Welcome back to The Week Ahead. After a turbulent week in markets and geopolitics, I suspect there is a good chance that anything I write here will be outdated by the start of next week.
As things stand, the stock market reaction so far has been relatively modest. With the FTSE 100 down by 5% since the US launched its attack on Iran, we are certainly nowhere near a crash:
*Market close on 12/03/26
While a 5% drop in two weeks may feel slightly uncomfortable, it’s probably worth remembering that the FTSE 100 is still up by nearly 20% on a one-year view at the time of writing, as is the S&P 500. European indices have fared a little worse:
Another indicator highlighting the relatively muted stock market reaction so far is the VIX volatility index, which reflects US market conditions. Although volatility has risen since the end of February, it remains well below the levels seen during last April’s tariff tantrum:
Energy winners vs losers?
One reason for the recent underperformance of the UK and European indices may be that these regions are seen as likely to be greater net losers than the US as a result of soaring energy prices.
While US consumers are also suffering higher energy costs, the US is the world’s largest oil producer and is a net exporter of oil and gas. As a result, its large energy sector stands to enjoy bumper profits from elevated prices.
Oil & Gas
Mark commented last week that the only thing that goes up in a crisis is correlation between assets – i.e. they all fall together.
In this case we’ve seen sharp rises in energy prices, but in keeping with Mark’s adage oil and natural gas have started moving in lockstep since attacks on Iran started on 28 February. I guess this reflects the disruption to the shipment of both commodities from Gulf countries:
As yet though, both oil and gas prices remain lower than during the first year of the Ukraine war:
Unfortunately for many businesses and consumers, recent news suggests we may have to adjust to higher energy prices for some…
