Introduction
April followed a similar pattern to March, with the conflict in Iran dominating the headlines and influencing global markets. Oil prices and stockmarkets have been responding on an almost daily basis to every scrap of news, both positive and negative. The medium-term economic prognosis seems to the unwelcome return of inflation.
What April showed us (perhaps unexpectedly) is that financial markets are also capable of extraordinary optimism in the face of genuine uncertainty. The so-called “TACO trade” — shorthand for the belief that Trump always backs down when economic pain becomes acute enough — powered equity indices higher even as the disruption continued. The S&P 500 closed above 7,000 for the first time, finishing the month near record levels. The FTSE 100 recovered much of its March losses, supported by energy sector strength. May looks like another bumpy equity ride as the cease fire seems to be falling apart, and that pattern seems set to continue until a lasting truce is agreed.
Against this backdrop, all three major central banks — the Federal Reserve, the Bank of England, and the European Central Bank — held rates steady. The economic debate has shifted from “when will rates be cut” to “might rates have to rise”. The UK's Consumer Price Index hit an inflation figure of 3.3% in March, and the Bank of England warned of scenarios in which inflation could peak at 6.2% in 2027. These are not central forecasts, but the fact they are being modelled at all represents a meaningful shift in tone.
Fertiliser prices remain significantly above their February levels. The food price implications will take time to feed through, but they are coming.
As ever, the range of outcomes from here is wide. But the long-term investor’s discipline of staying the course (rather than reacting to the noise) was, once again, vindicated in April.
United States
April was a month of dramatic swings in the United States. Markets fell sharply in the first week as Iranian retaliatory strikes on alternative Gulf export routes at Fujairah and the Iraqi pipeline to Ceyhan raised fears of a sustained supply disruption beyond the Strait. Then, on 7th April, President Trump announced a two-week ceasefire with Iran, conditional on the opening of the Strait of Hormuz. The announcement triggered a historic rally: the S&P 500 posted one of its largest single-day gains in years and by 15th April had closed above 7,000 for the first time. By month-end, the index was trading near 7,138.
Once again, investigative analysis identified suspicious oil futures activity: a $950 million position on falling oil prices was placed shortly before Trump’s 7th April ceasefire announcement, mirroring the $580 million trade that preceded his 23rd March pause. Further waves of trading were identified by the BBC, but there appears to be no hard evidence of leaked information and no sign of a prosecution from the US financial authorities.
The Federal Reserve held rates steady at 3.5%–3.75% at its 29th April meeting, voting 11–1, with only Stephen Miran dissenting in favour of a cut. More notable was the degree of internal division: three regional Fed presidents: Beth Hammack of Cleveland, Neel Kashkari of Minneapolis, and Lorie Logan of Dallas, did not support inclusion of any easing bias in the statement, signalling that rate hikes cannot be ruled out. It was the first time since October 1992 that four dissents of any kind were recorded at a single meeting.
The meeting was also Jerome Powell’s last as Chair. His term expires on 15th May. In his final press conference, Powell confirmed he intends to remain as a member of the Fed’s Board of Governors — where his term runs to January 2028 — until the Justice Department investigation into the Fed’s headquarters renovation is “well and truly over with transparency and finality.” Kevin Warsh’s nomination to succeed him was advanced by the Senate Banking Committee in a party-line vote on the same day. Warsh is expected to chair his first Federal Open Market Committee meeting in June. Such is the global important of Fed decisions, this transition adds another layer of uncertainty to an already complex monetary environment.
US petrol prices averaged over $4 per gallon at month-end, down from a recent peak but still around 27% above pre-war levels. Jet fuel prices have increased significantly since the conflict began, prompting airlines to add baggage surcharges and prompting shipping giants including Amazon, FedEx and USPS to implement fuel surcharges. The IEA’s April Oil Market Report estimated that global oil supply fell by 10.1 million barrels per day in March — the largest disruption in recorded history — with OPEC+ production alone falling by 9.4 million barrels per day. Even as alternative routes from Saudi Arabia’s west coast and the UAE’s Fujairah terminal increased to 7.2 million barrels per day, this covered only a fraction of the 20+ million barrels per day that normally transits the Strait.
The Section 122 tariffs of 15% imposed following the Supreme Court’s IEEPA ruling remain in place and are set to expire on 24th July unless extended by Congress. With mid-term elections approaching, the politics of extension are difficult: polling shows growing voter opposition to inflation, and the Iran war has compounded import cost concerns. The Trump-Xi summit, now scheduled for mid-May in Beijing, offers the most significant near-term catalyst for trade clarity. Trump will be under more pressure to deliver an immediate and positive result for the US, than he may have anticipated when the summit was originally scheduled.
