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8 Jun 2026 | 3 minutes to read
(All equity data is MSCI; all data in sterling unless stated)
The conflict in the Middle East is causing such uncertainty that the Organisation for Economic Co-operation and Development (OECD) has produced two scenarios in its latest global outlook. In the first, forecasting short-lived disruptions with energy prices easing from mid-2026, global growth slows from 3.4% last year to 2.8% this year, before recovering to 3.1% in 2027. In the second, prolonged disruption persisting well into 2027, shows growth stalling to 2.1% this year and to 1.8% next year. Countries most exposed to energy and food prices are likely to be worst affected in this scenario. In the short term, the OECD notes that policymakers have a tricky task: to balance paying for targeted support to households and businesses today, which is costly, with meeting longer-term commitments to fund defence spending and mitigate climate change, without becoming over-indebted. The OECD also stresses that global energy infrastructure needs to be more resilient to support future growth.
The US has announced new tariffs on sixty countries it alleges don’t do enough to prevent forced labour and who may also benefit from unfair trading practices. According to the Office of the US Trade Representative (USTR), countries that have taken mitigating steps – including Canada, the EU and the UK – will face a new 10% tariff on most imports. Others will be hit with 12.5%.
The Trump administration has been pursuing new ways to impose tariffs since the US Supreme Court struck down its use of the International Emergency Economic Powers Act (IEEPA) in February. The latest attempt invokes Section 301 of the 1974 Trade Act. If effective, by some estimates it could generate north of $160bn in revenues.
A key question is whether the new rates will ‘stack’ on top of existing tariffs, and whether they’ll work with Most-Favoured Nation rules aiming to prevent trade discrimination. Since the Supreme Court ruling, some countries have voided hastily-agreed bilateral agreements, while others have dragged their heels in negotiations. Currently, the EU is in the process of ratifying the Turnberry Deal agreed with the US last summer, only to find another spanner in the works.
For companies, complex rules fuel uncertainty and increase contractual risk – indeed, tariffs illegally collected under the IEEPA are still being refunded to importers. The White House is imposing tariffs to try to exert geopolitical leverage, rejig global supply chains and encourage more job and wealth creation in the US. But without the sweeping authority of the IEEPA, the US risks imposing a brittle and onerously complex latticework of tariffs.
Surprisingly strong US jobs data, with more hiring across more sectors than expected, poses policymakers a dilemma when deciding interest rates next week. The US economy added 172,000 jobs in May, double forecasts of 85,000, and gains for March and April were revised up by 93,000 in total. Leisure and hospitality, local government, and health care all saw strong growth. Hiring ahead of the World Cup could be behind some increases, as previous additions had been concentrated and gradual in a small number of sectors. The unemployment rate was unchanged at 4.3% and average hourly earnings rose 0.3% in May, and 3.4% over the past year, all in line with expectations.
Overall, whilst rate cuts may be on the back burner for now, the fact that real incomes are not growing as fast as expected, should temper any chatter of rate hikes. Even tax refunds from Trump’s One Big Beautiful Bill this spring have not been enough to maintain spending power, with lower income households the most affected. The Federal Reserve next meet on 16-17 June. A further hold in the benchmark interest rate is fully expected.
Global equity markets were generally weaker following the jobs update, while US government bond yields fell.
Gold has replaced US Treasuries as the world’s top reserve asset, according to the European Central Bank (ECB). The move is partly explained by gold’s rapid price rise in recent years, by around 30% in 2024 and 60% in 2025, increasing its relative share in foreign reserve assets. By the end of last year, the ECB estimates that the share of gold in foreign reserves had increased to 27%, surpassing US Treasuries (22%), other US dollar reserves (20%) and the euro (15%). Back in 2023, gold was the smallest asset in percentage terms in foreign reserves. Increasing geopolitical risk is the other explanation, with the ECB noting that the central banks buying the most gold in recent years have tended to be in regions such as China, Turkey, Poland and India.
Looking ahead, the report also considers the specific limitations of the gold price compared to major currencies: volatility, lack of liquidity and storage costs. Purchases of gold decreased in 2025 compared to previous years, and since the Middle East war, reports suggest that some central banks have been selling gold to defend their currencies and to finance energy import costs.
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