May recycled many of the same headlines about the conflict in Iran, but with arguably less financial market noise accompanying it. Perhaps we have become a little numb to White House statements about a peace deal nearing completion and Iran denying it.
The UK news cycle moved away from President Trump, and onto Prime Minister Starmer for a few days, but by the end of the month we were once again listening to the White House talking about another imminent peace deal and looking for signs of support for that view from Iran’s leaders.
UK
Volatility in the UK has been triggered by a stuttering leadership challenge to the Prime Minister, Sir Keir Starmer, following the poor local election results in May. We have said many times before that whatever our own views are of the policies and politics of the Prime Minister, and Chancellor Rachel Reeves, financial markets dislike uncertainty and this is what we now have.
There is no doubt that Starmer has struggled to unite the country and his own party behind him, but the alternatives do not offer a silver bullet solution. Front runner Andy Burnham has to get through the 18th June Makerfield by-election and is regarded as a significantly more left wing replacement. Last year he said the UK should not be “in hock” to bond markets and offered an olive branch to Jeremy Corbyn and his supporters. Angela Raynor as Prime Minister would certainly be seen as a big lurch to the left. Rachel Reeves may be unpopular with the electorate but bond markets regard her as disciplined and predictable. She could well be replaced should Starmer be removed, and there has been much talk about increased government spending by his rivals. Bond yields rose immediately on the news of the leadership challenge, and this might create enough pressure for a new Prime Minister to keep her in post. Wes Streeting is arguably the most centrist option, but has made controversial comments about rejoining joining the EU which might not play out well with the electorate. Starmer looks set to contest any leadership bid and still retains the support of a large number of his MPs, albeit as the best option for now, with no obvious election winning successor ready to replace him.
Whilst this only covered the first month of the Middle East conflict, The S&P Global UK Manufacturing Purchasing Managers’ Index held steady at 53.7 in May 2026, unchanged from April, which was its highest level since May 2022. Rising fuel prices, borrowing costs and inflation will inevitably hinder growth, but there are signs that UK businesses are current more resilient than many economists have suggested.
Headline inflation via the Consumer Prices Index for April came in at 2.8%, which was down from 3.3% in March and below market expectations. The moderation was driven primarily by the introduction of Ofgem’s new energy price cap on 1st April, which pulled housing and household services inflation sharply lower. The largest upward movement was from motor fuel prices, which rose by 23.0% in the 12 months to April 2026, compared with a rise of 4.9% in the 12 months to March. The April figure was the highest annual increase recorded since September 2022. The average price of petrol stood at 156.8 pence per litre in April 2026, the highest price since November 2022, when it reached 163.6 pence per litre because of the war in Ukraine.
There will be be more political turbulence to come once the Mayfield by-election is over. Equity markets have largely brushed off the noise for now. We are not talking about the FTSE 100 hitting 11,000, as we were before the Iran conflict in March, but we are also not seeing the same level of volatility which immediately followed it. The FTSE 100 closed the month at 10,459. Let’s see what June brings.
United States
US equities continued to advance in May, despite the bumps that rates, oil, and geopolitical headlines continue to bring. The S&P 500 and Nasdaq Composite set fresh highs as semiconductor and AI stocks rallied.
Ben Snider, chief US equity strategist in Goldman Sachs Research, estimates that AI-related investment will drive approximately 40% of S&P 500 earnings-per-share (EPS) growth this year. Sentiment around just a small number of big tech stocks continues to have a heavy influence on global markets. Should the Iran conflict come to an end we will no doubt see renewed media speculation on an ‘AI bubble’.
There will be huge interest in the IPO for Space X, Elon Musk’s rocket and satellite business, in June. It could herald further AI tech stock IPOs for the likes of OpenAI and Anthropic.
Kevin Warsh was confirmed by the Senate in a 54–45 vote, the closest confirmation in the modern era, and was sworn in as the 17th Chair of the Federal Reserve on 22nd May. He inherits rates held at 3.50% to 3.75%, a committee that produced four dissents at its most recent meeting, and inflation that remains above the Fed’s 2% target. His first Federal Open Market Committee meeting as Chair is on 16th and 17th June.
Markets are not expecting a rate move in June — CME FedWatch data showed a 97% probability of no change at the time of Warsh’s confirmation which has risen since, but an expectation that rates will be higher by the start of 2027. Several FOMC members have continued to stress the need to keep rate hike options open. The committee Warsh walks into is, by some measures, the most divided since the early 1990s, and the whole planet is aware of President Trump’s view on the mater of interest rates.
