Markets have rallied after the US and Iran agreed a framework peace deal, easing concerns over energy supply and inflation. Meanwhile, interest rate decisions from the Fed, Bank of England and Bank of Japan shape market sentiment this week.
Jemma Slingo, Pensions and Investment Specialist, Fidelity International shares her market report.
Investors will need eyes everywhere this week. Interest rate decisions, blockbuster IPOs, and a crucial by-election could all move markets. For now, however, attention is firmly on the Middle East. On Sunday, Iran and the US struck a deal to reopen the Strait of Hormuz and stop all military action. Investors hope this marks an end to a conflict that began in February and rapidly spread across the Gulf. A formal signing ceremony is due to take place in Switzerland on Friday.
Global stock markets have surged in response. Europe’s STOXX 600 hit an all-time high this morning and Asian equities are climbing too. US equity futures have also seen decent gains.
The rally reflects optimism about inflation. The Middle East conflict triggered an energy crisis that pushed up prices around the world, and many investors feared a prolonged period of oil-driven inflation. The preliminary deal has eased some of these concerns. In a post on Truth Social, President Donald Trump urged producers to “let the oil flow!”, and the price of Brent crude has fallen to around $80 a barrel.
Lower energy costs are particularly good news for manufacturers and for major energy-importing regions such as Asia. The picture is less rosy for energy companies, however. Shares in BP and Shell both slipped this morning, weighing on the FTSE 100’s performance.
There is still plenty to do before the Strait of Hormuz – the world’s busiest oil shipping route – can return to normal, however. Most urgently, the waterway must be cleared of mines. Investors will also be wary of false dawns. There have been several diplomatic breakthroughs since the Middle East conflict began, but ceasefires have proved fragile so far.
Interest rate action
Iran will be front of mind for central banks this week. At the start of 2026, interest rates were on a downward trajectory. The energy shock changed the game however and, on Friday, the European Central Bank hiked interest rates for the first time since 2023. This week brings more key decisions.
The Bank of Japan is up first on Tuesday and is expected to raise the benchmark rate to 1% – its highest level in three decades but still very low by global standards. The Federal Reserve follows hot on Japan’s heels on Wednesday, and the Bank of England will announce on Thursday. Both the US and UK are expected to hold interest rates for now.
The mood music has changed, however. Traders are factoring in two UK rate hikes over the next 12 months, and inflation data due out on Wednesday could pile on further pressure. Meanwhile, investors are still trying to gauge the direction – and communication style – of new Fed chair Kevin Warsh, who will preside over his first rate-setting meeting this week.
Political drama at home
Closer to home, all eyes are on the north-west constituency of Makerfield, where a by-election will take place on Thursday. Greater Manchester mayor Andy Burnham hopes to be elected as MP for Makerfield, which would enable him to challenge Sir Keir Starmer in a leadership contest.
AI mania
Amid all this excitement, the technology landscape is also shifting. SpaceX floated on New York’s Nasdaq exchange on Friday in the biggest IPO in history. Elon Musk’s space exploration venture was last trading at above $160 a share, making it the sixth largest US company by market value.
There could be even more change to come in the tech sector, with Anthropic and Open AI also planning to go public, according to media reports. There is clearly a voracious appetite for artificial intelligence and ambitious new technologies. Based on expected annual revenues of around $18bn and a flotation valuation of roughly $1.8 trillion, investors are valuing SpaceX at about 100 times annual sales.
