Global markets navigated yet another volatile period as the US-Iran conflict entered its ninth week. Brent crude briefly surged to a wartime high of $126 last Thursday morning before retreating to around $114. The spike was driven by an apparent breakdown in diplomatic negotiations after US Central Command briefed the President on expanded military options. This renewed investor fears of further combat operations. Goldman Sachs reported that exports via the Strait of Hormuz are now at just 4% of their pre-war levels. Meanwhile, the World Bank warned that energy prices are on course to surge 24% in 2026, their highest level since 2022, and described the ongoing disruption as the “largest oil supply shock on record”,
Against this backdrop, the United Arab Emirates announced last Tuesday that it will withdraw from OPEC from the 1st May. The UAE is the cartel’s third largest producer and has capacity of around 4.8 million barrels per day – almost 50% above its current OPEC quota. It’s capacity to produce well beyond this limit has long been a source of frustration, with economists at John Hopkins University describing the decision as a move to maximise output before peak oil demand restricts revenues further. The impact of this decision on supply and pricing will be unclear until the Strait reopens and normal oil and gas shipping resumes.
Moving away from the Middle East, King Charles III addressed a joint session of the US Congress last week. He met with the President and delivered a speech last Tuesday that emphasised the enduring relationship between the two nations. The visit has been broadly perceived as a positive signal for relations amidst heightened tensions.
US Equity Market:
Last week, Kevin Warsh secured approval from the Senate Bank Committee by a 13 to 11 vote moving him one step closer to becoming Chair of the Federal Reserve. This decision followed the Department of Justice dropping its investigation into current chair, Jerome Powell, and moves the process to the wider Senate floor for a full vote.
Towards the backend of the previous week, Warner Bros Discovery shareholders approved its $111 billion takeover by Paramount. The $31 per share offer made in February proved to be sufficient to win the drawn-out bidding war against Netflix.
US equities were mixed over the period, with strong tech earnings offset by renewed concern over oil prices, fading optimism around a diplomatic resolution in the Middle East and a below expectations growth print. Google (Alphabet) was the standout performer on last Wednesday’s bumper tech earnings announcement day, with its 81% increase in net income sending shares up over 6% in after-hours trading. Amazon, Meta and Microsoft also beat earnings expectations, but markets reacted less favourably to accompanying news of large increases in AI expenditure. It was also announced on Thursday that the US economy had grown 2% in Q1, marginally below the 2.2% expected. The S&P 500 finished this eventful period to Friday up 0.92%.
UK Equity Market:
Last week was a strong week for UK oil and gas major BP following a record-breaking earnings release. Last Tuesday, the company reported profits around £2.4 billion off the back of elevated oil prices and high trading volumes over the first quarter of the year. This figure comfortably exceeded analysts’ expectations of £1.99 billion – a figure that was already double the profits recorded in Q4 2025. The result was well received by markets, with BP’s share price rising by more than 2% over the week.
The UK government faced another setback in the delayed project to construct a third runway at Heathrow last week. A press release revealed that a Chinese sovereign wealth fund is considering a sale of its stake, citing concerns around rising costs for the project which is yet to take off.
The FTSE 100 closed broadly flat over the week to Friday, while sterling now trades at around 1.36 against the dollar.
Inflation, Interest Rates and Bond Markets:
Last week was also a bumper week for global monetary policy, with the Federal Reserve (“Fed”), Bank of England (“BoE”) and European Central Bank (“ECB”) all meeting. In line with expectations, each central bank elected to hold rates steady at their respective current rates (Fed: 3.5-3.75%; BoE: 3.75%; ECB: 2%). Their decisions were accompanied by commentary highlighting conflict-driven inflation pressures and signalling that rate hikes could be on the horizon later in the year.
Inflation prints released during last week underscored these concerns. Eurozone inflation came in at 3%, marginally above expectations, marking its highest level since September 2023 and a second consecutive sharp monthly increase. In the US, personal consumption expenditures inflation – the Fed’s preferred measure used as a benchmark versus their 2% target – rose to 3.5% in March. Iran has also experienced mounting price pressures, with inflation rising to 50% in March from an already elevated 40% level.
What’s on the horizon
Near-term focus remains on the trajectory of diplomatic negotiations between the US and Iran, and whether the current ceasefire will translate into a substantive agreement to reopen the Strait of Hormuz. As markets grow increasingly sceptical of a near-term resolution, the impact will continue to affect oil prices, bond yields and risk assets.
This week sees further Q1 earnings announcements for the markets to digest, albeit of a lesser materiality by comparison to the tech mega caps seen last week. Berkshire Hathaway, Palantir, Walt Disney, Uber and Shell are amongst some of the biggest names set to report.
In addition to these releases, there will also be some key macroeconomic data points to process. Particular light will be shed on the state of the US labour market, with job openings announced today, followed by non-farm payrolls and unemployment on Friday.
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Source of financial market data: MorningstarDirect.