HL commentary as it happens

Energy markets see a rare moment of calm, but no sign of easing

Energy markets are looking relatively calm this morning, but with oil prices still hovering around the $100 mark and weekly gains of roughly 8%, there’s been little real let‑up. Traders are continuing to weigh the fallout from the conflict with Iran, with no signs of de‑escalation and production disruptions keeping supply concerns front of mind. With the Strait of Hormuz essentially closed, any measures to relieve price pressure are likely to be little more than a temporary stopgap.

US markets stumble as investors begin to price in a prolonged conflict

It was a tough session for US markets last night, with the S&P 500 falling 1.5%, and futures pointing to more weakness heading into this afternoon's open. Investors are starting to question the assumption that the conflict in Iran will be a short-lived disruption, as increasingly heated rhetoric heightens the risk of sustained pressure on energy prices.

UK economy flatlines in January, UK stocks open lower

UK markets opened lower this morning, weighed down by a softer‑than‑expected GDP print and ongoing tensions in the Middle East. The economy failed to grow at all in January, suggesting activity was already subdued even before the recent jump in energy prices began to bite. That’s starting to force a rethink of this year's outlook, with previous 1.0% growth expectations now looking optimistic - with some scenarios pointing to closer to 0.6%, 0.4% or even 0.1%, depending on how long elevated energy costs stick around. While some temporary factors may have played a role, the broader concern is that rising energy prices from March onwards are likely to squeeze both household spending and business investment, potentially leading to a loss of momentum in growth in the months ahead, just as inflation risks remain elevated.

Stable US CPI inflation offers markets a ray of light

The US Consumer Price Index read out for February was thankfully uneventful, with price rises unchanged at 2.4%, bang in line with economists’ forecasts. In quieter times, that would be taken as a positive, but these figures haven’t captured the recent spike in energy prices. While the numbers do point to a picture of underlying price stability, interest rate expectations are likely to be dominated by geopolitical events for a while yet. While the likely timing of further reductions in borrowing costs has been pushed out a few months markets are still expecting at least one rate cut by the Fed this year.

Buyer demand for UK houses dries up in February

This morning’s RICS UK Residential Market Survey showed that the headline net balance for new buyer enquiries slipped from -15% to -26% in February as prospective homeowners exercised caution due to heightened geopolitical and macroeconomic uncertainty, and a difficult mortgage market. Price rise expectations have also moderated but remain positive on a 12-month view. The depth and length of hostilities in the Middle East are likely to remain a key influence on buyer sentiment.

FTSE 100 opens down as oil price climbs back to $100

The FTSE 100 opened down this morning as Iranian naval drones attacked oil tankers in Iraqi waters, sending oil prices back to the $100 mark. Volatility will likely persist in the near-term, but a co-ordinated international response by the 32 members of the International Energy Agency, who have agreed to the largest ever release of emergency oil reserves, should provide some offset as 400 million additional barrels find their way to the market. It’s a testing time for investors, but those with long memories may take comfort in the fact that stock markets have shown remarkable resilience over the years. Since the turn of the century, the FTSE All World index has more than trebled while navigating events including the dot com crash, the Great Financial Crisis, Russia’s invasion of Ukraine, the coronavirus and Liberation Day.

Futures for Europe and the US are mixed – noting that the war is far from over

Futures for Europe and the US are painting a more mixed picture with the FTSE 100 opening slightly down, along with the DAX and CAC in Germany and France, while Italy and Spain are in positive territory. Futures across the Pond also look positive. Before too much optimism sets in, investors should be mindful that this war is far from over, despite President Trump’s comments that it would end “soon”. Volatility is high, the VIX index was back up above 25 yesterday, and we expect these fluctuations to continue for a few weeks yet.

Following dramatic spikes earlier in the week, the oil price fell to below $90

Oil – the key driver of stock and bond markets over the past week – has fallen back to below $90 a barrel, providing some relief for markets. Asian markets are in the green today, with the MSCI Asia Pacific Index up more than 3% – trading at values last seen at the beginning of February. Recent volatility has been challenging for investors, but it is worth noting that on a one-year view, investors in the region have seen an attractive return of nearly 35%.

UK retail sales broadly flat for February

UK retail sales painted a fairly flat picture for February, with the latest British Retail Consortium (BRC) data describing it as a decidedly “grey” month for the high street. Total sales rose just 1.1%, driven largely by food inflation (+2.9%), while non-food slipped back by 0.4% with both in-store (+0.2%) and online (-1.3%) channels struggling to gain momentum. February is typically a quieter trading period, but from March, investors will be watching closely for the first signs of how the conflict in the Middle East begins to filter through into consumer behaviour and discretionary spending.

Global markets rebound after oil price swings

Global equity markets are still taking their cues from oil this morning - but the tone has notably improved after yesterday’s wild swings. What initially looked like a one-way surge in energy costs and the inflation headaches that come with it has started to stabilise, offering some much-needed breathing room.

Investors are still grappling with an uncertain timeline, with oil prices serving as something of a live progress bar for how long this conflict will persist. But the dilemma between the drag of elevated energy costs and the fear of missing a relief rally tipped toward the latter into the US close. A message from President Trump suggesting the conflict could end soon sparked a sharp late-session rebound, flipping what had been a broadly negative landscape on its head.

Oil prices in the 80s/90s are still a tricky backdrop, but it’s significantly better than pushing toward 150, which had been a fear at points yesterday. Investors should also take some comfort from the growing list of potential measures at the White House's disposal. President Trump has options, like waiving oil-related sanctions and having the US Navy escort tankers through the Strait of Hormuz to keep supply flowing and prices in check. G7 finance ministers have also said the group stands ready to release oil from strategic reserves if necessary. It’s too early to call an end to the volatility, but having levers to pull should help calm some nerves.