Oil Prices and Market Movements
Brent crude initially dropped by as much as 7% but has since recovered, trading 1.65% lower at $116.18 per barrel. Earlier, the global oil benchmark surged above $126 a barrel, reaching its highest level since March 2022. This spike followed reports that former US President Donald Trump will be briefed today on potential military options against Iran.
In stock markets, the FTSE 100 index rose by 110 points, or 1.1%, to 10,323. Germany’s Dax increased by 0.3%, while the French CAC index declined by 0.6%, and Italy’s FTSE MiB experienced a slight dip.
Russ Mould, investment director at AJ Bell, commented on the market movements:
"The FTSE 100 was helped by its oil and gas heavyweights but elsewhere there was heavy selling in Europe as the energy price shock threatens to intensify and with it dials up inflationary pressures across the board in the global economy."
Unilever’s shares remained stable despite beating expectations, supported by strong emerging market performance. However, investors remain cautious due to anticipated challenges in the consumer sector.
Mining services company Weir saw a significant decline in its shares after long-serving CEO Jon Stanton announced his intention to step down. Stanton had played a key role in reshaping the business, and investors expressed concern over the company’s future under new leadership despite resilient trading.
The Federal Reserve’s final meeting under Chair Jerome Powell was notable despite no change in headline interest rates. While Trump appointee Stephen Miran voted for a rate cut, three other members opposed language suggesting future cuts. Powell confirmed he will remain a governor until 2028 and criticized interference from the Trump administration, highlighting ongoing market concerns.
Volkswagen reported losses exceeding one billion euros due to US tariffs and costs associated with ending production of a battery electric vehicle in Tennessee, a response to Donald Trump’s anti-electric car policies. The company announced a €500 million cost for winding down production of the ID.4 electric crossover SUV in favor of the petrol SUV Atlas, alongside €600 million in tariffs.
Trump’s stance against electric vehicles has forced manufacturers to pivot away from battery cars toward more polluting vehicles in the US market. Volkswagen and others also face competition from Chinese manufacturers offering lower-priced electric cars.
Volkswagen CEO Oliver Blume stated:
"The world is undergoing fundamental change – and we are aligning our strategy consistently. Wars, geopolitical tensions, trade barriers, stricter regulations, and intense competition are creating headwinds."
The company plans to reduce its manufacturing footprint and is considering leasing spare factory space to Chinese manufacturers.
Volkswagen CFO Arno Antlitz added:
"In this environment, the planned cost reductions are not enough. We must fundamentally transform our business model and achieve structural, sustainable improvements. This includes improving the cost structure of our vehicles without compromising product substance, significantly reducing overhead costs, increasing the efficiency of our plants, and accelerating technology development and decision-making."
Eurozone Growth and Inflation Data
The eurozone economy grew by 0.1% in the first quarter, while inflation rose to 3% in April, driven by an almost 11% increase in energy prices. The European Union also expanded by 0.1% between January and March, according to Eurostat, the EU’s statistical office. In the fourth quarter of 2025, GDP had increased by 0.2% in both regions.
Germany, Europe’s largest economy, grew by 0.3%, while France showed zero growth. Italy expanded by 0.2%, and Spain grew by 0.6%. Among member states with available data, Finland recorded the highest growth at 0.9%, followed by Hungary at 0.8%, and Estonia and Spain both at 0.6%. Ireland (-2.0%), Lithuania (-0.4%), and Sweden (-0.2%) experienced declines.
Inflation rose to 3% in April from 2.6% in March. Energy prices had the highest annual rate at 10.9%, up from 5.1% in March, followed by services at 3.0%, food, alcohol & tobacco at 2.5%, and non-energy industrial goods at 0.8%.
China’s manufacturing sector increased production for the second consecutive month in April, shipping goods early amid concerns that the Iran conflict will raise costs. The official purchasing managers’ index (PMI) for manufacturing slightly decreased to 50.3 from 50.4 in March but remained above the 50 threshold indicating growth. New export orders rose to 50.3, the highest since April 2024, up from 49.1 in March.
Zhiwei Zhang, chief economist at Hong Kong-based Pinpoint Asset Management, told :
"It will be interesting to see if the official trade data confirm the resilience of exporters in coming months. The outlook for the export sector is very important for China’s economy, as domestic demand has been weak."
