This week, global markets have been boosted by renewed hopes of a peace deal between the US and Iran. On Wednesday indices across the UK and Europe jumped 2-3% while the S&P 500 in the US reached a new record high. Trump said he was pausing “Project Freedom”, his operation to protect ships moving through the strait, to enable a “complete and final agreement” with Tehran. Fresh hopes that the Strait of Hormuz could reopen pushed oil prices sharply lower, with crude briefly falling below $100 per barrel as concerns over supply disruptions eased. In the UK market, particularly, the improvement in sentiment supported most major equity sectors, with energy stocks the notable exception, reflecting the decline in crude prices.
Commenting on the negotiations, the US president posted on his Truth Social platform that if Iran agrees to the deal, then the current conflict will come to a swift end and passage through the critical Strait of Hormuz will immediately resume but if they do not military action will resume with heightened intensity. The latter comments were broadly shrugged off by global traders, particularly in Asia where the Nikkei touched new highs on Thursday. We may still see periods of back‑and‑forth before a deal is ultimately reached; however, the fact that both sides remain in active dialogue is encouraging and suggests the situation is moving toward a resolution.
Corporate earnings have continued to deliver in the first quarter, helping sustain market momentum despite heightened geopolitical tensions. AMD, the multinational semiconductor company, exceeded expectations as demand drove a 38% year‑on‑year increase in revenues, underpinned by strong data‑centre growth. Walt Disney and Uber also beat forecasts, highlighting the underlying strength of corporate fundamentals. In the UK, Shell posted above‑forecast first‑quarter profits of $6.9bn and announced a $3.0bn share buyback alongside a 5% dividend increase, reflecting elevated energy prices following the US‑Iran conflict.
Today, voters across the UK will head to the polls for local elections, an event that investors are monitoring closely for signs of growing political pressure on Prime Minister Keir Starmer and the governing Labour Party. Market participants are particularly focused on whether Labour suffers heavy losses, which could fuel speculation that confidence in Starmer’s leadership is beginning to weaken among MPs and party officials. Despite the political uncertainty, however, much of the negative sentiment appears to have already been reflected in UK government bonds, or gilts.
Later this week, we’ll also get US non‑farm payrolls, the latest unemployment figures, and more earnings updates from major companies including Toyota and Sony.
Nicola Tune, Portfolio Specialist
