Morning Markets - Equity markets look through Iran war impact for now, but a turbulent summer lies ahead

6 May 2026

If you are covering the latest news in financial markets, please see the following comment from Lindsay James, investment strategist at Quilter:

"Despite the announcement that US efforts to guide neutral ships through the Strait of Hormuz were to be 'paused' just one day after it began, oil prices continued to give up some of their recent gains. Brent crude fell to $108 per barrel as investors took encouragement from signals that the US remained determined to stick to the ceasefire.

"Words from President Trump around an agreement with Iran were viewed with some optimism despite Iran later throwing cold water on hopes for a quick resolution. With rationing of jet fuel already beginning in Europe, pressure is mounting for a negotiated outcome. Yet, equity investors continue to look through near-term risks and focus on the positives; a strong earnings season that has lifted expectations for profit growth this year in most regions and signs that the all-important US economy continues to deliver, with better than expected hiring data published yesterday underlining this resilience.

"The UK is as ever in a slightly different situation. Gilts yields have risen sharply, not only mirroring moves seen across the G7 to reflect higher inflation and anticipated base rate hikes, but with an added twist to reflect growing unease as we head into local elections. There are concerns that the resulting leadership will be a shift to the left at a time when the UK's reputation is still tarnished from efforts by members of the last government to ignore the bond market.

"With the 30 year gilt yield having reached a 28 year high at 5.78%, this forces the Treasury into absorbing higher interest costs at a time when they may also be asked to fund additional giveaways by a possible new leadership team. This could result in weaker fiscal rules or substantially higher taxes, with implications for growth. Neither looks attractive to a lender and has been foreseen for some months by major investors. The Quilter Investor Trends survey, issued in February to major fund groups in the UK, highlighted there was unanimity from fund managers that gilt yields would rise if Keir Starmer was replaced by a more left-wing candidate, as is now being openly discussed. There was also significant agreement (94%) that it would reduce business confidence, damage growth (50%), and reduce Labour's chances of winning the next election (63%).

"While equity markets remain willing to look through the impact of the US war with Iran - at least while the economy seems able to shrug it off - bond markets, with coupons that do not generally adjust with inflation, cannot. With no concrete signs that a resolution is near, and political winds changing in the UK at the worst moment, this summer looks likely to be a turbulent one not only for airlines but potentially for markets too."