German Economy Surprises with Growth
Germany’s economy grew by 0.3% in the first quarter, exceeding expectations despite the adverse effects of the Iran conflict. This growth was faster than the 0.2% recorded in the previous quarter, which was revised down from 0.3%. The Federal Statistical Office (Destatis) reported increased household and government spending, along with higher exports. Additional details will be released next month.
Carsten Brzeski, global head of macro at ING, commented:
"Almost exactly one year after the new German government – under chancellor Friedrich Merz – came into office, today’s data suggests that the German economy is better than its reputation implies. However, it would be risky to assume that today’s performance can simply be continued. The war in the Middle East and soaring energy prices, combined with a lack of structural reform and clear strategy for how to restore competitiveness, do not bode well for Germany’s growth outlook. Judging from the latest sentiment indicators, the signs of a recovery on the back of fiscal stimulus, particularly in defence and infrastructure, have started to fade away. Soaring energy prices have again exposed the fact that Germany is one of Europe’s largest net importers of energy. Some 6% of its oil imports come from countries in the Middle East. The so-called energy-intensive industries in Germany account for some 17% of industrial gross value added and employ just under one million people. With the war in the Middle East now gradually shifting from a pure energy price shock towards an energy supply and broader supply chain shock, the German economy is once again at the centre of an exogenous, global, disruption. Even if fears of another year of stagnation have returned, it should be clear that the planned investments in defence and infrastructure are still on track and should support the economy this year and beyond. The fiscal impulse is real, it just needs time to reach the real economy."
DCC Rejects Takeover Bid; Shares Fall
The Irish energy distributor DCC has declined a £4.95 billion takeover offer from US private equity firms KKR and Energy Capital Partners, stating the proposal undervalued the company. Shares of the London-listed, Dublin-based company dropped 5.1% to £55.80.
The cash offer of £58 per share represented an 8% premium over DCC’s closing price before the bid was announced. Under UK takeover regulations, the consortium has until 10 June to make a firm offer or withdraw. This bid is part of a broader trend of private equity interest in UK-listed companies due to their relatively lower valuations.
Recent FTSE 100 takeover activities include insurer Beazley, investment company Schroders, and product testing firm Intertek. Beazley, specializing in cyber-attack insurance, was acquired in early February. Schroders was taken over by a consortium, ending two centuries of family ownership but creating one of the world’s largest fund managers. Intertek is currently being pursued by Swedish firm EQT, which is working on an improved offer.
DCC, which distributes liquid gas, biofuels, and renewable energy to businesses and households, has been streamlining its operations to focus on its core energy business, divesting healthcare and technology assets.
RBC Capital Markets analysts noted:
"We think there is a good chance that a deal happens, but are not convinced it will be much more than 10% ahead of the current price."
In Germany, unemployment rose by 20,000 in April, exceeding expectations and surpassing the 3 million mark. Andrea Nahles, head of the labour office, said:
"There is still no sign of a turnaround in the labour market. The spring upturn remains weak in April as well."
Air France-KLM Adjusts Capacity Amid Rising Costs
Air France-KLM reported a smaller-than-expected first-quarter loss but has reduced its capacity growth forecast due to the US-Israeli conflict with Iran and rising jet fuel prices. The carrier anticipates its fuel expenses to increase by $2.4 billion this year. Capacity growth is now expected to be between 2% and 4%, down from the previous forecast of 3% to 5%.
Other European airlines, including easyJet and Tui, have also revised their outlooks, anticipating more significant impacts from the closure of the Strait of Hormuz, which has driven energy prices higher.
Air France-KLM CEO Ben Smith stated:
"While fuel price increases are not yet reflected in the results we present today, they are expected to weigh on the coming quarters."
The company is limiting discretionary spending, including travel expenses, and has frozen hiring for non-operational roles while continuing recruitment for operational positions such as mechanics. Its fuel hedging strategy remains active, with 33% hedged for 2027.
Despite these challenges, summer travel demand remains strong, with European destinations like Italy and Spain popular, although travel to parts of the Middle East remains restricted. The company noted an initial surge in bookings to Asia following the outbreak of the Iran conflict but plans to expand long-haul capacity gradually as travelers postpone or book closer to travel dates.
Air France-KLM reported a first-quarter operating loss of €27 million, an improvement of €301 million compared to the previous year.
French and Spanish Economic Performance
France’s economy showed no growth in the first quarter, with decreased household spending and a significant drop in exports. GDP remained unchanged between January and March, following 0.2% growth in the previous quarter. Household consumption slightly declined by 0.1%, and investment fell by 0.4%. Domestic demand’s contribution to GDP growth was zero this quarter, down from 0.4 points in the fourth quarter.
