HL commentary as it happens

Oil price steady but inflation worrying the European Central Bank

Oil prices are holding around $97 a barrel. Tanker traffic through the Strait of Hormuz continues, with vessels reportedly moving in small groups through a diplomatically sensitive corridor. While flows remain uninterrupted for now, the situation remains fragile.

UK gilt yields have eased in recent days, with the 10-year falling back below 4.9% from recent highs of near 5.17%. In Europe, the tone is turning more hawkish. Some European Central Bank members have indicated a rate rise as soon as June may be needed, signalling they can no longer look through persistent inflation pressures. Markets are now pricing in two further increases this year in Europe."

Brent Crude trading at $98.14 per barrel, after new US strikes on Iran

That will make new US strikes on Iran overnight particularly painful for UK plc, as oil continued its slip and slide journey over the weekend. Brent Crude, which had been trading down as much as 5% over the long weekend, has jumped this morning and is now trading in the region of $98 per barrel.

British Chamber of Commerce warns 80% of firms affected by Iran conflict

New figures from the British Chamber of Commerce have found that 80% of UK firms either have been, or expect to be, impacted by the conflict in Iran, mostly as a result of higher energy and shipping costs. Manufacturing firms are being hit hardest, with 68% already seeing some knock-on effects and 23% expecting to feel the effects of the conflict soon. Over 40% of companies expect energy costs to rise by more than 20% in the next 12 months, coming on top of already higher energy costs in the UK and without the benefit of the price cap applied to consumers.

Gold set for a flat week as it loses some shine

Gold has slipped out of the spotlight since topping $5,000, with prices settling into a more benign range around $4,500-$4,800 in recent weeks. Conflicting signals around US-Iran peace talks are keeping investors cautious, particularly with Iran’s uranium stockpile still a major sticking point and oil prices sensitive to any shift in tone. That uncertainty would normally support demand for perceived safe havens, but sticky inflation risks and the prospect of interest rates staying higher for longer are keeping the gold trade relatively subdued for now.

Fresh data paints a bleak picture for UK public finances

The UK consumer is still looking fragile, even if confidence has ticked up from very low levels. GfK’s Consumer Confidence Index improved from -25 to -23 in May, better than expected, but the details were less comforting, with savings intentions dropping sharply and big-ticket purchase plans weakening again as households continue to feel the pressure from higher living costs. That caution was echoed in April’s retail sales, where volumes fell 1.3%, more than reversing March’s gain, with food the only major category to grow and fuel sales hit particularly hard as higher prices encouraged motorists to cut back on journeys and delay filling up. Add in a larger-than-expected borrowing figure, and the picture is one of weak growth, stretched household budgets and public finances that leave little room for easy fixes.

Equity markets tick cautiously higher

Global equity markets are heading into Friday on a cautiously brighter footing, with the FTSE 100 opening up and US futures looking broadly flat after Wall Street enjoyed a late flurry last night. Hopes that a deal between the US and Iran might be edging closer have helped steady nerves, but the details remain murky. President Trump has said the US will ultimately recover Iran’s enriched uranium stockpile, while fresh reports suggest Tehran may be unwilling to send that material abroad, a major sticking point in any agreement. Oil prices have also moved higher again as investors weigh the risk that talks drag on or fall apart. The honest answer is that nobody really knows where these negotiations are heading, but for now, markets are doing what they often do when a potential geopolitical off-ramp appears - tentatively moving as if the good news could be around the corner.