Weekly Market Update: 6th Mar
06/03/2026
Lucy Smith discusses the rise in oil and gas prices following the war in Iran, the impact of the war on other asset classes, and the market reaction to the UK Spring Statement.
Lucy Smith
Senior Investment Manager
Transcript
The news dominating the press this week has been the situation evolving in the Middle East, after the US and Israel launched a series of strikes on Iran, reportedly killing their supreme leader, Ayatollah Ali Khamenei. Iran has since retaliated, and the US is now putting pressure on its allies for further support.
As many Middle Eastern countries are major oil and gas exporters, it is common to see volatility in these markets whenever there is unrest in the region.
This chart, which we have shown before, highlights the level of crude oil production from each OPEC+ member in January 2026. You can see that countries such as Saudi Arabia, Iraq, Kuwait and the UAE are some of the largest producers, which helps explain why tensions in the region can lead to volatility in oil and gas prices. Iran, highlighted in pink, is also estimated to produce between 4–5% of global oil supply.
This chart shows the Brent crude oil price over the past five years. You can see the recent spike, where the cost of a barrel of oil has risen from around $60 per barrel in late 2025 to around $85 per barrel today. However, prices remain significantly lower than the peak seen in 2022, when Russia invaded Ukraine and oil briefly rose above $120 per barrel.
It has not just been oil prices reacting to the news, gas prices have also been significantly impacted.
This chart shows the price of UK natural gas, which experienced a sharp increase this week, rising by around 98% in just two days. If we widen the timeframe and look over the past five years, you can see that while current prices are the highest since late 2022, they are still well below the extreme levels seen at the start of the Ukraine war.
The pink box in this image highlights the Strait of Hormuz, the narrow waterway linking the Persian Gulf to the Arabian Sea. More than 20% of global oil and liquefied natural gas passes through this route, which runs alongside Iran.
Oil tankers have reportedly been blocked and unable to pass through the strait, which has created a supply shock and driven the recent increases in oil and gas prices. Insurance costs for these tankers are estimated to have risen twelve-fold due to the heightened risk, and the designated high-risk war zone for insurers has also been expanded in recent days to cover a larger area of the Gulf.
Despite these developments, global markets have held up reasonably well. However, we have seen a spike in the VIX index, also known as the “fear index,” which measures expected volatility in equity markets. When this index rises above 20, it typically signals heightened expectations of volatility among investors.
It has not just been energy markets reacting to the conflict, other asset classes have also felt the impact.
This chart shows the US 10-year Treasury yield over the past year. More recently, yields have been rising, which indicates that investors have been selling these bonds, pushing prices down and yields higher. This may reflect concerns that higher oil and gas prices could add inflationary pressure, making it less likely that the Federal Reserve will cut interest rates as quickly as previously expected.
The US dollar also strengthened slightly this week. If the likelihood of Federal Reserve rate cuts declines, US yields become relatively more attractive, which can lead to increased demand for US assets and therefore the dollar. For sterling-based investors holding US investments, a stronger dollar can provide a positive currency tailwind.
The price of gold this week may not have behaved quite how some investors expected following the escalation in conflict.
Typically, geopolitical tensions push the price of gold higher, which we did initially see earlier in the week. However, the price has since fallen back and may even finish the week slightly below where it started. This is not entirely surprising given the recent rise in US bond yields and the strengthening dollar. A stronger dollar makes gold more expensive for investors buying in other currencies, and because gold does not produce an income, higher bond yields can make fixed income investments relatively more attractive.
Finally, bringing the focus back to domestic markets, Rachel Reeves delivered the UK Spring Statement on Tuesday.
This was expected to be largely uneventful, as Reeves has previously stated that the government intends to deliver one major fiscal event each year, which takes place in the Autumn Statement. True to that expectation, there were no major tax changes or significant spending announcements, and the market reaction was fairly muted.
This chart shows the performance of the FTSE 100 and FTSE 250 so far this year. The FTSE 100, which contains largely global companies, and the more domestically focused FTSE 250 both remained broadly flat during the speech itself, but finished the day slightly lower, largely reflecting the rising tensions in the Middle East.
UK 10-year government bond yields dipped slightly when Reeves announced that the Office for Budget Responsibility believes the government now has more fiscal headroom than previously expected. However, yields rose again later in the day as markets reduced the probability of a near-term rate cut from the Bank of England, following the sharp increase in oil and gas prices.
Looking forward to the week ahead we have earnings from Oracle and Volkswagen on Tuesday, and Adobe and BMW on Thursday.
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