Weekly market commentary

Market review

Markets were driven by fast‑moving geopolitical developments this week, following a further escalation in the Middle East over the weekend. Early optimism emerged on Monday after US President Donald Trump said the US and Iran were discussing a ceasefire, alongside a temporary pause in military strikes on Iran’s energy infrastructure. This helped lift both government bond and equity markets. However, sentiment shifted again after Iranian officials denied that any formal talks were taking place.

As the week progressed, negotiations appeared to regain momentum. The US outlined a proposed ceasefire framework, while Iran set out its own conditions, with indirect discussions reportedly taking place via intermediaries. By the end of the week, the initial pause in conflict had been extended, with US officials suggesting talks were progressing well, although missile exchanges between Israel and Iran continued.

Despite the heightened uncertainty, oil prices showed signs of stabilising, supported by a partial reopening of the Strait of Hormuz, a key global shipping route. Even so, concerns remain about the longer‑term impact on the global economy, particularly for regions heavily reliant on energy imports. Government bond markets in Europe including the UK reflected these risks, with investors pricing in the possibility of two interest rate increases as central banks look to counter increasing energy costs threatening to push inflation higher while growth remains fragile.

Away from geopolitics, technology stocks saw renewed volatility. Advances in artificial intelligence (AI) continued to reshape the sector, creating opportunities for some companies while putting pressure on others. As AI tools become more capable, concerns have grown that certain technologies or business models could become less relevant, contributing to uneven performance across the market and highlighting the disruptive nature of rapid technological change.

Outlook

Markets continue to be influenced by developments in the Middle East, with changing headlines driving short‑term volatility. Investors are weighing the impact of higher energy prices on inflation against signs that economic growth may be slowing, alongside uncertainty around policy responses. Despite this backdrop, company earnings remain resilient and equity markets have held steady, highlighting the importance of diversification.

Movers table