The Trump-Xi summit took place on 14th–15th May in Beijing, Trump’s first visit to China since 2017. The summit produced a framework for deeper cooperation and several economic agreements. China committed to purchase more US agricultural products, and both sides agreed to establish boards of trade and investment to facilitate bilateral discussions. China indicated reducing tariffs would be part of the plans, but Trump told reporters it was not discussed. However, the summit stopped well short of major structural breakthroughs on advanced chip export controls, technology transfer, or Taiwan. Think tank, The Atlantic Council, described it as “a big show — with little to show for it.” A further schedule of meetings, Washington in September, Shenzhen in November, and the G20 in Miami in December, suggests the tougher conversations remain ahead.
Europe
European markets have continued to navigate the energy shock, with the European Central Bank’s (ECB) 11th June meeting now the central policy event for the continent. The ECB held its deposit facility rate at 2.0% at its 30th April meeting. It was a unanimous decision, but contested and President Lagarde confirmed the Governing Council had actively debated a rate hike.
Eurozone CPI for April came in at 3.0%, the highest since mid-2024, driven by a 10.8% increase in energy costs. Core inflation eased from 2.3% to 2.2%, confirming second-round effects have not yet taken hold.Among the Eurozone’s major economies, inflation accelerated in Germany (2.9% vs. 2.8%), France (2.5% vs. 2.0%), Italy (2.8% vs. 1.6%), and Spain (3.5% vs. 3.4%), but moderated in the Netherlands (2.5% vs. 2.6%).
There is no doubt that European financial markets are sensitive to the Middle East conflict. European equity markets finished the month stronger on the news of a possible end to hostilities. Eurozone Manufacturing Purchasing Managers Index (PMI) dropped to 51.6, from 52.2 the previous month, although this was slightly ahead of expectation.
Far East
China’s exposure to the energy shock has continued through May, with Gulf oil production cuts squeezing production costs for steel, chemicals, and electronics. The Trump-Xi summit in Beijing on 14th–15th May was, from China’s perspective, a managed success. Xi characterised the meetings as “historic” and described “important common understandings” on trade and economic cooperation. China also indicated reducing tariffs would be part of the planned bilateral trade and investment boards.
However, Beijing made no concessions on advanced technology controls or Taiwan. Xi warned Trump that mishandling the issue of Taiwan risks “clashes and even conflicts”. The Chinese contigent declined to characterise the summit in the expansive terms Trump used, suggesting the tougher structural negotiations remain ahead.
India’s stockmarkets have underperformed emerging markets, reflecting its vulnerability as an energy importer, the ongoing fiscal pressure from subsidy costs, and investor concern about the secondary tariff threat from the US for any crude procurement from Iran.
The good overall performance for emerging markets masks this underlying divergence in the performance of individual countries. Emerging market economies are have a tailwind where they benefit from strong global fundamentals and red hot sector investment such as AI and semiconductor technology. They will continue to struggle where they are exposed to energy shocks, and this is a structural exposure that will persist as long as the Strait of Hormuz remains restricted.
Summary
The key Central Banks around the world are now faced with a different path to the one they seemed to be steadfastly on in 2025. The are all signalling caution.
Even if peace is restored in the Middle East and the Strait of Hormuz is re-opened, it may take many months to unwind the pain caused by its closure. Supply would take months to fully recover and logistical bottlenecks could persist. Inflation is once again the enemy.
The Bank of England’s Monetary Policy Committee’s next decision on 18th June will be one of the most consequential in years. It will most likely be the first time the Committee may seriously contemplate raising rates to contain an energy-driven inflation shock since 2022.
That said, we have been pleasantly surprised in recent years of the reliance of many of the world’s great economies, and there does seem to a realistic chance that the conflict will reach some form of conclusion soon.
And finally…
Did you know the first stock exchange in the world was established in Amsterdam in the early 17th century.
The Amsterdam Stock Exchange was created during the Dutch Golden Age to facilitate the trading of shares in the Dutch East India Company (VOC), the first publicly traded company in history, allowing investors to buy and sell ownership stakes and receive dividends from profits.
This innovation marked the beginning of modern stock markets, introducing concepts such as continuous trading, brokers, and the ability to spread financial risk among multiple investors.
If this blog has raised any questions why don't we have a quick chat?
Garry Hale MD & Certified Financial Planner
A brief meeting might be of interest, especially if you’re unsure just how wealth management and financial planning could help you.
It would only require the investment of an hour or so of your time, and the coffee’s not bad either.
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June Market Commentary
Introduction
May recycled many of the same headlines about the conflict in Iran, but with arguably less financial market noise accompanying it. Perhaps we have become a little numb to White House statements about a peace deal nearing completion and Iran denying it.
The UK news cycle moved away from President Trump, and onto Prime Minister Starmer for a few days, but by the end of the month we were once again listening to the White House talking about another imminent peace deal and looking for signs of support for that view from Iran’s leaders.
