July 2026 - Market review

UK

Oil price subsides on ceasefire: Iran and the US reached a deal during June that allowed the Strait of Hormuz to reopen to commercial shipping. Following the announcement, the price of Brent crude oil fell to US$72.92 per barrel by the end of the month, compared with an intra-day peak of over US$126 during the conflict. The FTSE 100 Index – which has a relatively large exposure to energy companies – rose by 0.8% over June, while the FTSE 250 Index fell by 1.8%.

Supply chain resilience: the Organisation for Economic Cooperation & Development (OECD) highlighted the economic vulnerabilities caused by “single chokepoints” like the Strait of Hormuz and urged governments to step up their efforts to improve supply chain resilience. During June, investors refocused on defence stocks as the UK government unveiled plans to increase spending on defence. 

Economic activity takes a hit: the UK economy shrank by 0.1% during April as the war in the Middle East pushed up costs and dampened activity. The OECD expects UK economic growth to decline from 1.4% in 2025 to 0.9% in 2026, and then to rise to 1.1% in 2027. Unemployment is set to increase, while inflation is predicted to peak at 3.7% this year. The OECD called on the UK government to continue its ongoing fiscal consolidation. 

Food-price inflation slows: despite higher energy prices, the annualised rate of inflation remained at 2.8% during May as the rate of increase in food prices slackened to its slowest pace since December 2024. Bank of England policymakers left interest rates unchanged at 3.75%, although two of the nine members of the Monetary Policy Committee voted for an increase. Inflationary pressures resulting from the war in the Middle East are expected to take some time to cool down. 

Political uncertainty: the resignation of Prime Minister Sir Keir Starmer and the expected succession of Labour MP Andy Burnham as the UK’s seventh prime minister in ten years triggered fresh uncertainty in June, particularly regarding government spending and taxation policy. Business groups called for clarity and stability. The British Chambers of Commerce commented: “Businesses can only deliver growth if the environment they operate in gives them the confidence to act” while the Confederation of British Industry warned: “The UK’s economic challenges will not disappear with a change of prime minister.”

Global

Middle East ceasefire: The US and Iran finally agreed a ceasefire in June, allowing the Strait of Hormuz to reopen, and the oil price subsided to pre-war levels. However, June proved to be a volatile month for technology stocks around the world as investors considered whether some AI-related companies could be overvalued. While the technology-heavy Nasdaq Index fell by 2.8% over June, the Dow Jones Industrial Average Index rose by 2.5%. The much-trailed IPO of SpaceX took place during the month, raising US$75 billion. 

US rates set to rise: the US economy expanded by 2.1% year on year during the first quarter, compared with an earlier estimate of 1.6%. Higher energy prices drove up the annualised rate of US inflation from 3.8% in April to 4.2% in May; in response, President Donald Trump controversially commented: “I love the inflation.” Meanwhile, the core personal consumption expenditures (PCE) index rose to its highest level since October 2023. As Kevin Warsh’s first meeting as Chair, Federal Reserve policymakers opted to maintain interest rates at a range of 3.5% and 3.75%; nevertheless, they expect to tighten rates this year. The price of gold fell below US$4,000 per ounce for the first time in since November.

ECB tightens: the European Central Bank (ECB) raised its key interest rate from 2% to 2.25% in June; however, ECB President Christine Lagarde subsequently commented that the central bank “no longer need(s) to act with the same force” to combat inflation. Germany’s rate of inflation eased from 2.6% in May to 2.3% in June, while French inflation fell from 2.4% to 1.8%, fuelling hopes that the ECB may be able to hold off on further tightening. The Dax Index fell by 0.4% over the month. 

Inflationary headache for Japan’s policymakers: the Bank of Japan (BoJ) raised its key interest rate from 0.75% to 1% in a bid to curb inflationary pressures. While the annual rate of consumer price inflation was 1.5% in May, wholesale price inflation reached 6.3%, and the BoJ warned: “There is a risk of underlying CPI inflation deviating … above the price stability target of 2%.” Meanwhile, the yen fell to its lowest level against the US dollar since 1986, providing a boost for blue-chip stocks and fuelling inflationary pressures. The Nikkei 225 Index rose by 5.6% over the month.

As ever, if you have any questions regarding your investments, please do not hesitate to contact us by calling +44 (0) 7917 390 344  or emailing me at richardbrazier@culverfinancial.co.uk and we will be happy to talk to you.