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13 Apr 2026 | 3 minutes to read
Markets could well be set for a nervy week after negotiations in Islamabad over the weekend failed to progress a two-week conditional ceasefire in the Middle East. Hopeful that diplomacy might work, equities initially rose, bond yields fell, oil declined, gold rallied and the US dollar weakened, before yielding to the reality that all sides remain poles apart. The ceasefire’s terms are sketchy and the reality on the ground unclear, with talk of the US “blockading” the Strait of Hormuz.
The uneasy truce leaves some 170 million barrels of oil already afloat still trapped in the Gulf, as Iran reportedly seeks to toll vessels passing the strait in return for guaranteeing its safety. Releasing the oil to foreign importers may ease the supply-shock for now, but the fragility of regional infrastructure is clear. Two weeks is not long enough for Qatar to restart its LNG supplies for instance. And it will likely take years to build new pipelines out of the region to circumvent the strait’s chokepoint.
Diplomacy may yet fix the seemingly insoluble positions of the US, Israel and Iran. In time, it’s possible that the Middle East becomes even better integrated into the global economy, and its energy infrastructure more secure.
Thus far, investors appear largely willing to view the crisis as more barrel-half-full than barrel-half-empty. For a brief while last week, the reprieve allowed markets to refocus on other data for clues as to the underlying health of the global economy. But the conflict certainly has the potential to scar the global economy more meaningfully the longer the impasse runs.
The US labour market seemingly shrugged off the energy shock, with job creation much stronger than expected in March. Although the broader trend of a sluggish jobs market remains intact. Employers added 178,000 jobs over the month – a significant reversal from the 133,000 decline in February – while the unemployment rate fell to 4.3%, according to the US Department of Labor. The healthcare sector was responsible for much of the growth in March, adding 76,000 jobs. But much of this was the result of striking workers returning, reversing the detrimental effect it had in February.
The gains might lead to greater confidence in the resilience of the jobs market, reinforcing the view amongst policymakers at the US Federal Reserve (Fed) that holding interest rates steady is the most appropriate path. At least while they await greater clarity on the impact of higher oil prices on the economy. Nevertheless, the broader picture on US jobs remains sluggish. Little hiring has taken place over the past 12-months, while the unemployment rate edging lower is largely due to a shrinking workforce. The economy needs to add fewer jobs to keep the unemployment rate steady or falling. Fed chair, Jerome Powell, has spoken of a “delicate balance” in the labour market: few jobs are being added, but employers are not implementing job cuts at any great pace either. The trend for wage growth is also a soft one, with average hourly earnings up only 3.5% from a year ago.
Prior to the Iran war, some policymakers had pushed for rate cuts to head off any labour market weakness, but with news last week that US inflation had jumped back up to its highest level in nearly two years, a patient wait-and-see approach is likely the only option for the central bank in the near term. US consumer prices were reported to have climbed 3.3% over the 12 months to March, picking up from 2.4% in February.
The European Union is seemingly taking steps to steady and evolve its global trade relationships amid rising geopolitical fragmentation, underscored by progress on new trade deals with Australia and the US in recent weeks.
After eight years of talks, the EU and Australia reached a landmark trade deal worth an estimated $7bn, as both seek to reduce reliance on the US and China. The agreement removes tariffs on most goods and strengthens cooperation in defence and critical minerals. European carmakers are set to gain from better access to the Australian market, though agriculture products remain contentious. Import quotas for Australian beef and lamb will rise, with beef exports to the EU expected to increase more than tenfold over the next decade. Australian farmers argue quotas remain too restrictive, while European farmers remain opposed to the increase. The deal forms part of a broader EU push to diversify its trade relationships. It follows January’s agreement with India, while a separate recent agreement with South American Mercosur bloc countries continues to face resistance in the European parliament, due to farming sector pressure. The EU-Australia deal still requires approval from all EU member states and both parliaments, a process likely to take at least a year.
Meanwhile, the European Parliament has moved a step closer to approving the awaited EU-US trade deal, voting to support legislation easing months of uncertainty driven by the threat of US President Trump’s tariffs. The agreement would cap most tariffs at 15% on EU goods, down from a threatened 30%, in exchange for increased European investment into the US and the removal of import duties on US industrial goods. Crucially, the deal includes safeguards allowing the EU to suspend concessions if the US reneges on any commitments. The deal still requires approval from all EU member states, with a final vote expected in the coming months. The US and EU remain the world’s largest trading relationship, accounting for nearly a third of global trade.
UK housing market loses momentum – The Royal Institute of Chartered Surveyors (RICS) March data showed buyer demand fell to its weakest since August 2023. Agreed sales also dropped to a net balance of -34% from -13% a month earlier, as higher borrowing costs and geopolitical uncertainty weigh on confidence
Anthropic’s cyber risks – US Treasury Secretary, Scott Bessent met leaders from some of the largest US banks including Goldman Sachs, Citigroup and Morgan Stanley to discuss the potential cyber risks from Antrophic’s latest Artificial Intelligence (AI) model. The concern being that the model’s ability to identify cybersecurity vulnerabilities could be exploited by bad actors
Meta debuts new AI model – Meta unveiled ‘Muse Spark’, its latest large language AI model, showing improved performance in language and visual tasks, narrowing the gap with Google, OpenAI and Anthropic. The model is set to replace Llama and will shortly power chatbots across Whatsapp, Instagram and Facebook
UK AI project is paused – OpenAI has paused a UK digital infrastructure project, dubbed Stargate UK. It was part of the US-UK AI deal announced last September. OpenAI cited high UK energy costs and regulatory challenges, and stated that it would only move forward with the project when the “right conditions” could enable long-term infrastructure investment”
Turkish Central Bank sale weighs on the gold price – The Turkish Central Bank executed c.$20bn in gold sales and swap transactions in March, including some 52 tonnes sold to support the Lira and FX liquidity needs. Such action by some central banks likely contributed to gold’s largest monthly fall since 2008
US Manufacturing Purchasing Managers’ Index (PMI) – The Institute for Supply Chain Management (ISM) Manufacturing PMI rose to 52.7 in March, the highest growth in factory activity since August 2022
Chinese inflation misses forecasts – Inflation rose +1% year-on-year in March, below economists’ expectations of +1.2%, suggesting limited initial spillover from the Middle East conflict, despite China’s status as the world’s largest oil importer
US used Electric Vehicle (EV) sales jump – The sale of used EVs sales rose c.+12% in the US over Q1 2026 compared to the same time last year, driven by models bought during a post-pandemic boom flooding on to the used car market and petrol prices exceeding $4 per gallon for the first time since 2022
Private Credit redemptions rise – A private credit fund managed by Barings has capped withdrawals at 5% per quarter, after investors sought to withdraw over 11% in the first quarter of the year. A number of private credit funds have experienced high redemption requests of late amid rising concerns over loan quality transparency, valuations and AI-related disruption
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