UK
Volatility in the UK has been triggered by a stuttering leadership challenge to the Prime Minister, Sir Keir Starmer, following the poor local election results in May. We have said many times before that whatever our own views are of the policies and politics of the Prime Minister, and Chancellor Rachel Reeves, financial markets dislike uncertainty and this is what we now have.
There is no doubt that Starmer has struggled to unite the country and his own party behind him, but the alternatives do not offer a silver bullet solution. Front runner Andy Burnham has to get through the 18th June Makerfield by-election and is regarded as a significantly more left wing replacement. Last year he said the UK should not be “in hock” to bond markets and offered an olive branch to Jeremy Corbyn and his supporters. Angela Raynor as Prime Minister would certainly be seen as a big lurch to the left. Rachel Reeves may be unpopular with the electorate but bond markets regard her as disciplined and predictable. She could well be replaced should Starmer be removed, and there has been much talk about increased government spending by his rivals. Bond yields rose immediately on the news of the leadership challenge, and this might create enough pressure for a new Prime Minister to keep her in post. Wes Streeting is arguably the most centrist option, but has made controversial comments about rejoining joining the EU which might not play out well with the electorate. Starmer looks set to contest any leadership bid and still retains the support of a large number of his MPs, albeit as the best option for now, with no obvious election winning successor ready to replace him.
Somewhat surprisingly there was some positive economic news. Gross Domestic Product (GDP) grew by 0.6% in Q1 2026 according to the Office for National Statistics (ONS). This was an unexcepted result led by a 0.8% increase in services output, and included 0.3% growth in March despite the Iran conflict.
Whilst this only covered the first month of the Middle East conflict, The S&P Global UK Manufacturing Purchasing Managers’ Index held steady at 53.7 in May 2026, unchanged from April, which was its highest level since May 2022. Rising fuel prices, borrowing costs and inflation will inevitably hinder growth, but there are signs that UK businesses are current more resilient than many economists have suggested.
Headline inflation via the Consumer Prices Index for April came in at 2.8%, which was down from 3.3% in March and below market expectations. The moderation was driven primarily by the introduction of Ofgem’s new energy price cap on 1st April, which pulled housing and household services inflation sharply lower. The largest upward movement was from motor fuel prices, which rose by 23.0% in the 12 months to April 2026, compared with a rise of 4.9% in the 12 months to March. The April figure was the highest annual increase recorded since September 2022. The average price of petrol stood at 156.8 pence per litre in April 2026, the highest price since November 2022, when it reached 163.6 pence per litre because of the war in Ukraine.
There will be be more political turbulence to come once the Mayfield by-election is over. Equity markets have largely brushed off the noise for now. We are not talking about the FTSE 100 hitting 11,000, as we were before the Iran conflict in March, but we are also not seeing the same level of volatility which immediately followed it. The FTSE 100 closed the month at 10,459. Let’s see what June brings.
United States
US equities continued to advance in May, despite the bumps that rates, oil, and geopolitical headlines continue to bring. The S&P 500 and Nasdaq Composite set fresh highs as semiconductor and AI stocks rallied.
Ben Snider, chief US equity strategist in Goldman Sachs Research, estimates that AI-related investment will drive approximately 40% of S&P 500 earnings-per-share (EPS) growth this year. Sentiment around just a small number of big tech stocks continues to have a heavy influence on global markets. Should the Iran conflict come to an end we will no doubt see renewed media speculation on an ‘AI bubble’.
There will be huge interest in the IPO for Space X, Elon Musk’s rocket and satellite business, in June. It could herald further AI tech stock IPOs for the likes of OpenAI and Anthropic.
Kevin Warsh was confirmed by the Senate in a 54–45 vote, the closest confirmation in the modern era, and was sworn in as the 17th Chair of the Federal Reserve on 22nd May. He inherits rates held at 3.50% to 3.75%, a committee that produced four dissents at its most recent meeting, and inflation that remains above the Fed’s 2% target. His first Federal Open Market Committee meeting as Chair is on 16th and 17th June.
Markets are not expecting a rate move in June — CME FedWatch data showed a 97% probability of no change at the time of Warsh’s confirmation which has risen since, but an expectation that rates will be higher by the start of 2027. Several FOMC members have continued to stress the need to keep rate hike options open. The committee Warsh walks into is, by some measures, the most divided since the early 1990s, and the whole planet is aware of President Trump’s view on the mater of interest rates.
The Trump-Xi summit took place on 14th–15th May in Beijing, Trump’s first visit to China since 2017. The summit produced a framework for deeper cooperation and several economic agreements. China committed to purchase more US agricultural products, and both sides agreed to establish boards of trade and investment to facilitate bilateral discussions. China indicated reducing tariffs would be part of the plans, but Trump told reporters it was not discussed. However, the summit stopped well short of major structural breakthroughs on advanced chip export controls, technology transfer, or Taiwan. Think tank, The Atlantic Council, described it as “a big show — with little to show for it.” A further schedule of meetings, Washington in September, Shenzhen in November, and the G20 in Miami in December, suggests the tougher conversations remain ahead.
