Weekly Market Update: 13th Mar
13/03/2026
Lucy Smith discusses the continued volatility in oil markets, bond yields remaining high, and the latest US economic data.
Lucy Smith
Senior Investment Manager
Transcript
Good morning and welcome to the Killik & Co market update.
In the last market update video, we discussed the impacts of the war in Iran on various asset classes. Over the past week, tensions have remained elevated, there have been mixed messaging from both sides about how long the conflict may continue, and the Strait of Hormuz remains blocked.
Iran’s newly appointed Supreme Leader, Mojtaba Khamenei, stated yesterday that the blockade of the Strait of Hormuz would remain in place for now, reinforcing concerns about ongoing supply constraints and disruptions global energy markets
This chart shows the one-year price of Brent crude oil. As you can see, there has been significant volatility over the past week. On Monday, the oil market experienced one of its largest single-day price swings in recent years, with Brent crude reaching a high of around $119.50 per barrel and a low of approximately $84 per barrel.
Before the conflict began, global oil supply was estimated at roughly 106 million barrels per day. Since the war started around two weeks ago, estimates suggest that supply disruptions may have reduced available oil flows by as much as 17 million barrels per day. To put this into context, during the Russia–Ukraine war, global oil supply was disrupted by roughly 1 million barrels per day.
In response to the disruption, the International Energy Agency, or IEA, has announced coordinated action to stabilise markets. The agency has agreed to release 400 million barrels of oil from emergency reserves to help offset supply shortages and reduce pressure on global oil prices. This release represents the sixth collective intervention in the organisation’s history, with previous releases in 1991, 2005, 2011, and twice in 2022.
Looking at this next chart, we can see the futures prices for Brent crude oil. The oil futures curve is currently heavily backwardated, meaning the spot price of oil is significantly higher than prices for future delivery. While prices for immediate delivery are elevated, contracts for delivery in future years are priced much lower. This suggests that the market expects the current disruption to oil supply to be relatively short‑lived rather than a long‑term structural shortage.
Turning to equity markets, oil majors such as BP and Shell have performed strongly in recent days, benefiting from higher oil prices. This chart shows the one-year share price performance of both companies, with both stocks rising by more than 7% so far this week.
This chart shows the VIX or the “fear index,” measures expected volatility in the equity markets. The index has edged slightly lower this week compared to last week, although it remains above the 20 level, which typically indicates elevated expectations of market volatility.
So far, the week, the S&P500 is down around 2.5%, and FTSE100 and STOXX Europe 50 are both down by almost half a percent.
In fixed income markets, bond yields have remained elevated and have continued to climb over the past week. Market expectations for interest rate policy in the UK have also shifted. Previously the marketing was pricing an 85% chance of 2 rate cuts in 2026, but it is now looking like the Bank of England may not cut interest rates at all this year, and markets are even assigning roughly a 50% probability of a rate hike later in the year.
This chart shows the UK two-year gilt yield compared with the ten-year gilt yield over the past year. As we discussed in last week’s video, sharp increases in oil and gas prices can act as an inflationary supply-side shock, increasing the chance that central banks keep interest rates higher for longer.
You can see that the two-year gilt yield, which is more sensitive to near-term interest rate expectations, has risen more sharply than the ten-year yield. This reflects the market’s view that the conflict is primarily affecting short-term inflation and interest rate expectations, rather than long-term economic trends.
We see a similar pattern in the United States. This chart shows two-year and ten-year US Treasury yields. You can see that the two-year yield has also increased more rapidly as investors adjust their expectations for future interest rate policy.
Turning to commodities, the price of Gold has remained relatively flat this week. As discussed in last week’s video, this may be due to the combination of higher bond yields and a stronger US dollar, both of which tend to reduce the appeal of gold as an investment.
Finally, looking at the latest economic data from the United States, several key indicators were released this week.
Starting with inflation, Consumer Price Index (CPI) data showed inflation holding steady at 2.4%, which is broadly positive for financial markets. However, the most recent geopolitical developments occurred late in the reporting period, meaning that the impact of higher oil and gas prices is unlikely to be reflected in these figures yet.
This may therefore be one of the last data releases before the effects of higher energy prices begin to appear. Rising oil prices often feed through into the broader economy via higher gasoline costs, transportation expenses, shipping, and ultimately consumer goods prices, which could complicate the inflation outlook in the months ahead.
Meanwhile, US jobless claims came in slightly below market expectations, suggesting that the labour market remains resilient. This will be somewhat reassuring for the Federal Reserve, as rising unemployment alongside higher interest rates would make monetary policy decisions more difficult.
Looking forward to the week ahead we have results from Prudential on Wednesday and Accenture and Vonovia on Thursday.
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