HL LIVE
HL commentary as it happens
Tuesday 24th March
Gilt yields started Monday at GFC highs, but fell through the day – lower UK inflation due tomorrow expected to dampen yields further
Gilt yields started the week at highs not seen since the global financial crisis – such was the fear induced by the incendiary language over the weekend but similarly fell to end the day down. The 10-year peaked above 5% before falling to 4.86%. UK inflation, due tomorrow, is expected to fall to 2.8% in February from 3% the previous month which could dampen yields further.
Iran denied talks have begun, causing whipsaw in markets
Announcing plans to extend the previous 48-hour deadline to open the Strait of Hormuz, or else, by five days, he sent a clear signal to the market that the US is ready to make a deal. Just a couple of days earlier, Trump had outlined plans to target Iran’s power plants, and Iran in turn had threatened energy and water infrastructure across the Middle East.
Opponents are calling it another TACO – Trump Always Chickens Out – trade, supporters hailing another example of the Art of the Deal, but either way equity markets rallied in inverse response to falling oil, with the S&P 500 up 1.15%, the NASDAQ up 1.38%. Intra-day trading saw markets at even higher levels, as the peace talk optimism boosted stocks and bonds. Yields on Treasury bills – US government debt – whipsawed through the day, as market expectations swung from escalation to resolution. Ending the day with 10-year T-bill yielding 4.36%, down from highs of 4.45%.
Today, Asian markets are continuing the positive momentum seen overnight in the US, with most markets in the green. The Nikkei 500 is up 1.37% in Japan, China indexes in Shanghai and Hong Kong are up 1.5% and 2% a piece. Futures for the UK and Europe are more cautious however, indicating the FTSE 100 will open marginally down and the Euro Stoxx and DAX,reversing their respective rallies of yesterday, look set to open down, too.
Brent initially fell below $100 as President Trump delays targeting Iran’s power supply in favour of truce talks
According to President Donald Trump, preliminary truce talks have begun with Iran. According to Iran, he’s living in la-la-land and the talks never happened. But the markets love hope, and the prospect of a ceasefire was enough to push brent crude oil down 11% yesterday to below $100 a barrel for the first time in weeks. But the Iran denial, and a report that the UAE and Saudi Arabia are considering entering the war, has sent oil back up to $103. It’s foreign-policy-by-soundbite, but it is President Trump’s speciality.
Monday 23rd March
Brent Crude see-saws as Trump ups pressure to re-open strait
Brent Crude is currently trading at $113 per barrel but has bounced between $104 and $118 over the last 24 hours as traders continue to grapple with the standstill of shipping in the Strait of Hormuz, which typically transports 20 million oil equivalent barrels of hydrocarbons each day. The International Energy Agency is considering the release of further emergency reserves, but the effectiveness of this temporary measure is limited, with a swift end to hostilities in the Gulf remaining key to restoring stability. US crude inventories are one to watch after a surprise build last week, illustrating strength in America’s domestic energy supplies.
Spotlight on Wednesday’s UK inflation figures
On the domestic front, Wednesday’s UK CPI inflation reading for February will be a key data point for rate setters and markets. The numbers predate the recent oil shock and forecasts, but comments by the Bank of England suggest that continued high services inflation is likely to keep the number close to January’s 3.0% read out. Easier comparisons and the fiscal tightening seen in the 2025 Budget had been expected to see second quarter CPI inflation fall towards 2.1%, but higher fuel prices are now expected to see the average of the next three months stay at around 3%. That’s seen discretionary sectors under perform so far in 2026, partially offset by stronger performances in Oil & Gas, Electricity and Aerospace and Defence.
FTSE 100 opens down
The FTSE 100 opened down after a weekend of heightened military action and rhetoric in the Middle East. The US President has given Tehran until the end of today to reopen the Strait of Hormuz or risk strikes on the country’s power generation facilities. So far, there have been no signs of Tehran backing down, but international diplomatic efforts, including a late-night Sunday call between Donald Trump and Sir Keir Starmer, have intensified in an attempt to avoid further escalation.