Foreign trade had a strongly negative impact on growth, subtracting 0.7 points after contributing 0.6 points previously. Exports fell sharply by 3.8%, while imports declined by 1.7%. Total production of goods and services increased marginally by 0.1%, after a 0.2% gain in the prior quarter.
Spain’s economy slowed to 0.6% growth in the first quarter from 0.8% in the previous quarter, according to preliminary data from the National Statistics Institute. This result slightly exceeded expectations. Spain has been one of Europe’s top performers, partly due to record tourism, and grew by 2.8% last year. The Spanish government maintains a 2.2% growth forecast for this year but acknowledges that uncertainty from the US-Israeli conflict on Iran could affect this outlook.
Whitbread Announces Job Cuts
Whitbread, owner of Premier Inn, plans to cut approximately 3,800 jobs in the UK and Ireland as part of a reset of its five-year business strategy, following tax increases and pressure from a recent budget. The reductions will affect about 12% of Whitbread’s 30,000-strong workforce in the UK and Ireland, primarily in its Beefeater and Brewers Fayre restaurants, which are typically located adjacent to or within Premier Inn hotels. Consultations with affected employees will begin immediately.
Whitbread expects to retain a significant portion of those impacted and aims to find alternative roles, given it hires around 15,000 people annually. The company was among the largest fallers on the FTSE 100, declining 4.4%.
The job cuts follow a fresh business review initiated in November, a year after the initial five-year plan announcement. Whitbread faced increased costs from the Chancellor’s 2025 budget, including an estimated £50 million impact from changes to business rates, compounded by rising wage and food costs.
Whitbread’s new strategy focuses on becoming a pure hotel business, seven years after selling its soft drinks division to Coca-Cola for nearly £4 billion. This shift implies the eventual disappearance of the Beefeater restaurant brand, established in 1974 and known for steaks and classic pub dishes, from UK high streets.
Bank of England Interest Rate Decision and Economic Outlook
Good morning, and welcome to our ongoing coverage of business, financial markets, and the global economy.
The Bank of England is expected to maintain interest rates at 3.75% at its noon meeting, as policymakers evaluate the economic impact of the Iran conflict. Economists will scrutinize the statement and press conference for indications of future rate policy. The nine-member Monetary Policy Committee, led by Governor Andrew Bailey, may signal potential rate hikes in coming months if the Middle East conflict, where a fragile ceasefire exists, drives inflation upward.
One or two members might vote for a quarter-point increase as a preemptive measure against rising inflation. Prior to the US and Israel’s attacks on Iran on 28 February, the Bank had anticipated cutting borrowing costs this year as inflation was expected to approach its 2% target during spring. The conflict has since disrupted these forecasts.
Economist Sandra Horsfield of Investec noted:
"The repercussions of the conflict are still keenly felt and uncertainty about how the situation could evolve also remains high."
The European Central Bank is also expected to keep rates unchanged on Thursday but may signal a potential hike, possibly as soon as June, to address an energy-driven surge in consumer prices.
In the United States, the Federal Reserve left interest rates unchanged for the third time this year on Wednesday, despite persistent calls from Donald Trump for rate cuts.
Oil prices surged an additional 7% on Thursday, reaching their highest levels since March 2022, following reports that the US is considering military options against Iran to break the deadlock in stalled nuclear negotiations.
Donald Trump is scheduled to receive a briefing today from Centcom commander Admiral Brad Cooper regarding plans for military strikes on Iran aimed at compelling the country to return to nuclear negotiations, according to Axios.
Brent crude futures for June rose 5.3% to $124.58 per barrel after earlier reaching $126.41. On Wednesday, oil prices increased by 6.1%. The June contract, which expires Thursday, has risen for nine consecutive days, while the July contract climbed 3% to $113.78 after a 5.8% gain the previous day.
US West Texas Intermediate (WTI) futures for June increased 2.3% to $109.35 per barrel after hitting $110.93 earlier, following a 7% rise on Wednesday. Both benchmarks are on track for their fourth consecutive month of gains, with Brent more than doubling since the start of the year and WTI up over 90%.
Asian stock markets declined, with Japan’s Nikkei down 1.06% and Hong Kong’s Hang Seng falling 1.2%.
Key upcoming events include:
- 10am BST: Eurozone GDP and inflation data for Q1 and April
- Noon BST: Bank of England interest rate decision
- 1.15pm BST: European Central Bank interest rate decision
