Mike Lea, Head of Investment – Friday 1st May 2026
Recent developments in the Middle East have once again shown how quickly geopolitical events can unsettle markets, with oil prices being one of the clearest flashpoints. Despite a broad market recovery in April as investors came to believe the crisis would be quickly resolved, brent crude oil has moved above $120 a barrel this week, back to the peak of late March. The continued disruption around Iran and the Strait of Hormuz has raised renewed concerns about global supply and the knock-on effect on inflation and growth [1].
This is important to understand because energy prices do not stay confined to the energy market. They feed through into transport, manufacturing, food production and business costs more broadly, influencing inflation expectations and the outlook for interest rates. Yesterday (30th April), the Bank of England kept the bank rate at 3.75%, noting that UK CPI inflation had risen to an annual 3.3% in March, up from 3% in February, and that higher energy prices were likely to push inflation higher later this year [2].
It was not that long ago that markets were pricing in interest rates reductions to near 3% in 2026, but now it is more likely that rates will rise to offset inevitable prices rises. This concern for increased rates has pushed UK borrowing costs up steeply, with 10-year UK gilts now yielding 5% annually, against 4.2% before the war.
In its April outlook, the International Monetary Fund (IMF) said global growth is expected to slow to 3.1% in 2026, from a 3.3% forecast in January, and slow to 3.2% in 2027, assuming the Middle East conflict remains limited in duration and scope, while global headline inflation is projected to rise modestly in 2026 before resuming its decline in 2027 [3]. Against the short-term backdrop is a well-supported global economy, driven by US demand where tax-cuts and capital investment are providing support.
Well-constructed portfolios are designed with periods like this in mind. Diversification across asset classes, sectors and geographies is there precisely so that no single event, market shock or commodity spike dictates long-term outcomes. As economic conditions change, so does the influence of specific areas of investment portfolios, reducing the overall volatility experienced.
This increase in news-flow and volatility can be unnerving and moments like this are often a prompt to review personal and business liquidity needs, forthcoming transactions, gifting plans, trust distributions and even additional investment timing. Our role is to ensure the investment strategy remains aligned with that wider picture, while keeping sight of a client’s long-term objectives, time horizon and appetite for risk.
Short-term volatility is uncomfortable, but it is not unusual. For most investors, the greater risk lies in making poorly timed decisions in response to events that feel urgent in the moment but may have limited bearing on long-term outcomes.
Periods like this are exactly why robust financial planning and properly diversified portfolios matter. The objective is not to avoid every shock, it is to ensure that, when shocks come, decisions remain anchored in judgement, perspective and the client’s wider plan.
Sources
[1] Reuters, 30 April 2026
[2] Bank of England, Monetary Policy Summary and Minutes, 30 April 2026
[3] IMF World Economic Outlook, April 2026