Negotiations between the US and Iran to end the ongoing conflict in the Middle East and reopen the Strait of Hormuz remain unresolved, with key sticking points still in play, according to the US Vice President. Despite the lack of a formal agreement, markets are buoyed by the anticipation of a deal, as evidenced by record highs in US stocks and strong performances in Asian markets, particularly Japan’s Nikkei and South Korea’s Kospi, which surged over 7% this week.

The decline in oil prices, now approaching $90 per barrel for Brent crude, has significant implications for the financial markets. A 12% drop in oil prices this week has boosted UK government bonds, with yields on 10-year and 30-year Gilts falling, suggesting easing inflation fears. Conversely, the FTSE 100 has struggled, impacted by BP’s chairman resignation and broader commodity price declines.

Looking ahead, market participants should closely monitor the upcoming Fed meeting on June 16-17, where inflation data and interest rate decisions could influence stock valuations and the trajectory of the current rally. Additionally, the UK’s political landscape and the potential for further shifts in central bank policies will be critical themes as June unfolds.

Source: xtb.com