Infrastructure attacks prompt surge in oil prices

Global markets have swung sharply this week as the Iran conflict and a cascade of hawkish central‑bank signals roiled equities, bonds and commodities. Oil, which had surged on fears of prolonged supply disruption through the Strait of Hormuz, eased slightly by Friday, but remained highly volatile as investors assessed the risk of further strikes on energy infrastructure. Bond markets endured a heavy sell‑off, with yields climbing to multi‑month highs after the Federal Reserve, European Central Bank and Bank of England all signalled that rate cuts were increasingly unlikely this year, prompting traders to price in potential hikes instead. Global equities fell, led by Europe and Asia, where markets remain more exposed to energy shocks, while US indices also declined for a third consecutive week against a backdrop of rising inflation concerns, stress in private credit markets and geopolitical uncertainty. 

The FTSE 100 was down 2.3% over the week by mid-session on Friday, with the more UK-focused FTSE 250 trading 2.8% lower.

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Middle East

Iran’s confrontation with Israel and the US has sharply escalated into an energy‑sector conflict, with missile strikes hitting key oil and gas infrastructure across the Gulf. The most serious damage occurred in Qatar, where Iran targeted Ras Laffan Industrial City – the world’s largest LNG export hub, handling nearly 20% of global supply – causing extensive fires and forcing a halt in production. QatarEnergy confirmed significant damage across multiple LNG facilities, including two liquefaction trains and a gas‑to‑liquids unit, cutting 17% of its export capacity and potentially sidelining output for up to five years. The strikes followed Israel’s attack on Iran’s South Pars gas field, part of the shared reservoir with Qatar, prompting Tehran to retaliate not only against Qatar but also against energy facilities in Saudi Arabia and the UAE. 

Saudi Arabia’s Aramco‑linked SAMREF refinery in Yanbu was also hit, although damage there was minimal and crude loadings resumed shortly after a brief halt. Yet the strike underscored the vulnerability of alternative export routes as the Strait of Hormuz – through which about a fifth of the world’s oil normally passes – remains effectively choked off by Iranian attacks on commercial shipping. The UAE meanwhile shut parts of its gas infrastructure after missile debris fell on facilities, adding to the regional disruption. 

The combined impact has fuelled sharp moves in energy markets. European gas benchmarks jumped more than 30% on news of the Ras Laffan damage, while Brent crude, already rising amid the conflict, climbed further on fears of broader supply losses. Diplomatic pressure is mounting: Qatar has condemned the strikes as a “dangerous escalation” and expelled Iranian defence staff, while US president Donald Trump warned Tehran that further attacks on Qatari energy infrastructure would trigger a US strike on the South Pars field. 

Efforts to stabilise markets have so far had limited effect. The International Energy Agency authorised the release of emergency stocks in an unprecedented intervention, but traders remain sceptical that such measures can offset the loss of capacity at the world’s most important LNG hub or the growing risk to tanker traffic. With energy infrastructure burning, export routes compromised, and no sign of de‑escalation, the crisis is now reshaping global supply dynamics – and any recovery, even after a ceasefire, is likely to be slow.

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Economics 

The sharp escalation of the Iran conflict has forced central banks worldwide to reassess monetary policy, emphasising inflation risks and retreating from earlier expectations of rate cuts. The Bank of England held rates at 3.75%, but its commentary effectively extinguished any prospect of rate cuts this year, with markets now pricing in the possibility of a hike as energy‑driven inflation pressures intensify. Yields on UK gilts surged, reflecting expectations that tightening may resume. The European Central Bank also held steady, but investors now anticipate at least one rate rise later in 2026 as the energy shock feeds into eurozone inflation. Bond markets across the continent sold off sharply as central banks signalled greater concern about persistent price pressures.

The Federal Reserve kept interest rates unchanged and adopted a more cautious tone, with officials weighing the inflationary impact of higher oil prices and supply disruptions against uneven labour‑market signals. Markets have pushed back expectations for any 2026 cuts, with traders now expecting the Fed to remain on hold for the rest of the year. 

