The Cambridge Weekly – 7th September

There was a re-escalation of tensions in the Middle East last week, as both sides engaged in conflict around the Strait of Hormuz and known US bases in the region for the first time in more than a month. The price of Brent crude thus rose over the period from just under $90 per barrel to around $95 by Friday.

Elsewhere, the US agreed a deal with Venezuela’s interim government to revive Venezuela’s oil industry, which is estimated to hold c.65bn barrels of recoverable reserves. In response, energy major Chevron subsequently pledged $7bn to expand its Venezuelan joint ventures as part of a plan to approximately double its production in the region. Despite positive signals, economists are cautious on the move as Venezuela’s wider oil industry has suffered from years of underinvestment and declining production, implying that a broader recovery is likely to require significant capital and time before influencing global supply chains.

US Equity Market:

US stocks struggled to make progress over the week, as renewed geopolitical tensions and lingering concerns regarding rising government borrowing costs weighed on investor sentiment. The S&P 500 index fell last Monday following the weekend events, with most sectors declining, although energy companies benefited from higher oil prices. The index closed the week to Friday up 0.13%.

Global taxi company Uber announced plans to cut 10% of its workforce – the largest reduction since the pandemic – as it seeks to simplify management, and redirect investment towards autonomous vehicles. The company had approximately 34,000 employees at the end of 2025 and has committed billions to driverless transport, but stated the restructuring was not directly driven by AI. Shares climbed 2.4% on the announcement but remain down 7.7% for the year.

In one of the largest legal settlements by a US corporate,  Meta agreed to pay approximately $18bn to settle legal claims relating to the effects of Facebook and Instagram on younger users. Despite this, the 10-year payment plan and the limited impact on future income, led Meta to conclude that they did not expect this to have a material impact on financial results moving forward. In other news, US private equity fundraising continued to recover, as growth-focused funds further benefited from renewed institutional investor demand.

UK Equity Market:

Sentiment in the UK remained oriented toward the cost of living and public finances last week. Prime Minister Andy Burnham pledged further measures to support households, while reaffirming the government’s commitment to its fiscal rules. He also highlighted that he wishes to protect British steelmaking and farming as part of a new EU-UK deal, warning that proposed European restrictions – that were intended to protect European manufacturing against Chinese competition – could disadvantage UK producers, should they not be part of the agreement.

The new government’s ambitions, which are expected to be clearly laid out at the upcoming October budget, come against a difficult economic backdrop. Higher energy prices and borrowing costs are expected to weigh on future growth, whilst rising gilt yields have reduced the government’s fiscal headroom for additional spending to stimulate the economy. Estimates suggest increased debt-interest costs have tightened the buffer against breaking the government’s own spending rules by between £9bn and £14bn.

The FTSE100 index fell last Tuesday as Middle East developments and climbing global government bond yields weighed on equities globally. Mining and energy companies provided some support, but higher borrowing costs put pressure on domestically-focused sectors. The index closed the week relatively unchanged, while sterling continues to trade at around 1.35 against the US dollar.

Inflation, Interest Rates and Bond Markets:

Global government bonds sold off sharply, as rising oil prices compound existing fears surrounding elevated inflation. US 10-year reached 4.81% midweek, whilst German and Japanese equivalents climbed to their highest levels since 2011 and 1996, respectively. UK 10-year gilt yields briefly touched 5.26%, while the 30-year hit 5.89% – its highest level since 1998. Higher yields have added tens of billions to the projected debt-servicing costs of G7 governments.

Federal Reserve Chair Kevin Warsh used the recent Jackson Hole speech to emphasise that central bank policy should respond to the expected path of inflation, rather than wait for pressures to appear fully in official data. Markets digested the comments and attributed a greater probability to a rate hike at the next Federal Reserve Open Market Committee meeting in September, with markets currently pricing the probability at c.60%.

Eurozone inflation rose from 2.9% to 3.3% over August – its highest level since 2024 – as energy inflation accelerated to 14.3%. Meanwhile core inflation, which excludes volatile energy and food prices, fell slightly to 2.4%, highlighting the impact that energy market trends are having on global inflation. Market pricing now implies an almost certain European Central Bank (ECB) rate hike on Thursday.

What’s on the horizon

Eyes will remain firmly fixed on the Middle East as the conflict continues, whilst elsewhere, Tuesday’s opening of the annual UN general Assembly in New York, could provide indications into the future of international policies that affect all companies.

Thursday will bring a busy schedule of macroeconomic releases, including the ECB’s latest interest rate decision, Germany’s August Consumer Price Index (CPI), and US existing home sales and Producer Price Index (PPI) data for August. PPI measures changes in selling prices, offering a view of inflation from the wholesaler’s perspective, while CPI tracks price changes faced by consumers. The US and China will also publish August CPI figure. Japan and the eurozone will begin the week with their respective Q2 GDP releases, before the UK’s July GDP data rounds off the week.

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.