Introduction: Oil rising back towards $100...
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Global investors remain hopeful that a US-Iran peace agreement could be imminent, although optimism may be diminishing following recent US military actions in the Middle East.
Brent crude oil prices are edging closer to the $100 per barrel threshold, rising 2.5% today to $98.57 a barrel, after falling below $100 yesterday for the first time in two weeks.
Negotiators from the US and Iran are meeting in Doha to discuss a potential resolution to the three-month conflict, following former President Donald Trump’s statement last weekend that a peace deal with Iran "has been largely negotiated".
However, US strikes yesterday have introduced some uncertainty regarding the proximity of a final agreement.
Jim Reid of Deutsche Bank suggests the US attacks were “a warning shot that the ceasefire is fragile”, explaining:
“These actions were described as ‘defensive’ and not an end to the ceasefire with Iran.
Net net, optimism is still elevated that an agreement can be made to end the war. We have been here before, of course, but it has felt for some time that the move towards peace has been three steps forward and one or two back.”
Positive developments are also visible in the government bond market. Yields, or interest rates, on US debt have declined today as prices rose, buoyed by hopes that a peace deal will reopen the Strait of Hormuz and alleviate inflationary pressures affecting the global economy.
Wall Street, which was closed yesterday, is expected to open higher.
Markets have become more sensitive to risk, according to Daniela Hathorn, senior market analyst at Capital.com, who warns:
“Markets are still leaning optimistic, but the tolerance for negative headlines is shrinking. If negotiations stall further or the Strait disruption worsens, the reaction across oil, yields and equities could become much sharper than it has been over the past few weeks.”
The agenda
- 11am BST: CBI distributive trades survey of UK retail for May
- 1.30pm BST: Chicago Fed index of US National Activity for April
- 2pm BST: S&P/Case-Shiller index of US house prices
UK consumers likely to face higher prices ‘for many months to come’
Consumers have been warned that higher prices could persist throughout the summer even if supply chain disruptions ease, with economic repercussions expected to be felt “for many months to come.”
Disruptions to global shipping, combined with soaring costs for energy and raw materials, have increased expenses for UK businesses, with these effects already reflected in retail prices, according to recent inflation data.
Retailers have introduced promotions to attract bargain hunters, but businesses report it is becoming increasingly difficult to avoid raising prices and have urged the government to implement additional measures to ease the burden.
Shop price inflation is already rising, as indicated by figures from the British Retail Consortium (BRC).
Furniture, along with health and beauty products, have seen some of the largest price increases in recent weeks, contributing to a 1.2% year-on-year rise in shop prices in May. This rate slightly exceeds the three-month average of 1.1%.