The European Central Bank left interest rates unchanged at 2% at its March meeting, warning that the Iran war has made the economic outlook “significantly more uncertain” by driving up oil and gas prices and creating upside risks for inflation and downside risks for growth. Policymakers said the conflict would have a “material impact” on near‑term inflation through higher energy costs, with the medium‑term effects depending on how long the disruption lasts. The ECB also raised its inflation forecasts – now expecting 2.6% in 2026 – and declined to commit to a future rate path as markets increasingly price in the possibility of one or two hikes later this year. 

Across Asia, the war‑driven surge in oil prices has triggered a rethink. The Bank of Japan faces limited options, warning that the inflation shock complicates plans for normalisation. Emerging‑market central banks are in an even tougher bind: India is expected to keep rates low to support growth but may be forced into heavy currency market intervention to stabilise the rupee as capital flows shift toward the US. Thailand and the Philippines may have to abandon dovish stances despite the growth hit from higher energy costs. South Korea, while wary of inflation, has signalled a preference for stability but may face mounting pressure to respond if imported energy prices continue to spike.

Australia raised rates by 25 basis points this week in a pre‑emptive move against renewed inflation expectations, particularly with imported energy costs rising. New Zealand, by contrast, faces a sharper trade‑off between slow growth and resurgent energy‑driven inflation, complicating its policy trajectory.

Worldwide, the Iran conflict has triggered a rapid tightening in financial conditions. Bond yields are rising across regions as markets price in fewer cuts and greater odds of rate hikes, especially in Europe and the UK. Central bankers are now openly warning that the oil‑price shock may prove more persistent, forcing them to prioritise inflation ahead of growth.

US producer prices jumped 0.7% in February, marking their strongest annual rise since early 2025 and underscoring persistent inflationary pressures in the pipeline. The increase, driven by higher costs for both services and goods – including sharp gains in food and energy – lifted the annual rate to 3.4%, according to the Bureau of Labor Statistics. These inflationary pressures were evident before the airstrikes on Iran or the oil-price surge that followed. 

The UK’s 2026 CPI shopping basket has been reshaped to reflect shifting consumer habits, with the Office for National Statistics adding 27 items – including houmous, alcohol‑free beer, pet grooming, dashboard cameras and motorhomes – while removing 19, such as sheets of wrapping paper and certain premium lagers, bringing the total basket to 760 items. The update also marks a statistical step change: for the first time, over half of grocery prices will be captured through supermarket scanner data rather than manual collection, improving accuracy and making the index more responsive to real‑world spending. 

Private credit markets

Mounting strains in the $2-trillion‑plus private credit market have become a growing source of alarm for global investors, as redemptions surge, asset values are marked down and default risks rise. Funds across the sector have been forced to gate or cap withdrawals after a wave of investor requests collided with the illiquidity of their underlying loans, exposing the structural mismatch at the heart of non‑bank lending. Blackstone, BlackRock and Morgan Stanley are among those limiting redemptions, while banks including JPMorgan have begun marking down software‑linked loan exposures amid fears that weakening cash flows and rapid AI‑driven disruption are eroding the value of key borrowers. Analysts warn that rising use of payment‑in‑kind (PIK) interest and growing concentrations in stressed sectors suggest the market is undergoing its first true cycle‑wide test, with some default rates already approaching double digits. Although major managers argue the system is “cooling”, not collapsing, the sector’s sheer size and its deep ties to banks and private equity mean any severe downturn could spill into the broader economy, elevating its significance far beyond niche credit markets. 

Company news

Nvidia’s four‑day GTC 2026 conference delivered a sweeping vision of the company’s ambitions, with headline announcements ranging from next‑generation AI hardware to an expanded full‑stack strategy that cements its role at the centre of the global AI boom. The keynote showcased major advances including the Vera Rubin platform – a vertically integrated AI system designed for agentic workloads – alongside early details of its successor, Feynman, marking a leap forward in inference, data‑centre scale and photonics‑based chip design.  Nvidia also laid out its broader AI “layer cake” framework, positioning itself not just as a chip designer but as an infrastructure provider spanning energy, silicon, data‑centre systems, models and applications – a declaration that AI has become essential industrial infrastructure.  The event’s significance lies in how comprehensively Nvidia is shaping the next era of computing: from trillion‑dollar AI infrastructure demand to breakthroughs in graphics, robotics and cloud‑scale software, the conference signalled both technological leadership and an aggressive push to define the architecture of the AI‑driven economy for years to come. 

