Remember yesterday’s optimism? It didn’t last long. On Tuesday, markets rallied on growing hopes that the US and Iran were edging toward a ceasefire. By Wednesday morning, those hopes were in tatters.
The turning point was Donald Trump’s primetime address to the nation on Tuesday evening. Rather than the exit strategy many had been hoping for, the president declared that two to three more weeks of “extremely hard” military strikes lay ahead. He warned that if Iran did not come to terms, the US would target every remaining power station and oil facility in the country.
Oil prices reacted instantly. Brent crude, which had dipped below $100 a barrel on Tuesday as peace talk rumours swirled, surged more than 5% overnight back above $105. The Strait of Hormuz – the narrow waterway through which a fifth of the world’s oil normally passes – remains blocked, with only a handful of ships getting through each day. Around 2,000 vessels are stuck waiting in the region, and analysts warn it will take months to clear that backlog even once the strait reopens.
The dollar strengthened as investors moved back into safer assets, pushing the pound and euro lower. Sterling gave back much of Tuesday’s recovery against the dollar, though it is still above the worst levels seen at the end of March. Against the euro, the pound is treading water near a one-month low.
If you’re planning a currency transfer – whether for a property purchase, regular pension payments or simply getting travel money sorted – that kind of overnight swing is exactly why locking in a rate in advance can make a real difference. Currencies are moving on headlines rather than economics right now, and that makes timing extremely difficult to judge.
Meanwhile, the cost-of-living picture in the UK got a little more complicated yesterday. April brought a rise in the energy price cap, higher employer national insurance and the end of some business rates relief – all of which will eventually feed through to prices on the high street. UK factories are already feeling it: a survey published yesterday showed input costs rising at their fastest pace in more than three years, with manufacturers pointing to shipping delays and higher raw material prices caused by the Middle East conflict.
Looking ahead, this week has an unusual shape. US jobs figures are released on Good Friday, when markets are closed for the bank holiday. That means traders will not be able to react until Monday – the same day a critical deadline on Trump’s threatened strikes against Iran’s energy grid expires. The combination of a delayed data reaction and a geopolitical flashpoint makes Monday one of the most closely watched sessions in recent memory.
