HL commentary as it happens

US natural gas storage figures later. Year-to-date prices -6.5% vs +90% for EU contracts.

Brent Crude is pushing on $105 this morning after bottoming out at nearly $97 in yesterday’s session as traders try to second guess the path of the Iran War.

US markets: Initial jobless claims in focus, 211k expected

US stock futures are also trading down this morning after yesterday’s broad-based gains. Outside of the geopolitical stage, weekly jobless figures will be a key datapoint for today, with new benefit claimants expected to rise slightly from last week’s 205k to 211k, still relatively low by historical standards. In recent times, weaker-than-expected labour market numbers have been seen as potential catalysts for rate cuts and greeted favourably by stock markets. However, in the current climate, signs that higher fuel prices and the fear factor are dragging on economic activity could be a negative for equities. Speeches by Fed Vice Chair Barr and Governors Cook and Jefferson are also lined up for today, giving further clues around the outlook for the economy and monetary policy.

Gold slides below $4,500

Gold has fallen back below $4,500 per ounce, around $1,000 lower than the peaks seen at the end of January. Interest rate expectations, rather than safe-haven appeal, have been in the driving seat. The inflationary impact of the oil market dislocation has increased the probability of a Fed rate hold until at least October from around 11% to 62% over the last month. Markets now see a 38% chance of at least a quarter-point rise, and when it comes to the possibility of a cut, all bets are off. Things could change quickly if Middle Eastern tensions simmer down, but the longer oil routes remain blocked, the more embedded hawkish forecasts will become.

FTSE 100 dips after two days of gains

After two days of gains, the FTSE 100 has given back a little this morning as investors seek out concrete signs of progress towards a peace deal between Washington and Iran and the resumption of oil and gas transit through the Strait of Hormuz. So far, the main communication channels appear to be traditional and social media, as well as third-party states. It may take a formal agreement or at least a move to the negotiating table to steady markets further. While the bears may have the edge this morning, there could be bulls waiting in the wings if moves towards a resolution gather pace.

Oil pulls back but still remains at elevated levels

Oil remains as volatile as ever, pulling back on hopes of de‑escalation in the Middle East, but prices are still sitting at seriously elevated levels. Social media posts and press conferences can only go so far, and it will likely take a full reopening of the Strait of Hormuz to drive any meaningful and sustained move lower from here.

US markets slid last night, but futures look more positive

The S&P 500 slipped 0.4% last night, but there’s a brighter tone this morning with futures edging higher as oil prices fall on hopes the White House can bring the Middle East conflict to an end. Under the surface, Tech told a more mixed story, with software stocks once again lagging behind the rest of the pack. Meanwhile, companies building the nuts and bolts of AI, like hardware and equipment firms, held up much better. It might be too early to call it a turning point, but the return of familiar trading patterns could be a very early indicator that the market is starting to think about life beyond the Middle East conflict.

UK markets react to inflation data, probability of rate hikes moves to 99%

UK markets have opened higher off the back of easing Middle East tensions, with investors taking a measured view of this morning’s inflation print. CPI held steady at 3.0% in February, right in line with expectations, but this is before the latest surge in energy prices feeds through. A pick-up in core inflation to 3.2%, alongside still-sticky services inflation, shows underlying price pressures haven’t gone away, but falling fuel and food costs offered some welcome offset for now. Looking ahead, the real story for UK markets will be what comes next, with elevated oil and gas prices expected to push inflation higher by the end of the year. The market is all but certain that the Bank of England will hike rates this year, with the implied probability now at 99%, but we know how quickly these odds can shift, and we don’t think it's quite as clear-cut.

Global equity markets move higher on signs of de-escalation

Global equity markets are pointing higher this morning after optimism grew around a potential resolution to the Middle East conflict, following reports that the US is pursuing talks with Iran. Reports suggest that Washington has sent Tehran a 15-point proposal aimed at resolving tensions, while Israeli media indicate that the US is pushing for a one-month ceasefire to allow negotiations to take place. Oil prices have moved lower on the developments, offering some relief to equities that had been weighed down by worries over inflation and the knock-on impact for interest rates. It’s still a highly fluid situation, trying to call how the rest of the week plays out would be unwise, but there are now clearer signs that we are on a path toward de‑escalation.

Gilt yields started Monday at GFC highs, but fell through the day – lower UK inflation due tomorrow expected to dampen yields further

Gilt yields started the week at highs not seen since the global financial crisis – such was the fear induced by the incendiary language over the weekend but similarly fell to end the day down. The 10-year peaked above 5% before falling to 4.86%. UK inflation, due tomorrow, is expected to fall to 2.8% in February from 3% the previous month which could dampen yields further.

Iran denied talks have begun, causing whipsaw in markets

Announcing plans to extend the previous 48-hour deadline to open the Strait of Hormuz, or else, by five days, he sent a clear signal to the market that the US is ready to make a deal. Just a couple of days earlier, Trump had outlined plans to target Iran’s power plants, and Iran in turn had threatened energy and water infrastructure across the Middle East.

Opponents are calling it another TACO – Trump Always Chickens Out – trade, supporters hailing another example of the Art of the Deal, but either way equity markets rallied in inverse response to falling oil, with the S&P 500 up 1.15%, the NASDAQ up 1.38%. Intra-day trading saw markets at even higher levels, as the peace talk optimism boosted stocks and bonds. Yields on Treasury bills – US government debt – whipsawed through the day, as market expectations swung from escalation to resolution. Ending the day with 10-year T-bill yielding 4.36%, down from highs of 4.45%.

Today, Asian markets are continuing the positive momentum seen overnight in the US, with most markets in the green. The Nikkei 500 is up 1.37% in Japan, China indexes in Shanghai and Hong Kong are up 1.5% and 2% a piece. Futures for the UK and Europe are more cautious however, indicating the FTSE 100 will open marginally down and the Euro Stoxx and DAX,reversing their respective rallies of yesterday, look set to open down, too.

Brent initially fell below $100 as President Trump delays targeting Iran’s power supply in favour of truce talks

According to President Donald Trump, preliminary truce talks have begun with Iran. According to Iran, he’s living in la-la-land and the talks never happened. But the markets love hope, and the prospect of a ceasefire was enough to push brent crude oil down 11% yesterday to below $100 a barrel for the first time in weeks. But the Iran denial, and a report that the UAE and Saudi Arabia are considering entering the war, has sent oil back up to $103. It’s foreign-policy-by-soundbite, but it is President Trump’s speciality.