Published
7th April 2026
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The Cambridge Weekly
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Once again, developments in the Middle East and announcements from the US administration in relation to the conflict continued to dominate global market headlines. Comments made at the start of last week suggested that an end to the war could be in sight, and this prompted a positive response from markets. However, this sentiment was largely reversed following a speech made last Wednesday night which indicated a conclusion to the conflict could still be a few weeks away.
Elsewhere, the UK also hosted talks with 35 other countries aimed at reaching a diplomatic solution to reopening the Strait of Hormuz. The operation is not expected to operate as a NATO mission and is expected to involve countries beyond the military alliance. Whilst no agreements have been made yet, this could prove to be a crucial first step towards regaining stability in oil and other broader commodity markets.
Brent crude, the international oil benchmark, closed the month last Tuesday 63% up. This performance reflects the benchmarks strongest month since 1990 – a clear indicator of the unprecedented rises in oil prices driven by the conflict. The benchmark jumped again after the speech last Wednesday night as investors responded to refreshed expectations for future oil supply disruption.
US Equity Market:
US equity markets endured a turbulent few days following the sell-off at the end of the previous week. Weakness continued into last Monday, with the S&P 500 initially slipping to an almost 8-month low, before rebounding sharply last Tuesday to post its strongest daily gain in ten months. This rally was driven by renewed investor optimism for a sooner-than-expected Iran war de-escalation following comments made by the US administration. By mid-week, the S&P 500 had surged over 4% from its low, while the Nasdaq had climbed over 5%. The indices closed the week to Thursday up 3.38% & 3.97%, respectively.
The impact of the conflict has continued to feed through to US consumers – gasoline prices have reached $4 per gallon for the first time since 2022, inflation expectations have risen sharply, and the University of Michigan consumer sentiment index fell 6% over the March. Elsewhere in macroeconomic data, manufacturing purchasing mangers’ index (“PMI”) rose to 52.3 over March from 51.6, while services PMI fell to 51.1 from 51.7, signalling the softest pace of service sector expansion in 11 months.
UK Equity Market:
Following the announcement regarding the talks to re-open the Strait of Hormuz by Prime Minister Sir Keir Starmer, the FTSE 100 index jumped almost 2%. This prompted a strong start to last week for the index, as it closed the week to Thursday up 4.71% from close the previous Friday.
Separately, the Bank of England has continued to warn that the economic shock from the ongoing conflict is intensifying pre-existing vulnerabilities facing the financial system. Surging energy prices, alongside equity and bond market sell-offs, could create further issues in private credit markets, as well as deepening government debt levels and stretched valuations.
Data released by the Office for National Statistics (ONS) last Tuesday revealed that real GDP in the UK is estimated to have increased by 0.1% over the fourth quarter of 2025, with the full year figure revised slightly upward to 1.4%. This serves as a backdrop to the OECD recently slashing its GDP growth estimates for 2026 to 0.7%, down from 1.2%.
Inflation, Interest Rates and Bond Markets:
Inflationary pressures linked to the conflict in the Middle East and higher interest rate expectations have driven investors to sell global government bonds in recent weeks. Given the inverse relationship between prices and yields, this trend has driven up government bond yields in most major economies. Since the end of February, UK & US 10-year yields have risen by 60bps and 38bps. China has been a notable exception to this trend, with its 10-year government bond yield edging lower. Economists attribute this to China’s more diversified energy mix and supply, as well as lower inflation levels prior to the conflict relative to other major economies.
In the Eurozone, provisional data for March released by Eurostat showed inflation rising sharply to 2.5%, up from 1.9% in February. Despite being slightly below analysts’ expectations, the estimate reflects a 60bps rise from the 1.9% recorded in February. Unsurprisingly, this rise has mostly been attributed to a 4.9% year-on-year increase in energy prices.
In Japan, core inflation slowed to 1.7% in March, below analyst expectations and the lowest level in two years. Despite the slowdown in inflation, markets continue to price in a rate hike at April’s meeting, a reflection of looming inflationary pressures from rising oil prices and a weakening Yen.
What’s on the horizon
The key near-term focus remains on the US President’s deadline for Iran to reopen the Strait of Hormuz. The outcome is expected to dictate the direction of energy prices and other markets during the second quarter of the year. General industry consensus is that the absence of a solution by mid-April will likely result in a worse economic and market fallout as strategic reserves, and Russian and Iranian oil exempted from sanctions, run low.
As we begin the run up to Q1 earnings season, this week brings several important economic data points. Thursday sees the release of US GDP figures for March, before the week rounds off on Friday with US and Chinese inflation releases, as well as Canadian unemployment numbers.
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.