UK
For UK investors, April brought a partial recovery from March’s losses, though the picture remains fragile and May looks like another choppy month. The FTSE 100, which had closed March around 10,176, climbed sharply following Trump’s 7th April ceasefire announcement before giving back some gains as the situation deteriorated again. The index is still materially below its all-time closing high of 10,910 set in late February. Energy stocks — BP and Shell in particular — have continued to outperform as Brent crude remains elevated. Banking, travel, and leisure names have lagged.
The Bank of England’s Monetary Policy Committee voted 8–1 to hold Bank Rate at 3.75% at its 29th April meeting. Chief Economist Huw Pill was the sole dissenter, voting for a 25 basis point increase to 4.0%. He is a notable voice. Several other members indicated they had actively considered voting for a hike, and the Bank’s published scenarios make clear how close the committee is to that threshold. In the most severe scenario — where oil prices remain above $120 per barrel and gas prices surge — the Bank indicated that rates may need to rise to above 5%, with inflation potentially peaking at 6.2% in early 2027.
UK CPI rose to 3.3% in March, up from 3.0% in February, driven by fuel prices. Governor Andrew Bailey acknowledged the complexity of the situation, noting that the oil price “went up, then came back down, and now it’s gone back up again” — making any path-dependent policy commitment difficult. The Bank’s Monetary Policy Report sets out three scenarios; in the most benign, inflation returns to 3.5% by year-end before falling back. In the most adverse, it remains above the 2% target until 2029.
Particularly noteworthy for longer-term financial markets: the 10-year gilt yield rose above 5% for the first time since 2008. This reflects a combination of higher inflation expectations, rising political uncertainty around the government’s fiscal position, and investor concern that the Bank of England may be forced to tighten materially. For borrowers — particularly those on fixed-rate mortgages due for renewal — this is a significant development. Mortgage lenders price off swap rates linked to future rate expectations, not the Bank Rate itself, meaning the hold in April will not prevent fixed rates from rising further.
The government has resisted calls for an emergency energy support package on the scale of the one launched 2022, though it has promised a means-tested energy allowance in the Autumn if required. Political pressure is mounting, with the planned fuel duty increase from September facing particular scrutiny. COBRA emergency meetings have continued, and the government’s fiscal headroom (already thin following the Spring Statement) is being further eroded by lower growth and higher borrowing costs.
Meanwhile, May's Council Elections loom large over head of the Prime Minister amidst more rumours of a leadership challenge.
Europe
European markets experienced a similar pattern to the UK: a sharp rally on the 7th April ceasefire announcement, followed by a retreat as the situation deteriorated and the ceasefire’s durability came into question. The ECB held its deposit facility rate at 2.0% at its 30th April meeting, in a decision that was unanimous but contested: Lagarde confirmed at her press conference that the Governing Council had actively debated a rate hike. Flash eurozone CPI came in at 3.0% for April, the highest since mid-2024, driven entirely by energy costs. Core inflation — stripping out food and energy — held at 2.2%, confirming that second-round effects have not yet taken hold.
Eurozone GDP grew 0.8% year-on-year in the first quarter of 2026, according to Eurostat’s preliminary estimate — a slowing from recent quarters, and below the ECB’s pre-conflict forecast. Declines were recorded in Ireland (-2.0%), Lithuania (-0.4%) and Sweden (-0.2%). The year-on-year growth rate was positive for fourteen countries and negative for one country.
The ECB now expects growth of 0.9% for the full year 2026, with the war described as a “downside risk.” Markets are fully pricing in three ECB rate hikes in 2026, with the first potentially arriving as early as June. As Lagarde herself noted, navigating a situation involving “war, ceasefire, peace talks, their collapse, a naval blockade, its lifting, its reinstatement” makes it “exceptionally hard to gauge the duration and depth of the consequences.”
European natural gas prices surged again in the second half of April as the ceasefire’s durability came into question. Dutch TTF remains significantly above its pre-conflict level. European gas storage entered the summer refill season from a depleted position following a harsh winter, and the damage to Qatar’s Ras Laffan LNG complex — which the IEA confirmed has taken the world’s largest liquefaction facility offline — represents a structural deficit that will take years to repair fully.
