The fallout from the conflict in the Middle East continued to build last week, as the latest US Consumer Price Index (CPI) print showed prices rising at their fastest pace since 2023. The headline figure jumped by 0.5 percentage points to a higher‑than‑expected +3.8% last month, with higher energy prices continuing to be the main culprit¹. Average gasoline prices have now climbed above $4.50, a level not seen for four years, and have breached the $5.00 threshold in states including California, Nevada and Oregon². Bonds sold off on fears that the Federal Reserve (Fed) may need to keep policy rates elevated to counter the inflationary threat, with the benchmark 10‑year yield rising 23 basis points (bps) to 4.60% (yields move inversely to prices). Equity markets also lost momentum, despite continued optimism around stocks linked to the artificial intelligence (AI) value chain. The S&P 500 closed the week +0.1% higher, while the Nasdaq slipped -0.2% (both in US dollars).

It was a difficult week in general for equity markets, with most major indices ending Friday in negative territory. In Europe, the MSCI Europe ex‑UK index declined by -0.6% (in euros), reflecting ongoing inflationary concerns and their implications for monetary policy. In the UK, the FTSE 100 slipped by -0.4%, despite a modestly encouraging rebound in economic activity during the first quarter. Asian equities also lost ground, notably in China where the Shanghai Composite shed -1.1% (in renminbi), with early support from a largely uneventful Xi–Trump summit fading as the week progressed. Japanese equities were notably weaker, with the Nikkei 225 retreating by -2.1% (in yen). This weakness was driven by a combination of concerns around the impact of elevated oil prices on the domestic economy and signs of profit taking among AI‑related stocks, which have benefited from particularly strong momentum in recent weeks.

Moving to commodities, oil prices rebounded from the prior week’s decline, with Brent crude climbing by +4.4% to $106 a barrel. The move reflected the ongoing stalemate in the Strait of Hormuz, where vessel movements remain severely constrained and continue to underpin supply concerns. As for gold, renewed strength in the US dollar proved to be a notable headwind, with the precious metal recording a weekly decline of -3.3% to $4,553 an ounce. Gold typically exhibits an inverse relationship with the dollar, and last week’s appreciation in the currency weighed on investor demand. In addition, the rise in Treasury yields acted as a further drag, as the increased income on offer from perceived safe‑haven assets reduces the relative appeal of non‑yielding holdings such as gold.

¹ Bureau of Labor Statistics – Consumer Price Index Summary, April 2026 
² American Automobile Association – Gas Prices: https://gasprices.aaa.com/

SJP Approved: 18/05/2026

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