Peace premium- markets pricing in a potential US-Iran deal.
This week @ 15:20pm Friday 8th May in London.
Markets:
- FTSE 100 fell 1.03% this week to 10,256.69, pressured by a sharp decline in energy stocks as Brent crude retreated on emerging US-Iran peace deal signals, and dragged further by HSBC, which shed over 6% after its Q1 results missed expectations.
- S&P 500 rose 1.48% this week to 7,337.11, recovering from early-week losses tied to geopolitical escalation as progress in US-Iran negotiations pushed oil prices lower and boosted risk appetite.
- Nasdaq Composite rose 2.75% this week to 25,806.20, supported by continued strength in technology names and broader relief as energy-driven inflation fears eased.
- Euro Stoxx 50 was flat this week, rising 0.07% to 5,075.24, as geopolitical uncertainty offset some recovery in cyclical sectors mid-week.
Bonds:
- UK 10-year gilt yields fell 23 bps this week to 4.88%, reflecting easing inflation expectations as oil prices dropped sharply on US-Iran ceasefire prospects, and as markets trimmed the number of expected Bank of England rate hikes this year.
- US 10-year Treasury yields fell 4 bps this week to 4.35%, reflecting a modest improvement in sentiment following progress in Iran negotiations, though yields remain elevated given persistent inflation concerns and a hawkish Fed posture.
Commodities:
- Brent crude fell 7.04% this week to $100.56/bbl, as a potential US-Iran memorandum of understanding raised expectations for a gradual reopening of the Strait of Hormuz and eased supply disruption fears.
- Gold rose 1.91% this week to $4,733/oz, as investors retained safe haven exposure amid continued uncertainty over the trajectory of the Middle East conflict.
- Copper rose 4.83% this week to $6.27/lb, driven by improved risk sentiment and renewed optimism over global demand as geopolitical tensions appeared to ease.
FX:
- GBP/USD rose 0.40% this week to 1.3631, as the dollar softened on easing geopolitical risk and reduced safe-haven demand.
- GBP/EUR was flat this week (-0.06%) at 1.1574, with both currencies broadly range-bound amid similar inflationary dynamics across the UK and eurozone.
Macro:
- The Bank of England held Bank Rate at 3.75% on 30th April (result digested this week), with the MPC voting 8-1 to hold. The lone dissenter favoured a rise to 4.00%. The Bank signalled that inflation is expected to move higher later in 2026 as Middle East energy costs feed through, and markets have repriced to around 50 bps of tightening by year-end, down from up to 75 bps earlier this month.
- UK local and devolved elections took place on 7th May, with results pointing to setbacks for Labour. Markets were relatively unmoved, though gilt yields briefly edged higher before settling.
- The dominant macro theme of the week was the US-Iran conflict and ceasefire diplomacy. Reports that the White House was close to a one-page memorandum of understanding with Iran triggered a sharp mid-week rally across equities and a significant fall in oil prices. The UAE’s interception of Iranian missiles on Monday 4th May had briefly reignited fears of broader Gulf escalation.
- US core PCE for March printed at 3.2%, confirming the Federal Reserve has no near-term basis for rate cuts. The Fed held rates at its late-April meeting and sounded notably hawkish.
Companies:
- HSBC Holdings: Q1 2026 pre-tax profit of $9.4bn missed consensus estimates of $9.6bn. The shortfall reflected a $400m charge tied to a fraud-related UK private credit securitisation exposure, plus a further $300m provision against Middle East conflict uncertainty.
- Rheinmetall AG: Q1 2026 results showed revenue growth of 8% year-on-year to EUR 1.94bn and a 17% rise in operating profit.
What we will be keeping an eye on next week…
w/c 11th May 2026
- US CPI (April): Tuesday 12th May — a key reading given persistent inflation concerns and the Fed’s hawkish stance.
- US PPI (April): Wednesday 13th May.
- UK GDP (Q1 first estimate): expected mid-week — will provide an early read on how the UK economy has fared amid Middle East disruption.
- US-Iran diplomatic developments remain the dominant market driver to monitor throughout the week.
Markets move constantly and the numbers in this update will change. This is a snapshot only, pulled together from a range of sources, and is meant as a quick guide rather than a precise record. It’s not investment advice and shouldn’t be used to make trading or investment decisions. If you need more accurate or specific data over a defined period, please get in touch with a member of the team who will be happy to help.
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This article is for information only and does not constitute advice or recommendation and you should not make any investment decisions based on it. The views and opinions of this article are those of Casterbridge at the time of writing and may change without notice. Any opinions should not be viewed as indicating any guarantee of return from investments managed by Casterbridge nor as advice of any nature. It is important to remember that past performance and the value of an investment, and any income from it, may go down as well as up and the investor may not get back the original amount invested.