Thursday 19th March
Interest rates held at 3.75%
As expected, the Bank of England (BoE) Monetary Policy Committee has held rates at 3.75%. The market had priced in a hold today, so reaction is muted. Committee members were unanimous with their cautious outlook in the face of the market uncertainty - with all members voting to hold rates. In the past few weeks, the market has gone from pricing in two cuts through 2026, to one rate hike, to one quarter point cut to, again today, an expectation that rates will rise later this year. These swings are understandable - the price of oil is dominating asset pricing and fear of an inflation spike is driving bond markets. However, we think these fears may be overblown. Comparisons with the interest rate hikes post Russia's invasion of Ukraine are not comparing apples with apples - rates are already elevated today, then they were at record lows, near 0%. As such, we think that while the conflict remains at elevated levels, the European Central Bank, BoE and Federal Reserve are likely to hold rates at current levels, but the downward trajectory will continue once the war is resolved.
The BoE Governor Andrew Bailey did leave the door open to raising rates on the outside chance the war causes prolonged and stubborn inflation in his statement, reminding consumers and corporates alike that the UK's inflation target is 2%.
US futures weak after Fed holds rates and raises inflation forecast
These latest energy price increases will compound inflationary concerns after the Federal Reserve held rates steady yesterday at 3.5%-3.75%. Beyond the impact of tariffs and the energy shock, Chair Jerome Powell also noted stubborn services inflation. The bank’s year-end core PCE inflation forecast was raised from 2.4% to 2.7%. Rate cuts are still being considered for later in the year, but markets are no longer pricing in a further cut in US headline rates this year.
US markets closed down yesterday evening and are now near six-month lows, with futures pointing to a weak open later today. Year to date, the tech-led NASDAQ has underperformed the wider index.
Oil and Gas prices spike again after attacks in Qatar and Iran
The most recent hostilities have sent Brent Crude prices up to around $114 per barrel, with European natural gas futures up around 25% to €68 per megawatt-hour. Donald Trump’s moves to reduce energy freight costs by temporarily lifting the Jones Act may take a little edge off these latest price increases, but it’s not a long-term fix.
FTSE 100 opens down
The FTSE 100 has opened down after overnight strikes on the world’s largest LNG facility in Qatar, and Iran’s South Pars gas field. In contrast to previous Middle East conflicts, the US is not drawing broad support from other Western nations, and calls by Oman’s foreign minister for Washington’s allies to help de-escalate the situation are well-founded. For now, the path back to the negotiating table looks far from clear, but as economic reality sets in, things could change. Any steps in this direction could provide welcome relief for stock markets.
Wednesday 18th March
US PPI, an inflation measure, is also expected at 1.30pm UK time
Economic news is the order of the day across the Pond as the we get both an inflation print and the US Federal Reserve’s Federal Open Market Committee concludes its March meeting. They may be meeting stateside, but whatever the Fed says today will have global implications.
The US Producer Price Index inflation report for February will be released today, but will not reflect elevated oil prices, so is expected to show month on month increase of 0.3%, in line with longer term trends. Data for the month of March will be more revealing, including recent oil and gas shocks.
An hour after the inflation print we’ll hear from the Fed, who we expect to hold rates today, as does the broader market, so the news is unlikely to move prices. What does have the potential for upset is what Chair Jerome Powell says at his penultimate press conference – how the vote was split and any commentary on the war, forward guidance implications. The markets have flipped from expecting two cuts this year pre-Iran conflict, to one hike after the escalations, to now one cut is the consensus view, later in the year.
The Fed will also share its Outlook-at-Risk report, published monthly, which gives details of risks to unemployment, inflation and economic growth. Expect oil prices to dominate.
Oil has edged down as Iraq agrees to new export route
While the war continues, markets and macro are pegged to the oil price. And so, with the value of black gold down slightly, so equities in Asia and European and US futures are up. It follows a positive session yesterday, in which the FTSE 100 rose slightly to 10,403.60, up 0.83% and the S&P 500 up 0.25% to 6,716.09.
The oil price has softened – though Brent still trades above $100 – thanks to two pieces of news; a select few tankers are moving through the key Strait of Hormuz and Iraq has agreed a pipeline deal to export oil via Turkey. A reminder that in normalised trade, 20% of daily oil and 25% of liquified gas flows through Hormuz; this activity is a fraction of that. But it does mark an improvement on last week, where the Strait was effectively shut. Iran is reportedly allowing only those tankers operated by countries considered neutral, or anti-US in this conflict, such as China.
While any relief rally is welcome, investors should be mindful that volatility is likely to continue over the next month, through extreme daily moves become less likely as markets look to longer-term indicators. Policy – both monetary and foreign – is key. Oil futures remain elevated compared to pre-conflict, with 6-month prices near $80. This is a key indicator of remaining risk to economic growth and consumer confidence.