Weekly market commentary

Market review

This week, markets remained volatile as rising geopolitical tensions and higher energy prices led investors to rethink the outlook for economic growth and inflation. Markets in both Europe and the US moved lower. Economically sensitive areas, such as raw materials and consumer discretionary (businesses selling non‑essential goods), underperformed as higher oil prices raised concerns about rising costs and pressure on company profits.

Government bond markets also fell as investors accepted that interest rates may stay higher for longer. Central banks remain cautious about inflation, particularly where higher energy prices risk feeding through to everyday costs. The biggest moves were seen in shorter‑term bonds, which tend to react most when expectations for future interest rates change.

The conflict involving Iran has now entered its third week. Direct strikes on energy infrastructure have increased uncertainty around global oil and gas supplies. Israel targeted Iran’s South Pars gas field, one of the world’s largest natural gas sources, followed by Iranian retaliation across energy facilities in the Gulf region. These developments pushed oil prices higher as markets considered how long supply disruptions might last. A key risk remains whether shipping through the Strait of Hormuz, a vital route for global oil transport, can return to normal.

Against this backdrop, central banks adopted a cautious stance. The US Federal Reserve signalled that interest rates would only be cut once there is clear and lasting evidence that inflation is falling. The European Central Bank left rates unchanged, while the Bank of England highlighted growing concern over inflation risks.

Outlook

Markets continue to react to changing economic data and ongoing geopolitical tensions. Different inflation and growth trends are leading central banks to take varied approaches. At the same time, technology and artificial intelligence are increasingly shaping which sectors lead markets, even though their wider economic impact remains uneven.

Movers table