The world breathed a sigh of relief this morning as Donald Trump’s extraordinary threat to wipe out Iranian civilisation proved unnecessary. Instead, the United States and Iran agreed a two-week ceasefire that would reopen the Strait of Hormuz and (in theory, at least) get those critical oil and gas vessels moving again.
Buoyed by relief and optimism, sterling strengthened by half a cent against the euro this morning. At the moment, the dust is very much still settling. To take advantage of that rate before any more news, secure a forward contract today by enquiring on our website or by calling the team on 020 8003 4915.
In the end, yesterday’s concerning comments from the White House turned out to be a classic Trumpian move. Escalate to de-escalate was clearly the tactic, although the president’s threat to end “a whole civilisation” was hardly a diplomatic masterstroke. Conservative figures broke ranks to criticise his tactics, while Democrat politicians eyed legislation to forcibly stop Trump.
Despite the ceasefire, it is unclear just how quickly shipping will resume and whether the battered refineries and storage facilities are in a workable state. This will be the key question in the coming weeks, with the answer likely to define just how much prices rise and whether British consumers can expect higher bills and petrol prices into the summer. Oil prices did fall by around 15% this morning but remain well above where they started the war.
Our April-June Quarterly Forecast will be released tomorrow against this unstable backdrop. The report provides a timely look at inflation and interest rates, which will no doubt be the subject of endless debate as the world looks for a way to end the war for good.
Everywhere you look, the ripples from the conflict are being felt. Electric vehicles had their best month ever in the British retail market, as hybrid and battery vehicles each recorded double-digit jumps in sales. Even a speedy reopening of the straight and a quick, lasting diplomatic resolution is unlikely to result in lower inflation in the short term, meaning the effects will likely extend into many corners of life.
