HL commentary as it happens

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.

Sign of cracks in US labour market compound concerns

Friday’s surprise drop of 92,000 in US non-farm payrolls was another fly in the ointment. Ordinarily signs of a slowing labour market can provide support to more doveish member of the Fed but recent events have put inflation worries back on the table with markets now not pricing in a further rate cut till September at the earliest. That’s also been reflected in a rise in treasury yields following the initial strikes on Iran with 10-year yields rising another 6 basis points today to 4.2%. The US currency has also responded with the dollar having recouped nearly all of its earlier year-to-date losses.

Oil prices race past $100 as Iran’s neighbours turn off the taps

At the time of writing, some of the froth had come off the top with Brent Crude trading at around $108 per barrel down from earlier highs of $116. Oversupply in the global oil market has been a dominant theme in recent months, but a 70% production cut at Iraq’s three main oilfields, and a sharp fall in output from Kuwait could be followed by similar moves in the UAE and Saudia Arabia as storage reaches capacity. Until the Strait of Hormuz can be securely re-opened producers will be reticent to turn the taps back on, and even if that decision is made, there can be a significant lag until oil and gas wells return to full flow.

Stocks extend last week’s losses

Save for the Vix which measures volatility in the US market, investors in global stock markets are staring at red screens this morning after a weekend of intense hostilities in the middle east. By virtue of their time zone, Asian markets were the first to take a step down in reaction to Monday morning’s oil price spike which at one point had climbed over 20%. Donald Trump’s been clear around his intention to drive regime change in Iran, and also that the succession of Ali Khamenei by his son Motjaba would be unacceptable. Motjaba Khamenei’s appointment yesterday as the country’s supreme leader will do little to reassure markets that an end to the violence is in sight.

Chip stocks could face new export rules

Chip stocks could face a fresh bout of policy uncertainty after reports that the US is toying with the idea of new export controls on advanced AI chips - an unwelcome twist for the sector, especially after this administration scrapped Biden-era “AI diffusion” rules last year. The proposed framework could require government approval for shipments of AI chips to countries outside the US, effectively giving Washington a gatekeeper role in global semiconductor sales. Even so, this isn’t unfamiliar territory for chipmakers, who have navigated multiple rounds of export restrictions in recent years - meaning while it may add some administrative friction, it’s unlikely to materially dent financials if it comes to pass.

Gold on track for weekly decline as inflation fears take over

Gold is trading up to around $5,110 per ounce this morning but is still on track for its first weekly decline in five weeks - something that may come as a surprise given the ongoing geopolitical tensions. While the Middle East conflict has boosted demand for safe-haven assets, the resulting surge in oil prices has stoked fresh inflation concerns, prompting traders to dial back expectations for rate cuts. Markets are now pricing in just one US cut this year, down from two earlier in the week, after surging oil prices and a run of solid US data pointed to continued economic resilience. Rate expectations often don’t get the attention they deserve, but they’ve quietly been one of the biggest forces at play this week.

Selling pressure eases as oil prices slow their ascent

Global markets are looking more positive today, if only a touch, largely driven by a let-up in oil prices after a volatile week for energy markets. Oil slipped back this morning, on the back of a five-day rally as the Trump administration signalled it’s considering several steps to tackle the recent surge in oil and gas prices. Potential measures under discussion include releasing crude from US emergency reserves, granting waivers on fuel-blending requirements, and even allowing the US Treasury to trade oil futures. The move has helped calm nerves across markets this morning, with investors encouraged that policymakers are actively looking to contain the economic fallout from higher energy costs.

That said, it’s worth keeping the broader move in perspective - oil has still jumped nearly 20% this week, putting it on track for its biggest weekly advance since February 2022. Higher prices tend to feed through to consumers almost immediately via rising petrol costs, which in turn risks reigniting inflation pressures just as central banks were hoping for some relief. Still, stock markets have been reasonably robust considering the events, a signal that investors are siding with the transitory narrative for now, a view we share.