Germany’s harmonised inflation measure rose to 2.8% in March, driven by energy prices up 7.2% year-on-year. Germany’s fiscal expansion (announced earlier in the year) remains a medium-term positive, but its near-term benefits are being offset by the energy shock. In France, political pressures continue: the invocation of Article 49.3 to pass the 2026 budget without a parliamentary vote leaves little room for fiscal manoeuvre, and the deficit relative to GDP is unlikely to narrow meaningfully this year. In April fertiliser prices remained significantly above their mid-February levels, raising concerns about agricultural costs and crop yields into 2027.
Far East
China’s exposure to the energy shock has continued to accumulate through April, though the government has deployed significant reserves to cushion the impact. Much has been made of China's strategic decisions to improve its energy security. This has included investment in wind, solar and hydropower, along with offshore oilfields and building significant oil and LNG reserves. While China’s strategic reserves have provided a buffer, sustained disruption will inevitably squeeze production costs for steel, chemicals, and electronics. Export competitiveness — already under pressure from tariff uncertainty — faces a further headwind at a sensitive moment.
The Trump-Xi summit, originally scheduled for late March, remains deferred to mid-May. Senior trade officials have described the Paris discussions as “constructive,” and the summit agenda is expected to include an extension of the tariff truce negotiated in Busan last October, further soybean purchase commitments, and potentially progress on rare earth access. However, substantive movement on advanced chip export controls or Taiwan is considered unlikely. The Supreme Court’s IEEPA ruling — which stripped the administration of its primary tariff vehicle — has altered the negotiating dynamic, reducing Beijing’s incentive to offer significant concessions.
China’s Two Sessions growth target of 4.5%–5.0% for 2026, already the slowest projected growth since the early 1990s, looks challenging in this climate. The 15th Five-Year Plan’s AI-driven industrial modernisation agenda remains the medium-term strategic priority, but overcoming these immediate economic headwinds will be crucial for success.
Japan and South Korea remain acutely exposed. Japan’s Cabinet Office has warned that a sustained 10% increase in crude oil prices could add up to 0.3 percentage points to consumer inflation over the course of a year, and the Bank of Japan’s policy meeting in late April was closely watched for any signal of a policy shift. Japan’s exports have continued to grow, posting a trade surplus of 667 billion yen in March, though this reflects in part the yen’s weakness relative to major trading partners. South Korea’s 100 trillion won market stabilisation programme, announced in March, has provided a degree of support. A Samsung-led AI rally in early May brought another milestone for the tech heavy KOSPI index as it broke 7000 for the first time on 6th May.
Emerging Markets
The divergence across emerging markets that opened in March has continued and widened in April. Commodity exporters — Brazil, Peru, and several African nations — have continued to benefit from elevated energy and metals prices. Energy importers across South and Southeast Asia face intensifying fiscal and inflationary pressure.
India’s position remains particularly complex. Emergency LPG redistribution powers, first invoked in March, remain in effect. The government faces the prospect of higher energy, fertiliser and food subsidy costs at a time when the fiscal deficit is already under pressure.
Across Southeast Asia, emergency measures have varied in severity but remain widespread. Worst hit are countries such as Bangladesh, Pakistan and Sri Lanka, who are all heavily dependent on imported oil and gas to meet domestic demand. As they lack the foreign exchange reserves needed to secure energy supplies in volatile global markets, in times such as these they are immediately forced into a stark choice between energy access, inflation and fiscal stability.
The IEA’s April Oil Market Report projects global oil demand to contract by 80,000 barrels per day this year — a 730,000 barrel per day downward revision from the previous month. The projected 1.5 million barrel per day demand decline in the second quarter of 2026 would be the sharpest since the pandemic. Demand destruction is spreading from the Middle East and Asia Pacific toward Europe and North America as scarcity and higher prices persist.
Summary
April 2026 showed us what financial markets can do with hope and belief. A two-week ceasefire and Trump's promise of a peace deal were enough to drive the S&P 500 to record highs. At the same time the Strait of Hormuz remained effectively closed, energy prices stayed elevated, and central banks on three continents signalled that rate hikes could not be ruled out. The belief that Trump backs down and de-escalates when the economic pain intensifies seems to be a core market assumption in 2026, but it is has not yet brought a resolution to the conflict in Iran, which rumbles on, and the turbulence continues.
The most immediate concern for the British public is the trajectory of mortgage rates and gilt yields, both of which have moved materially in April in ways that will take time to work through household finances. Inflation is the next problem. The Bank of England’s Monetary Policy Committee's next decision on 18th June will be one of the most consequential in years. It will most likely be the first time the Committee may seriously contemplate raising rates to contain an energy-driven inflation shock since 2022.
