Published
20th April 2026
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The Cambridge Weekly
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The US implemented a naval blockade on Iranian ports last Monday following failed peace negotiations in Pakistan. Oil prices briefly surpassed $100 per barrel but have since settled back down to around the $96 mark. Iran exported more than 1.8 million barrels per day in March, a figure that could fall close to zero if the blockade proves effective. While Iran maintains some short-term flexibility, with around 150 million barrels already loaded on tankers outside the Strait of Hormuz (allowing sales to continue for a few weeks), sustained restrictions would likely force a significant decrease in production within a fortnight.
Earnings season kicked off last week with many US banks posting huge profits off the back of heightened, geopolitically-induced, market volatility over the quarter. Gains were largely driven by equities trading functions, which make money when clients place trades, regardless of the market direction. JP Morgan delivered record trading income and $16.5 billion of profit, Citi produced its strongest quarterly revenue in a decade as profits rose 42%, and Wells Fargo saw profits rise 7%. JPMorgan, Goldman Sachs and Citigroup also announced their largest-ever share buyback programmes, signalling management confidence in the sector’s outlook.
China’s economy grew 5% year-on-year in Q1, exceeding the 4.8% consensus forecast, supported by strong hightech manufacturing output. However, confidence in sustained growth remains muted, as the full economic impact of Middle East tensions is unlikely to be reflected in the data.
US Equity Market:
Driven by earnings optimism and rising hopes of a resolution to the war in the Middle East, the S&P 500 closed at a record high last Wednesday, above 7,000 for the first time and up over 10% from its conflict low. Investors returned to technology stocks, which led the rally, as risk appetite rebounded following weeks of war-related scepticism and uncertainty surrounding the labour-force impact of AI.
BlackRock, the world’s largest asset manager, delivered strong first-quarter results, with revenues rising 27% and more than $130bn of net client inflows. Unlike banks, its profits are derived from percentage-based fees on assets under management, meaning market declines – like those seen over the past few months – directly impact earnings.
UK Equity Market:
Office for National Statistics (ONS) figures released last Thursday revealed that the UK economy expanded by 0.5% over February, surpassing expectations and indicating strong economic momentum prior to the war-driven energy price shock. Deutsche Bank economist, Sanjay Raja, cautioned that the “upward GDP momentum won’t last”, indicating that the impact of the energy shock has already begun to be felt by households. This followed an IMF announcement earlier last week which cut the UK’s 2026 growth forecast from 1.3% to 0.8%, a larger downgrade than for any other G7 economy. The FTSE 100 closed out the week to Friday marginally up 0.7%.
Fears of a UK and European natural gas crisis abated somewhat last week, as prices fell back towards pre-war levels. UK gas prices, which had hit a three-year high in March, have since fallen below January’s prices. These declines were triggered by reduced Asian demand, prompting traders to warn that the threat to supplies may not yet be over, but nonetheless provided relief to UK policymakers.
Inflation, Interest Rates and Bond Markets:
European government bond markets suggest investors view the UK, Germany and France as among the most exposed to inflation pressures. This sentiment is reflected in the relative rise in yields observed for each country since the war broke out. Ten-year gilt and Italian government bond yields have both risen by more than 50bps, while French yields are 46bps higher than pre-war levels. It is worth noting that levels have fallen marginally over the last two weeks, a reflection of investor hope for a resolution to the conflict in the Middle East.
US CPI for March jumped to 0.9% month-on-month, in line with forecasts and bringing year-on-year inflation to 3.3%, up from 2.4% at the end of February. More than three-quarters of the figure was attributable to surging energy costs, most notably gasoline, which climbed 21.2% over March. Analysts are also concerned that the possible imposition of new tariffs on China, and the likely retaliation, could put further upward pressure on inflation.
What’s on the horizon
The most pressing event on the horizon this week is the expiration of the existing ceasefire agreement between Iran and the US tomorrow. The resumption of hostilities, or the extension of the ceasefire is likely to be the single biggest driver in markets over the short-term.
In macroeconomic data releases, March CPI in the UK is due to be released on Wednesday. Both investors and policymakers will be watching this print closely given the upcoming Bank of England’s Monetary Policy Committee meeting later this month. In the US, jobless claims and both manufacturing and services PMI are both released on Thursday, the latter two of which are key leading inflation indicators.
Finally, Q1 earnings seasons continues this week, with both Tesla and Intel, amongst other big names, both reporting.
This material has been written on behalf of Cambridge Investments Ltd and is for information purposes only and must not be considered as financial advice. We always recommend you seek financial advice before making any financial decision.
Past performance is not a guide to future performance.
The value of your investments can go down as well as up and you may get back less than you originally invested.
Source of financial market data: MorningstarDirect.
