Oil Approaches $100 as Iran Conflict Rumbles On

Geopolitical Tensions Lift Oil While Global Equities Diverge

Oil prices moved sharply higher again last week as hostilities between the US and Iran continued to escalate across the Persian Gulf, reigniting concerns over global energy supplies. The memorandum of understanding signed by both parties in June effectively collapsed earlier this month, with the US resuming airstrikes and naval operations following a series of Iranian attacks on oil tankers. Having already surged around +16.0% during the previous week, Brent crude rose by a further +10.0%, briefly approaching $97 per barrel. Reports of attacks on Saudi-linked vessels in the Red Sea by Iranian-backed Houthi forces added to supply concerns and further supported prices. The renewed rise in oil prices has reinforced worries about the inflation outlook at a time when bond yields have already begun to move higher. As a result, investors are increasingly questioning whether the Federal Reserve may need to tighten policy further in the months ahead, although no change in interest rates is expected at this week’s meeting. Encouragingly, a pause in hostilities over the weekend prompted oil prices to give back some of their recent gains. Nevertheless, the situation remains highly fragile, and energy markets are likely to remain sensitive to further geopolitical developments.

Global equity markets delivered mixed returns last week. In the US, both major indices moved lower, with the S&P 500 declining -0.6% and the technology heavy Nasdaq falling -2.1% (both in US dollar terms). Sentiment was weighed down by a number of high profile earnings releases, most notably from Alphabet and Tesla, whose shares sold off sharply following their second-quarter results¹. Investor concerns centred on elevated spending commitments and the potential impact these could have on future cash generation. In Europe, steady gains by German and French equities helped to lift the MSCI Europe ex UK index by +0.3% (in euros) whilst the FTSE100 advanced by +1.3% as the UK welcomed its seventh Prime Minister in the past decade. Chinese equities also finished the week higher, with the Shanghai Composite gaining +1.3% (in renminbi terms) despite some profit-taking on Friday. Early week strength in semiconductor related stocks was the primary driver of performance. Meanwhile, in Japan, the Nikkei 225 rose +0.7% (in yen terms), navigating a notably volatile trading week to record another modest gain.

The Week Ahead

Country		Period	Actual	Forecast	Previous
UK	Average Wages YoY	May	4.30%	4.50%	4.40%
	Consumer Price Index Inflation YoY	June	2.60%	2.70%	2.80%
	Flash Composite Purchasing Manager Index	July	52.10	49.70	49.30
	Producer Price Index Inflation YoY	June	3.50%	3.50%	4.00%
	Retail Sales YoY	June	4.20%	2.30%	3.20%
	Unemployment Rate	May	4.90%	5.00%	4.90%
US	New Home Sales Annually Adjusted Units	June	0.628m	0.610m	0.580m
Europe	European Central Bank Monetary Policy Meeting	July	-	-	-
Europe	Flash Composite Purchasing Manager Index	July	51.90	50.30	50.00
Japan	Flash Composite Purchasing Manager Index	July	53.10	-	52.80
Japan	Nationwide Core Consumer Price Index Inflation	June	1.60%	1.60%	1.40%
China	N/A	-	-	-	-
Source: Workspace Datastream

¹ T. Rowe Price – Global Markets Weekly Update, 24/07/2026

Last week’s UK labour market data pointed to a gradual cooling rather than any meaningful deterioration in conditions. The headline unemployment rate remained unchanged at 4.9% in the three months to May², suggesting the labour market continues to absorb the impact of weaker economic growth and higher labour costs reasonably well. While payrolled employee numbers have softened over the past year and vacancy numbers continue to trend lower, the overall picture remains one of moderation rather than outright weakness. The most notable development was a further easing in wage pressures. Annual growth in total earnings slowed to +4.3%, while regular pay (excluding bonuses) growth eased to +3.4%, continuing the downward trend seen over the past year.

Moving to inflation, the latest Consumer Price Index (CPI) print provided another encouraging signal that price pressures remain broadly contained, with headline CPI inflation coming in at +2.6% in June, 20 basis points (bps) below expectations³. The data were released before the recent renewed rise in energy prices following the US resumption of military action against Iran, which has pushed oil markets higher in recent weeks. Even so, the June reading suggests underlying inflationary momentum was softer than anticipated heading into that period. As for producer prices, factory gate inflation, which measures the prices manufacturers charge for their goods, slowed to +3.5% year-on-year, down from +3.7% in May⁴. Meanwhile, input cost inflation eased more sharply, falling from +9.3% to +7.3%, helped by a decline in crude oil prices during the month. In other news, retail sales volumes rose +4.2% year-on-year in June, comfortably ahead of expectations and an acceleration from May’s revised +3.5% increase⁵. Sales were supported by warm weather, promotional activity and stronger online spending, resulting in a third consecutive monthly gain. The improvement was reinforced by the latest flash UK Composite PMI, which climbed to 52.1 in July from 49.3 in June, moving back into expansionary territory after two months of contraction6. Both the manufacturing and services sectors improved, with survey respondents citing firmer demand and a recovery in new orders.

² ONS – Labour Market Overview, July 2026
³ ONS – Consumer Price Index Inflation, June 2026
⁴ ONS – Producer Price Index Inflation, June 2026
⁵ ONS – Retail Sales, June 2026
⁶ S&P Global – UK Flash Composite Purchasing Manager Index, July 2026

Elsewhere, the US housing market showed signs of resilience, with new home sales rising to an annualised rate of 628,000 units in June, ahead of expectations and up from 618,000 in May⁷. The increase marked the first monthly improvement in three months and suggests that builder incentives and modest price reductions continue to support demand despite elevated mortgage rates. However, sales remained below year-ago levels and housing affordability continues to act as a constraint, with borrowing costs remaining close to their highest levels in almost a year.

⁷ US Census Bureau – Monthly New Residential Sales, June 2026

Attention in Europe remained focused on the ECB’s latest policy meeting, where policymakers left interest rates unchanged, keeping the deposit rate at 2.25% while reiterating a data-dependent approach⁸. Although no action was taken this month, the ECB acknowledged that higher energy prices and ongoing geopolitical tensions continue to pose upside risks to inflation, leaving the door open to further tightening over the coming months if price pressures prove persistent. More encouragingly, the latest flash Eurozone Composite PMI rose to 51.9 in July from 50.0 in June⁹, comfortably ahead of expectations and signalling the first expansion in private sector activity in four months. The improvement was driven by a recovery in services activity and stronger manufacturing output, while new orders increased at the fastest pace since April 2023.

⁸ European Central Bank – Monetary Policy Meeting, 23/07/2026
⁹ S&P Global – Europe Flash Composite Purchasing Manager Index, July 2026

Inflation in Japan ticked higher in June, with nationwide core CPI rising to +1.6% year-on-year, up from +1.4% in May and the strongest reading since March¹⁰. The increase was largely driven by higher energy-related costs as the impact of rising oil prices gradually filtered through the economy, although inflation remained below the Bank of Japan’s +2.0% target for a fifth consecutive month.

¹⁰ Statistics Bureau of Japan – Nationwide Core Consumer Price Index Inflation, June 2026

There were no major economic releases in China last week.

SJP Approved: 27/07/2026

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