The core principle has not changed: short-term shocks, however dramatic, have consistently rewarded those who maintained perspective and resisted the urge to react. The range of outcomes remains wide. But those outcomes include scenarios where this disruption resolves faster than feared, energy prices normalise, and the rate-hiking cycle that markets are beginning to price never fully materialises.
And finally...
Each time a new monarch ascends the throne, their coinage portrait faces in the opposite direction to that of their predecessor.
King Charles III wasn't asked which was his best side, he had no choice in the matter. He faces to the left on his coinage, as Her Late Majesty Queen Elizabeth II faced right.
There has been one exception to the tradition. During his brief reign, Edward VIII broke protocol by insisting his portrait showed his favoured left side, meaning his effigy would face the same way as that of his predecessor, George V. However, when he abdicated, no coins featuring his portrait had been issued or passed through the Royal Proclamation process. The correct protocol then resumed during George VI’s reign, with his portrait facing left as if Edward VIII’s had faced right.
Sources:
Federal Reserve April 2026 FOMC statement → https://www.federalreserve.gov/newsevents/pressreleases/monetary20260429a.htm
Bank of England MPC minutes, April 2026 → https://www.bankofengland.co.uk/monetary-policy-summary-and-minutes/2026/april-2026
Bank of England Monetary Policy Report, April 2026 → https://www.bankofengland.co.uk/monetary-policy-report/2026/april-2026
Bank of England inflation warning (6.2%) → https://www.msn.com/en-gb/news/other/bank-of-england-warns-prolonged-oil-shock-could-push-inflation-to-62/gm-GMC31222EB
UK gilt yields top 5% → https://www.msn.com/en-gb/news/insight/uk-gilt-yields-top-5-amid-oil-price-surge/gm-GM44F4BD0D
BP and Shell share prices → https://www.fool.co.uk/2026/03/02/the-bp-and-shell-share-price-are-soaring-today-are-we-looking-at-another-massive-spike/
FTSE 100 index → https://www.londonstockexchange.com/indices/ftse-100
ECB April 2026 rate decision → https://www.ecb.europa.eu/press/pr/date/2026/html/ecb.mp260430~81b7179e6f.en.html
Eurostat Q1 2026 GDP flash estimate → https://ec.europa.eu/eurostat/web/products-euro-indicators/w/2-30042026-bp
European earnings — Iran war winners and losers → https://www.euronews.com/business/2026/04/08/european-earnings-preview-who-wins-and-who-loses-from-the-iran-war
German inflation 2.8% in March → https://www.globalbankingandfinance.com/german-inflation-accelerates-2-8-march/
EU natural gas prices (Dutch TTF) → https://tradingeconomics.com/commodity/eu-natural-gas
IEA April Oil Market Report (×2) → https://www.iea.org/reports/oil-market-report-april-2026
Suspicious oil futures trades (BBC) → https://www.bbc.co.uk/news/articles/cge0grppe3po
CFTC probe into oil trades before Trump moves → https://www.msn.com/en-ca/news/insight/cftc-probes-oil-trades-made-before-trump-s-iran-moves/gm-GM4A542B3F
Fuel surcharges by delivery giants → https://www.msn.com/en-us/news/other/fuel-price-volatility-forces-delivery-giants-into-surcharges/gm-GMD7FA6525
Fertiliser/nitrogen price shock → https://www.financialcontent.com/article/marketminute-2026-4-6-the-nitrogen-shock-global-fertilizer-prices-rocket-262-as-energy-crisis-threatens-food-security
China's energy reserves and oil shock → https://www.msn.com/en-us/money/general/china-s-energy-fortress-was-built-to-withstand-just-this-type-of-oil-shock/ar-AA21lKdj
Strait of Hormuz impact on Japan & South Korea → https://www.dw.com/en/strait-of-hormuz-iran-war-japan-south-korea-shipping-trade-energy-gas-oil/a-76881461
Japan's Cabinet Office oil price warning → https://uk.investing.com/news/stock-market-news/japan-warns-wardriven-oil-price-surge-could-fuel-lasting-inflation-93CH-4580773
Japan exports/trade surplus March 2026 → https://www.cnbc.com/2026/04/22/japans-exports-expand-11point7percent-in-march-on-brisk-demand-higher-prices.html
South Korea KOSPI breaks 7,000 → https://www.msn.com/en-us/money/markets/koreas-kospi-breaks-7000-as-ai-rally-catapults-samsung-into-1-trillion-club/ar-AA22uKtb
BBC live coverage (ceasefire/Hormuz) → https://www.bbc.co.uk/news/live/cre1rwz3019t
Barchart TTF futures prices → https://www.barchart.com/futures/quotes/TG*0/futures-prices