Prudential delivered a strong set of annual results, reporting broad‑based double‑digit growth across key metrics as the insurer capitalised on sustained momentum in its Asian and African markets. New business profit rose 12% to $2.78bn, while the total dividend was lifted 15% to 26.60 cents. The group also unveiled an expansive capital‑return programme of more than $7bn between 2024 and 2027, including completed and ongoing share buybacks, alongside portfolio moves such as increasing its stake in its Malaysian business. Its capital strength was reinforced by a ratings upgrade to AA from S&P Global Ratings, underscoring a robust balance sheet as Prudential positions itself for continued growth across its core regions. 

Travis Perkins reported a tough 2025, with revenue dipping 0.9% to £4.56bn and adjusted operating profit down 12.5% to £133m as weakness in the housing and construction markets squeezed margins in its core merchanting arm. The group swung to a £97m operating loss after taking £222m of impairments linked to underperforming Toolstation Benelux, CCF and selected merchanting branches, as well as restructuring costs and the sale of Staircraft. Despite the downturn, Toolstation UK delivered a bright spot with a 29% rise in adjusted operating profit to £44m. The dividend was cut 17% to 12p a share, but new chief executive Gavin Slark, who joined in January, said the group is focused on rebuilding performance and navigating subdued trading conditions in early 2026.

Micron delivered a blockbuster second quarter, with revenue surging to a record $23.86bn – almost triple the level a year earlier – as the memory maker rode an AI‑driven boom in demand and a tight supply backdrop.  Chief executive Sanjay Mehrotra said every major metric – revenue, gross margin, earnings per share and free cash flow – reached new highs, prompting the board to raise the quarterly dividend by 30% to $0.15. Looking ahead, the company guided for another record-breaking period in its third quarter, forecasting revenue of about $33.5bn on continued AI‑fuelled demand. 

Accenture posted solid second‑quarter results, with revenue rising to about $18bn as record bookings – buoyed by accelerating corporate adoption of AI – helped lift earnings to $2.93 a share. The consultancy also raised its full‑year guidance, citing resilient demand and strong market‑share gains, but its shares slipped after management warned that clients remain cautious on big IT‑transformation spending, prompting a softer revenue outlook for the May quarter. 

AIA reported record full‑year results, delivering double‑digit growth across all major metrics as strong, broad‑based demand lifted the value of new business by 15% to US$5.52bn and operating profit after tax by 12% to US$7.14bn. The insurer also increased its total dividend by 10 per cent, while approving a new US$1.7bn share buy‑back, underscoring confidence in its capital strength and long‑term growth trajectory. 

JD Wetherspoon’s latest trading update shows solid sales momentum but mounting cost pressures that threaten to squeeze profitability. Like‑for‑like sales rose 4.7% in the 25 weeks to 18 January, with bar sales up 6.9% and strong festive trading delivering an 8.8% uplift over Christmas, reflecting resilient customer demand. However, rising expenses – including energy, wages and business rates – have increased by about £45m in the period, prompting management to warn that profits are likely to underperform last year. Interim results are due on 20 March, with investors watching closely to see whether strong sales can offset intensifying cost headwinds.

Smiths Group reported robust full‑year figures for 2025, including 8.9% organic revenue growth, a higher operating profit margin and a 5.1% rise in the dividend. The engineering group has set guidance for 2026 of 4%–6% organic revenue growth and further margin expansion, underpinned by a strategic refocus on its John Crane and Flex‑Tek divisions while progressing the separation of Smiths Interconnect and Smiths Detection. Chief executive Roland Carter said the order book and business momentum support confidence in the outlook, with the group positioning itself for longer‑term growth and value creation.