Europe
European markets have continued to navigate the energy shock, with the European Central Bank’s (ECB) 11th June meeting now the central policy event for the continent. The ECB held its deposit facility rate at 2.0% at its 30th April meeting. It was a unanimous decision, but contested and President Lagarde confirmed the Governing Council had actively debated a rate hike.
Eurozone CPI for April came in at 3.0%, the highest since mid-2024, driven by a 10.8% increase in energy costs. Core inflation eased from 2.3% to 2.2%, confirming second-round effects have not yet taken hold.Among the Eurozone’s major economies, inflation accelerated in Germany (2.9% vs. 2.8%), France (2.5% vs. 2.0%), Italy (2.8% vs. 1.6%), and Spain (3.5% vs. 3.4%), but moderated in the Netherlands (2.5% vs. 2.6%).
The ECB revised down their economic growth forecasts for 2026 to acknowledge the impact of energy prices and the Middle East conflict.
Markets are fully pricing multiple ECB rate hikes in 2026, with the first potentially arriving in June.
There is no doubt that European financial markets are sensitive to the Middle East conflict. European equity markets finished the month stronger on the news of a possible end to hostilities. Eurozone Manufacturing Purchasing Managers Index (PMI) dropped to 51.6, from 52.2 the previous month, although this was slightly ahead of expectation.
Far East
China’s exposure to the energy shock has continued through May, with Gulf oil production cuts squeezing production costs for steel, chemicals, and electronics. The Trump-Xi summit in Beijing on 14th–15th May was, from China’s perspective, a managed success. Xi characterised the meetings as “historic” and described “important common understandings” on trade and economic cooperation. China also indicated reducing tariffs would be part of the planned bilateral trade and investment boards.
However, Beijing made no concessions on advanced technology controls or Taiwan. Xi warned Trump that mishandling the issue of Taiwan risks “clashes and even conflicts”. The Chinese contigent declined to characterise the summit in the expansive terms Trump used, suggesting the tougher structural negotiations remain ahead.
Japan has been a notable performer in global equity markets, with the Nikkei 225 hitting record highs in May. Japan’s the first quarter GDP growth of 2.1% beat expectations, mainly led by consumption, exports and public investment. This has boosted confidence in the expansionary policies of new Prime Minister, Sanae Takaichi, and the Nikkei 225 posted strong returns in May.
Emerging Markets
The divergence across emerging markets established in March and April has persisted through May.
However, the overall performance of emerging markets as an asset class was very good, up 9.7% for the month. The results were fuelled by big returns for Korea and Taiwan, which continued to benefit from their pivotal place in the AI supply chain which is attracting ever increasing demand.
India’s stockmarkets have underperformed emerging markets, reflecting its vulnerability as an energy importer, the ongoing fiscal pressure from subsidy costs, and investor concern about the secondary tariff threat from the US for any crude procurement from Iran.
The good overall performance for emerging markets masks this underlying divergence in the performance of individual countries. Emerging market economies are have a tailwind where they benefit from strong global fundamentals and red hot sector investment such as AI and semiconductor technology. They will continue to struggle where they are exposed to energy shocks, and this is a structural exposure that will persist as long as the Strait of Hormuz remains restricted.
Summary
The key Central Banks around the world are now faced with a different path to the one they seemed to be steadfastly on in 2025. The are all signalling caution.
Even if peace is restored in the Middle East and the Strait of Hormuz is re-opened, it may take many months to unwind the pain caused by its closure. Supply would take months to fully recover and logistical bottlenecks could persist. Inflation is once again the enemy.
The Bank of England’s Monetary Policy Committee’s next decision on 18th June will be one of the most consequential in years. It will most likely be the first time the Committee may seriously contemplate raising rates to contain an energy-driven inflation shock since 2022.
That said, we have been pleasantly surprised in recent years of the reliance of many of the world’s great economies, and there does seem to a realistic chance that the conflict will reach some form of conclusion soon.
And finally…
Did you know the first stock exchange in the world was established in Amsterdam in the early 17th century.
The Amsterdam Stock Exchange was created during the Dutch Golden Age to facilitate the trading of shares in the Dutch East India Company (VOC), the first publicly traded company in history, allowing investors to buy and sell ownership stakes and receive dividends from profits.
This innovation marked the beginning of modern stock markets, introducing concepts such as continuous trading, brokers, and the ability to spread financial risk among multiple investors.
If this blog has raised any questions why don't we have a quick chat?
MD & Certified Financial Planner
A brief meeting might be of interest, especially if you’re unsure just how wealth management and financial planning could help you.
It would only require the investment of an hour or so of your time, and the coffee’s not bad either.