Brent crude falls below $100 a barrel
Hope that the Iran war might end soon have now pushed Brent crude below the $100 a barrel mark.
The international benchmark is down over 15% since yesterday at $99.78 a barrel, its lowest level in a week.
Last night, Brent closed at $118.35 a barrel, before Donald Trump’s claim that the conflict will end in ‘two or three weeks’ sparked today’s relief rally in markets.
Key events
UK government borrowing costs are tumbling
The bond market is also reacting to hopes of peace in the Middle East soon.
Government bonds are rallying, which is pushing down the yield (or interest rate) on UK debt.
Ten-year UK gilt yields have fallen by 12 basis points (0.12 percentage points) to 4.8% this morning, the lowest since 19 March.
Shorter-dated two-year gilt yields are dropping too – down 14bps to 4.27%.
This is excellent news for chancellor Rachel Reeves, whose budget fiscal headroom had been eroded by the surge in gilt yields since the Iran war began (as bond investors had anticipated an inflation surge).
Oil company shares fall
There are only six fallers on the FTSE 100 share index this morning.
Two of them are the energy giants – Shell (-1.5%) and BP (-2.3%), tracking the Brent crude price lower.
FTSE 100 jumps amid rising peace hopes
Britain’s stock market has hit a two-week high at the start of trading, as hopes the Iran war could end soon fuels optimism in the markets.
The FTSE 100 index of blue-chip shares has surged by 1.8% in early trading, gaining 184 points to 10,360.
Engineering firm Rolls–Royce (+8.3%) are leading the risers; an end to the war would benefit its jet engine servicing operations.
Copper-producer Antofagasta (+7.2%) and airline group IAG (+5.6%) are also rising sharply.
Brent crude falls below $100 a barrel
Hope that the Iran war might end soon have now pushed Brent crude below the $100 a barrel mark.
The international benchmark is down over 15% since yesterday at $99.78 a barrel, its lowest level in a week.
Last night, Brent closed at $118.35 a barrel, before Donald Trump’s claim that the conflict will end in ‘two or three weeks’ sparked today’s relief rally in markets.
Chances of two Bank of England rate rises this year fall
City traders are slashing their bets on UK interest rate rises this year, as hope builds that an end to the Iran war might possibly be close.
The money markets are now pricing in around 41 basis points (0.41 percentage points) of increases to UK Bank rate by the end of 2026. That means that two quarter-point rises are no longer fully priced in.
Yesterday, the market was anticipating 66bps of rate rises by Christmas, and last week 75bs (or three quarter-point increases) were fully priced in.
Gold has risen to its highest level in almost two weeks.
After jumping 3.5% yesterday, gold is up another 0.8% today to over $4,700 an ounce.
Tony Sycamore, market analyst at IG, says an end to the Iran conflict could prove a double-edged sword for gold:
On one hand, a lasting peace agreement would remove the geopolitical safe haven bid that supported prices in the run-up to the conflict.
On the other hand, it would allow for lower oil prices and easing inflation fears, which would revive expectations for Federal Reserve rate cuts later in 2026. This dynamic, combined with the underlying structural demand from central banks who have been accumulating gold for diversification, means we could still see upside.
European stock markets are set to rally when trading begins in around 30 minutes, reports Emma Wall, chief investment strategist at Hargreaves Lansdown:
“Markets paint an optimistic picture this morning – choosing to believe the optimism from the White House that the war in Iran will be over in a couple of weeks. US President Donald Trump yesterday announced that he saw the war ending within a couple of weeks, and that he would be addressing the nation with further details later today.
This was enough to propel the S&P 500 into a relief rally, up 2.9%, the best day for the market since May last year. Asian markets have continued the optimism early today, with the Hang Seng in Hong Kong up nearly 2%, and the Nikkei in Japan jumping 4.56%. European futures are also looking positive, with markets in the UK, France, Germany and Italy set to open up.
UK food inflation forecast tripled to 9%
Ouch! UK food inflation is forecast to hit at least 9% by the end of this year, as the cost of living crisis is reignited by the Iran war.
The Food and Drink Federation has revised its food inflation forecast upwards – triple its previous forecast.
Having previously expected food prices inflation to end the year around 3%, the FDF now fear it will have risen to between 9% and 10%.
They say
This is a fast-moving situation, and our update is based on assumptions that the Straits of Hormuz opens within 2-3 weeks and energy production in the Middle East returns to normal within a year
As one of the UK’s energy intensive and most globally connected sectors, food and drink manufacturing is unusually exposed to these shocks, with cost pressures on multiple fronts hitting the industry at once
As well as the surge in energy costs, food producers also face a spike in the cost of fertilisers.
Last month, the boss of one of the world’s largest fertiliser companies – Yara International – has said global food supplies could be badly damaged this year if the Iran war becomes an extended conflict.
UK hit by ‘awful April’ shower of bill increases
An end to the war in the Middle East, and a drop in energy prices, would be a relief to UK households as we enter Awful August.
UK households face a bill surge this month, in which the annual cost of essentials, including council tax and water, will increase by more than £200.
The price jumps caused by the Iran war will add to that financial hit. More here:
Introduction: Oil tumbles and markets rally on hopes of Middle East de-escalation
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
After its biggest monthly gain ever, the oil price has dropped sharply on hopes of de-escalation in the Middle East.
Brent crude has dropped around 13% since last night, back down to $103 a barrel, as investors welcome signs from Washington DC that the Iran war might end soon.
Yesterday, US president Donald Trump said the United States could end its military attacks on Iran within two to three weeks, declaring:
Now we’re finishing the job. I think in two weeks or maybe a few days longer, we’ll do the job. We want to knock out everything they’ve got.
Trump is expected to address the US at 9pm ET tonight (2am BST tomorrow morning).
Asia-Pacific markets have started April in good heart too.
China’s CSI 300 index is up 1.5%, Japan’s Nikkei has surged 4.9% and South Korea’s KOSPI has leapt by 9.5%.
That follows gains in New York last night, where the Dow Jones Industrial Average jumped by 2.5%.
Investors are also cheered by reports that Iranian President Masoud Pezeshkian has said Iran is willing to end the war but only if there are guarantees “to prevent the recurrence of aggression”.
Chris Weston, head of research at Pepperstone, says the “more constructive commentary” from both the US and Iranian camps is encouraging traders to move bac into riskier assets:
We saw reports breaking in Asia yesterday from the WSJ that Trump was willing to end the war without taking the Straits of Hormuz. In fact, he encouraged other international peers to take the strait without US involvement. There are different ways to interpret that, both positive and negative, but the market has taken this as a small step towards appeasing and compelling the Iranian camp.
The Iranians have also come out with more constructive rhetoric for risk, signalling the necessary will to end the war. They have outlined their conditions, some of which were already known. But the combination of the narrative, driven through headlines, has certainly seen risk come back into play.
The agenda
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9am BST: Eurozone manufacturing PMI for March
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9.30am BST: UK manufacturing PMI for March
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10am BST: eurozone unemployment data
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10.30am BST: Bank of England releases financial stability report
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2.45pm BST: US manufacturing PMI for March
