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Team Asset Management investment manager Lloyd Adams offers this week’s global market review
OIL markets remain in focus this week. The ongoing effective shutdown of the Strait of Hormuz amid the threat of Iranian military strikes is resulting in a global supply loss of some 20 million barrels of oil each day.
This in turn has forced Gulf oil producers to curb output as storage fills up, pushing crude prices higher still.
G7 governments have responded under the banner of the International Energy Agency by agreeing to release 400 million barrels of oil from strategic reserves. However, these measures offer only temporary relief, with a sustained fall in oil prices wholly dependent on the reopening of this critical shipping route.
What was seemingly supposed to be a short, sharp war has taken on a new dynamic as the good ol’ U S of A has now decided that the situation in Iran should evolve into more of a “team effort”. TEAM MAGA’s approach in this regard has been to coerce NATO allies into providing military assistance or face “very bad” consequences.
US President Donald Trump has suggested his planned trip to China later this month could be delayed as Washington presses Beijing to assist in reopening the Strait of Hormuz. The scheduled visit with China’s leader Xi Jinping is significant for both diplomacy and global markets, as it would be the first by a US president since 2017 and provides a high-level platform to address tensions.
Critical energy and food security is a focus, along with ensuring that trade relations between the two countries remain practically workable.
On the macro front, the latest US figures show the economy slowing sharply at the end of 2025.
Gross domestic product rose just 0.7% on an annualised basis in the fourth quarter, well below earlier estimates and the previous quarter’s robust pace. Consumer spending and government outlays were weaker than expected, while orders for durable goods remained soft.
Meanwhile, core inflation continues to run above the Federal Reserve’s comfort zone of 2%, stoking the “affordability” issue that is becoming a thorn in Trump’s side.
Taken together, the data suggest the economy faces mounting pressures as growth slows and energy costs surge, giving rise to worries over a dreaded “stagflation”’ scenario comprising little-to-no economic growth and persistently high inflation.
Fiscal pressures are also evident. The US budget deficit has passed a staggering $1 trillion for the fiscal year through February.
Interest payments on the national debt remain a significant burden, while social security, health care and income support continue to dominate government spending.
With costs of the current hot war already running into estimates of tens of billions of dollars, markets are starting to rapidly reprice bond yields (higher) as concerns grow over how the final bill is to be paid.
Rising borrowing costs are also weighing on the American housing market. Mortgage rates climbed to their highest level since September, reflecting higher bond yields amid inflation concerns linked to the Iran conflict.
For buyers, the recent surge has quickly erased the modest relief offered by lower rates just weeks ago. This is more bad news for the incumbent President who is already battling disastrous approval ratings ahead of key midterm elections in November.
Industrial metal price action paints a mixed picture. Aluminium has risen sharply on fears that Middle East tensions could disrupt supply as the region accounts for a meaningful share of global production.
In contrast, gold and copper have struggled against the backdrop of sharply higher yields (gold pays no income) and growing growth concerns (Dr Copper is seen as a barometer of global economic activity). “King Dollar” enjoyed another positive week amid elevated uncertainty, although the gains were modest by historical standards.
Looking ahead, a daily barrage of contradictory comments from President Trump is likely to keep markets on the jittery side. Against this backdrop, major central banks, including the Federal Reserve, European Central Bank and Bank of England, meet this week.
For now, policymakers are expected to hold steady, waiting for greater clarity in an
increasingly uncertain environment.
A big surprise would be a rate cut from the Federal Open Market Committee, a move for which the Donald himself continues to loudly advocate through his Truth Social platform.
