Hopes of an imminent de-escalation in the war between Israel and Iran seemed to be dashed as President Trump called for Iran’s “unconditional surrender” while threatening its supreme leader. He met with his national security team to discuss the escalating Middle East conflict, fueling speculation that the US may join Israel's attack on Iran, which weighed on risk sentiment and pushed up crude prices again.

Stocks fell yesterday but are steadier this morning as investors assess the outlook and there is clearly no sense of panic even if crude prices are now trading with a $10 geopolitical premium right now and probably for a while yet.

Geopolitics is often quickly discounted – the S&P 500 is holding around 6,000 and the FTSE 100 is a whisker off its all-time high. But markets – notably crude oil – are showing some signs of concern, though it’s clear the base case is still that this does not escalate too much. Even if the US gets involved with a couple of strikes that the IDF cannot muster themselves (bunker-busting bombs to hit deep underground nuclear sites) it’s not like it’s anything we haven’t seen before.

The FTSE 100 crept up a few points early doors on Wednesday to 8,851 after yesterday saw it fall 0.46% to 8,834. Oil majors are keeping the market in better shape than European peers with WTI back to $75 – Shell now +8% in the last month and BP +7%.

Inflation this morning out of the UK showed the headline CPI holding steady at 3.4% (it had had registered 3.5% in April but an error meant this was de facto revised down to 3.4%). The May Core CPI reading fell to 3.5% YoY from 3.8% in April as expected, while the Core Services number fell to 4.7% vs. 4.8% expected and 5.4% in April.

UK petrol and diesel prices fell last month but higher oil prices will weigh on the outlook as far as the Bank of England is concerned.

US stocks slid Tuesday as escalating Israel-Iran tensions and weak retail sales rattled sentiment. The S&P 500 fell 0.8%, Dow 0.7%, and Nasdaq 0.9%. President Trump’s threat to Iran added to the sense of caution, while May retail sales slumped, suggesting tariff effects. Energy stocks outperformed as oil surged, with ExxonMobil and Chevron gaining over 2%. 

More bad US data – the hard data is catching up with the survey data. US retail sales fell last month more than expected, in a sign that the consumer is a) fatigued with prices and b) affected by tariffs. Retail trade sales were down 0.9% month-on-month in May. Meanwhile, US industrial production fell 0.2% in May 2025, missing expectations of a 0.1% rise, after a 0.1% increase in April. Manufacturing output rose 0.1%, below the forecasted 0.2%.

Energy divergence...SunRun fell 40% as the US Senate proposed phasing out solar and wind energy tax credits by 2028. Exxon +7% in the last month.