1 billion) in more than two years.
- Gold prices surged above $4,120 per ounce to a two-week high as escalating Middle East hostilities and a weakening U.S. dollar drove safe-haven demand.
- The Strait of Hormuz remains effectively closed following an explosion on a tanker and subsequent IRGC warnings that no vessel may enter without Iranian coordination.
- Taiwan's Ministry of National Defense announced plans to begin domestic production of RDX explosives after alleged Chinese interference disrupted international procurement efforts.
Legislative Action and Geopolitical Escalation
The U.S. House of Representatives narrowly approved a $95 billion GOP budget blueprint on Wednesday, intended to unlock funding for ongoing military operations. The measure includes $73 billion specifically for the war with Iran, alongside $12 billion for farmers and $10 billion for election-related measures. This framework allows Republicans to bypass a Senate filibuster through the reconciliation process, though the bill faces stiff resistance from lawmakers concerned about the lack of explicit congressional authorization for the conflict.
On the ground, tensions reached a new peak as a U.S. missile strike was reported near a passenger terminal at the Shalamcheh border crossing in Iran’s Khouzestan province. While Iranian media reported no immediate casualties from this specific strike, it follows a 12th consecutive night of U.S. Central Command attacks aimed at degrading Iran's maritime and drone capabilities. In retaliation, the Islamic Revolutionary Guard Corps (IRGC) reported that an oil tanker caught fire after an explosion south of the Strait of Hormuz, leading two other tankers to retreat.
Tesla Q2 Earnings and Market Reaction
Tesla (TSLA) reported second-quarter results that highlighted the high cost of its pivot toward artificial intelligence and robotics. Despite record vehicle deliveries of 480,126 units and revenue of $28.2 billion, the company’s adjusted earnings of 33 cents per share fell significantly short of the 51-cent analyst estimate. The heavy investment in Robotaxis, Optimus robots, and AI infrastructure led to a $1.1 billion cash burn, marking the first time the company has seen negative free cash flow since early 2024.
CEO Elon Musk reaffirmed that Tesla will continue aggressive capital spending, which is expected to exceed $25 billion this year. Investors remain wary of the immediate impact on margins, as automotive gross margins (excluding regulatory credits) sat at 16.3%. While the energy storage business achieved record deployments of 13.5 GWh, the stock remains under pressure as the market weighs long-term autonomous potential against current profitability strains.
Commodities and Global Finance
Gold (GLD) prices held steady above the $4,120 mark, benefiting from "dip-buying" as investors sought protection against the inflationary risks of rising oil prices. Global benchmark crude topped $94 per barrel following the disruptions in the Strait of Hormuz, a channel that typically handles 25% of the world's seaborne oil. Traders are now closely watching the Federal Reserve, with a 76% probability of a rate hike being priced in for September to combat energy-driven inflation.
In Asia, the Japanese 5-year government bond yield advanced to 2.00%, its highest level in years, as expectations for a faster pace of rate hikes from the Bank of Japan supported the Yen. Meanwhile, Taiwan is moving to secure its own defense supply chain by initiating domestic production of RDX explosives. The move follows a failed NT$590 million procurement contract that the Ministry of National Defense claims was sabotaged by Beijing-directed interference.
Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications.