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Andrew Gillham, head of fixed income at Team Asset Management, offers this week’s global markets review
GLOBAL markets recovered some lost ground last week as investors took advantage of cheaper stock valuations to “buy the dip”.
However, it was far from a smooth ride as markets moved sharply in either direction between President Trump’s bombastic threats and claims that great progress has been made in talks with the Iranian regime. The blue-chip S&P 500 index gained 4.2% over the week.
The US president has repeatedly shifted deadlines to reach a deal and re-open the Strait of Hormuz but his latest cut-off, of 8pm yesterday, is his most explicit yet, giving him little room to extend again.
“They’ll have no bridges. They’ll have no power plants. They’ll have no anything,” he asserted, outlining what would happen if Iran’s regime did not agree to US demands.
The uptick in sentiment in stock markets also reflects the relative stabilisation of energy prices, albeit at elevated levels. Brent crude edged back down to $109 a barrel on reports that several Asian countries, including China, India, Pakistan and the Philippines, have reached agreements with Tehran to allow some tankers to pass through the strait safely.
It has also been reported that Iran and Oman have held talks on establishing a protocol for safe and secure navigation through the narrow strait between the two countries, which serves as a critical transit route for global crude oil with around 13 million barrels passing through it each day in normal conditions.
The most immediate impact of the blockade of the strait has been acute energy shortages in countries that are heavily reliant on imports, some of which have imposed emergency measures.
The Philippines, which imports 98% of its oil from the Middle East, has declared a national emergency, Sri Lanka has introduced fuel rationing and a four-day work week and the government in Vietnam has urged employers to allow staff to work from home.
North America and Europe are much less exposed to the near-term impacts but the prospect of an extended period of elevated energy prices will have consequences.
Prior to the war, the Bank of England was expected to cut interest rates two more times this year but, in the space of a month, there has been an unprecedented shift in interest rate expectations, and money markets are now pricing in at least two rate hikes with policymakers under pressure to curb the threat of inflation from surging energy prices.
Against this backdrop, the average price of a two-year fixed-rate mortgage in the UK has risen from 4.83% to 5.35%, the highest level since March 2025 when the war started.
While the lens of markets remains focussed on the conflict in the Middle East, there was lots of corporate news to digest last week.
Shares in Eli Lilly gained 6.6% after it won US regulatory approval for Foundayo, its weight-loss drug in pill form. The Food and Drug Administration gave the go-ahead to doctors to write prescriptions for the pill immediately to adult patients who are overweight and have at least one weight-related condition such as high blood pressure or type 2 diabetes.
Foundayo will give Eli Lilly a like-for-like competitor to Novo Nordisk’s Wegovy pill and will be a preferable alternative for many patients to its injectable treatments including Zepbound and Mounjaro.
In contrast, shares in Nike fell 14%, extending its year-to-date decline to more than 30% after it issued a profits warning, forecasting that revenues could decline in 2026 owing to fierce competition in China and disruptions in Europe.
The athletic footwear and clothing company has experienced sales declines in China for seven consecutive quarters, and the current one is expected to be even worse with a 20% fall.
Rival domestic brands, including Anta and Li Ning, have gained substantial market share by offering similar footwear at much lower prices.
Looking ahead, although this week’s economic calendar will likely be overshadowed by events in the Middle East, Friday’s release of the US monthly inflation report for March will be keenly watched.
The surge in US gasoline prices to more than $4 a gallon is expected to increase annual headline consumer price inflation up from 2.4% 3.4%.
