Market overview
The announcement of a Middle East ceasefire led to the best weekly gain of the year for US equities, but US threats to blockade the Strait of Hormuz over the weekend served as a timely reminder that the situation remains fraught.
Oil prices moved sharply lower on the back of the ceasefire announcement, with Brent crude, an international benchmark, falling almost 15% — the largest weekly drop since 2020 — to settle back below the US$100 a barrel level. However, the blockade threats caused prices to spike higher on Monday 13 April, moving back above US$100. Stocks also began the new week in the red, although it should be noted that the reaction to US President Donald Trump’s inflammatory remarks have been measured, rather than extreme.
Attempting to predict what will happen next is a fools’ errand but it does appear that leaders are aware of the damage that the ongoing disruption is causing and are at least entertaining measures to mitigate it. The oil price, as of 13 April, remains elevated but still some way short of recent highs around US$120 per barrel. Roughly speaking, it is in the middle of the range seen over the last month. Global stocks have recouped a fair chunk of their declines and even though recent hostilities sound a note of caution, they are still some way above recent lows.
Earnings in focus
While Middle Eastern hostilities have understandably been at the forefront of investors’ minds of late, first quarter earnings season is about to start and vie for some attention. Over the next month or so we will get the initial indications of what the conflict has meant for corporate earnings and what business leaders expect going forward.
Despite the negative geopolitical backdrop, expectations are high going into the numbers. US stocks are expected to show 12.6% earnings growth, according to FactSet. Should this transpire then it would mark the sixth consecutive quarter of double-digit growth and positive earnings guidance has reached its highest level since 2021. Earnings are the cornerstone of long-term investing returns and even though the negative headlines have hindered sentiment, many businesses may have little to no adverse impact from events in the Middle East.
Inflation jumps, but remains contained
Arguably the broadest transmission mechanism for the Middle East war to impact corporate performance would be through high inflation. In this regard, on Friday we got the first look at US inflation figures since the conflict broke out. The annual Consumer Price Index (CPI) figure rose to 3.3% in March, up from 2.4% in February. While this marked the highest figure in two years, driven by a 12.5% rise in energy prices (gasoline up 18.9% and fuel oil up 44.2%) it is still a relatively low level compared to that seen in 2022 and 2023. The reading was in line with consensus analyst forecasts. Reassuringly, the core figure which strips out volatile elements such as food and energy came in at 2.6%, slightly less than the 2.7% forecast.
Weekly market moves and economic news:
The MSCI All Country World Index (MSCI ACWI) gained 4.1% last week, moving back into positive territory for 2026 (2.5%), boosted by hopes of a de-escalation in the Middle East.
United States:
For the second week running US equities moved higher (3.6%), ending up not far off flat YTD (-0.1%). The energy sector was the only sector to end the week lower, as oil prices fell sharply. Growth indices (3.8%,) outperformed value (2.9%,) but remain far behind in YTD terms (growth -5.5% YTD vs value 5.9% YTD). Tech stocks were among the best performers, with benchmarks rising 4.7% (-1.3% YTD).
Fixed income markets did not match equities in their enthusiasm to recent events, with the 10-year Treasury yield falling only 3 basis points on the week to 4.32% (up 15 basis points YTD) The 2-year Treasury yield dropped 4 basis points to 3.80% (up 32 basis points YTD). As of Friday, derivatives markets were pricing a 77% chance of an unchanged Federal Funds Rate by year end.
Consumer sentiment has taken a sizable hit of late, with the University of Michigan consumer sentiment index falling to 47.6 in April vs 53.3 in March. This is the lowest reading in the more than 70-year history of the index. The previous low point of 50 was recorded in June 2022.
United Kingdom:
UK stocks underperformed a bit on the week, rising 1.7% (7.9% YTD) but remain well ahead of peers for 2026. Mid-caps fared better, rallying 3.5% (0.3% YTD) to move back into the green for 2026. Gilts ended the week largely unchanged, with the 10-year yield at 4.83% (up 36 basis points YTD). The pound posted a notable appreciation, rising to US$1.35 from US$1.32.
Europe ex UK:
European stocks posted sizable weekly returns, as the MSCI Europe ex UK tacked on 3.5% (3.3% YTD). Germany equities gained 2.7% (-2.8% YTD), French benchmarks added 3.7% (1.5% YTD) and Italian bourses rose 4.3% (6.4% YTD). The euro gained amidst some broad weakness in the US dollar, ending the week at US$1.17.
