Shortly after a two-week ceasefire between the US and Iran was agreed, tensions have resurfaced, with Iran once again refusing to open the Strait of Hormuz. Under the terms of the agreement, Iran had insisted that Israel also refrain from launching attacks on Lebanon. However, strikes reportedly continued, which Iranian officials argue breaches the deal. In response, there are reports that Tehran has again restricted access to the vital shipping route, through which around one-fifth of global oil supply flows.
As for President Trump’s reaction, he has offered little direct comment on the increasingly fragile ceasefire or the pressures it is facing. Instead, he has stated that the US will maintain a presence near the strait to help ensure it is open and secure. In response to the latest developments, oil prices rose back above $97 a barrel on Thursday, as investors grew sceptical that the US-Iran ceasefire will hold, with disruptions in the Strait of Hormuz doing little to reassure markets. Asian equities declined, while both the FTSE and Euro Stoxx opened lower. Meanwhile, fresh peace talks between the US and Iran are scheduled to begin in Pakistan on Friday providing investors with cautious optimism that the latest hiccup will be fleeting. While markets continue to monitor the fragile truce and the elevated geopolitical risks surrounding Middle Eastern supply, our Investment Management team is closely tracking developments and remains fully prepared to act in order to deliver the best possible risk‑adjusted returns for clients.
As the situation surrounding the conflict in Iran continues, traders are beginning to shift their focus back to broader macroeconomic developments. Attention is now turning to President Trump’s expected meeting with China’s President Xi Jinping, which is upcoming after delays due to the war. The meeting is widely seen as an effort to maintain diplomatic ties on trade, despite China’s recent reluctance to provide the United States with military support in the middle east. The agenda is expected to centre on trade, including discussions on non‑sensitive goods and critical minerals access, following recent comments from U.S. Trade Representative Jamieson Greer, who emphasised that relations with Beijing remain stable and that the U.S. continues to access Chinese rare earth materials despite persistent tariffs.
Meanwhile, in Germany, industrial orders rose in February but still fell short of expectations. On a seasonally adjusted basis, orders increased by 0.9%, following a sharp decline of 11.1% in January. It is worth noting that this data predates the Iran conflict, meaning the full impact of rising oil prices on the industrial sector is yet to be seen. However, a substantial infrastructure fund is expected to support consumer spending over the course of the year.
Still to come this week we have China’s interest rate decision as well as US PCE and CPI.
Nicola Tune, Portfolio Specialist
