The Trump attack on Iran swept away any forecasts for 2026 being a re-run of 2025. As ever, there was no cunning plan, if one at all, and, despite comments to the contrary, his administration seemed surprised at the effect on stocks, bonds and energy prices. Initially, there was only a limited effect on indices, which were coming off all-time highs (probably part of his ‘thinking’) but as the conflict has escalated, volatility has increased and energy prices and sovereign yields have reached some uncomfortable levels. Risk assets have remained remarkably sanguine about events, although we enter the corporate earnings season looking ahead, more interested in forecasts and not the rear-view mirror. 

The pause from the tenuous ceasefire between the US and Iran lasted less than 24 hours as Israel (who appear to be the catalyst for this whole situation by influencing a gullible and impetuous President into action) turned their attentions to Lebanon. Predictably, recent talks in Islamabad broke down on the nuclear question and Trump’s latest plan is to blockade the Straits of Hormuz.  China, a mostly silent observer of this war until now, imports 80% of Iran’s oil. ‘Dated’ Brent, not normally used as a yardstick but still valid pricing for physical crude oil for immediate delivery, hit an all -time high of over $144bbl, double its level of the end of February. The spread between this spot price and the front month futures contract is normally $1- $2 but has ballooned out over $30.  It looks to be a while before this is over and even when it is the damage to Gulf energy infrastructure will take years to repair whether the Straits are open or not. 

The US Federal Reserve had no choice but to remain on hold and there were few changes to their statement. Spikes in US Treasury yields do not create an environment for cutting rates and the new Chairman will have a job convincing the FOMC to vote for the level of cuts that Trump wants (except for his stooges Warsh and Miran). Chairman Powell continues to caution against market expectations for rate hikes despite elevated inflation expectations, though recent CPI numbers were predictably higher.  However, looking through ‘transitory’ high levels of energy prices will become harder the longer this war drags on and growth is bound to take a hit.  

The ECB remained on hold with a hawkish tone and retain their option to act either way (‘agile and vigilant’). This check in global stability comes at a time when growth was just beginning to become more established across the eurozone but the bloc as a whole remains exposed to the negative effect of energy price spikes and supply disruption. Near term effects are non-linear within the bloc and the core economies are the most exposed, euro area CPI rose to 2.5% in March from 1.9% in February. The ECB also pushed back against market pricing for a hike in rates but there is still potential for a near-term move as they remain on ‘high alert’ and are determined to avoid accusations of reacting too late, as per 2022.  Euro Investment Grade spreads reflect this, widening further than US spreads but are still contained. 

The BoE scrapped any thoughts of rate cuts, staying on hold with a 9-0 decision while remaining ‘ready to act’. They are in a fair pickle now as growth forecasts have halved and inflation expectations raised. Market expectations aside, they are likely to remain on hold for the rest of the year, as things stand. Sterling money markets have pulled back from their extremes of pricing-in four hikes this year to just one and our Governor remains keen for us to have confidence that the Bank will not overreact. Gilt yields have risen the most amongst developed countries and saw a concerted move higher across the curve with the 30-year Gilt suffering a peak to trough move of over 50bp, a loss of near 8% in capital, the sharpest rise since Truss/Kwarteng. The two-year Gilt saw a move of over a 100bp in yield (a 2% drop in capital). The OECD continues to expound that the UK is the most exposed in the G7 to elevated energy costs. There is some truth here although it is baffling that there isn’t any indication that our government is learning from the situation and (re-)adopting more self-sufficient policies. Trump told the UK to ‘go get your own oil’. 

Gulf Debt Capital Markets have, unsurprisingly, shut down but thankfully most major banks had prefunded in the first two months. The establishment of the region as a financial centre has suffered a serious setback. European and US markets are still functioning well, secondary market liquidity has been good, and we have seen some large primary deals despite the volatility. Amazon came to market with a whopping $38bn issue in the second week (Stellantis also issued €5bn hybrids on the same day) and a few days later Amazon issued a further €14.5bn in a multi tranche out to 2064.
  
The biggest story for sterling was also in the primary market. Google (a better credit rating than Gilts) established a new curve of five issues totalling £5.2bn attracting interest of more than £30bn. The most astonishing enthusiasm was for their ‘Century’ tranche, which priced £1bn at 6.125% until 2126, more than £6bn of investors were prepared to lend them money for this period (we didn’t). They also raised CHF2bn and the rest in USD to make $32bn total borrowing. There is more to come, and JPMorgan have raised their 2026 GBP issuance forecast from £40bn to £70bn. Sterling spreads still haven’t widened any further than the middle of last year’s levels and liquidity remains healthy, each time there is a moment of calm the primary window opens and deals are printing easily, in size and with precious little New Issue Premium.

Private credit is exhibiting some pain and in particular Business Development Companies (vehicles to attract retail assets into private credit), Jamie Dimon’s fabled ‘cockroaches’ might be coming out of the shadows. The asset class has always made much of underlying liquidity characteristics and this is proving to be an illusion for some. Optimism holds that problems will remain contained within the asset class although our high street banks have been transacting SRT’s, strategic risk transfers, with private credit, moving risk off their balance sheet to others. These are all vetted and approved by the PRA so hopefully will not be a problem for the future.
 

The full Quarterly Review is available here. 

April 2026

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The contents of this article are for information purposes only and do not constitute advice or a personal recommendation. Investors are advised to seek professional advice before entering into any investment arrangements.

Please also note the value of investments and the income you get from them may fall as well as rise, and there is no certainty that you will get back the amount of your original investment. You should also be aware that past performance may not be a reliable guide to future performance.