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Thanks for following our coverage of the ongoing conflict in the Middle East and surging energy prices in the US.

You can keep up to date with the latest here.

Markets hold steady amid ceasefire hopes

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As markets head towards the close in the UK, the FTSE 100 has remained broadly flat, with defence companies and oil majors amongst the biggest losers as the US’ shaky ceasefire with Iran kept intact.

Comments from Israeli Prime Minister ⁠Benjamin Netanyahu that he was seeking direct talks with Beirut helped boost sentiment that the ceasefire might continue to hold.

Oil prices remained broadly stable at around $98 per barrel, down from highs of above $110 before the ceasefire was announced, though still above pre-war levels of around $70 per barrel.

In the US, the S&P 500 and the Nasdaq edged higher on Friday, setting both indices up for their biggest weekly gains since November and June, respectively. Rocketing inflation levels provided little surprise for the market, as they were broadly in line with what economists were expecting.

Traders stuck to their bets that the Federal Reserve would stay away from cutting interest rates any further amid concerns about inflation, despite pressure from President Trump.

Europe faces jet fuel shortage within weeks amid Iran war

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Europe could face a jet fuel shortage within weeks if the Strait of Hormuz does not open up, the airline’s industry body has warned. 

The Airports Council International Europe said in a letter to the European Commission that there could be a systemic shortage of jet fuel in Europe in just three weeks. 

The industry group warned that a fuel shortage would “significantly harm the European economy” and asked for the commission to identify alternative import sources of jet fuel and to temporarily lift import restrictions.

Prices have more than doubled to between $150 per barrel and $200 per barrel in recent weeks. Fuel alone accounts for roughly a quarter of operating expenses for most airlines. 

The industry group added that the impact of military activity on demand” was further straining supplies, according to the Financial Times which first reported the letter.

Vietnam and other countries in Asia have already begun rationing jet fuel due to shortages, but Europe has yet to experience widespread disruption.

Wall Street wavers amid shaky ceasefire agreement

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Stocks wavered on Wall Street on Friday as oil prices held steady amid a shaky ceasefire agreement between the US and Iran.

The S&P 500 rose 0.1pc in morning trading, heading for its second consecutive winning week following the ceasefire agreement, while the Nasdaq composite rose 0.6pc.

On the other hand, Brent oil which traded at roughly $70 per barrel before the war in late February, rose by 0.1pc to $96. American crude oil prices rose 0.4pc to $98.27 per barrel.

As negotiators from Iran and the US prepare for high-level talks on Saturday, the ceasefire remains shaky. Iran’s semiofficial Tasnim news agency has said that talks would not happen unless Israel stopped attacking Lebanon.

According to the country’s state news agency, eight Lebanese state security officers were killed in Israeli air strikes in the southern town of Nabatieh on Friday - the heaviest attacks on the area since the start of the war.

The Strait of Hormuz could be open within the next two months, Kevin Hassett says

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The Strait of Hormuz could be open within the next two months, Kevin Hassett, the director of the US’ National Economic Council has said. 

Speak to Fox News, Mr Hassett said he expects a “rapid reduction in energy prices” will take place once the strait opens. 

“There are boats going through, but at about 10% of the normal pace,” Mr Hassett said. President Trump warned on Wednesday that the ceasefire agreement would hinge on the Strait of Hormuz being reopened. 

“All US Ships, Aircraft, and Military Personnel, with additional Ammunition, Weaponry, and anything else that is appropriate and necessary for the lethal prosecution and destruction of an already substantially degraded Enemy, will remain in place in, and around, Iran, until such time as the REAL AGREEMENT reached is fully complied with,” Trump warned Iran in a Truth Social post on Wednesday.

“If for any reason it is not, which is highly unlikely, then the ‘shootin’ starts,’ bigger, and better, and stronger than anyone has ever seen before.”

US inflation soars as Trump triggers energy shock

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US inflation soared by the most in nearly four years in March, as Trump’s war with Iran triggers an energy shock. 

Energy prices rose by 10.9pc on the month, which alone accounted for nearly three-quarters of the monthly increase in prices in March. The surge in energy prices included a 21.2pc monthly rise in gasoline prices and a 30.7pc increase in fuel oil prices. Overall, inflation rose by 0.9pc over the course of March, the highest monthly gain since June 2022, during the peak of the post-pandemic inflation crisis.

While oil prices have fallen since the ceasefire, they still remain high compared to pre-war levels. The price pressures, with inflation now at 3.3pc, will make the Federal Reserve more wary about cutting interest rates, as progress towards the central bank’s target of 2pc stalls.

There are also concerns that higher energy prices will also spill out to other areas of the US economy. Grocery prices fell by 0.2pc in March, but economists expect that disruptions to the natural gas market will boost fertiliser prices which will be passed on to consumers in the form of higher food prices.

Russian supertanker enters Strait of Hormuz

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A Russian supertanker has passed through the Strait of Hormuz into the Persian Gulf, one of the first carriers to enter the waterway since the US agreed a ceasefire with Iran.

The Arhimeda, which was floated in 2000, entered the Gulf heading West towards Iran’s Kharg Island, its crucial port for exporting crude oil, Bloomberg first reported.

The vessel is one of the first to enter the waterway, with most craft seeking to flee the region after hundreds were trapped by fighting when Iran closed the Strait of Hormuz. 

Francesco Sassi, an international relations expert at the University of Oslo, said: “This is a prime example of how both regimes are capitalising on the energy implications of the war launched by the United States and Israel. 

“While most Gulf State tankers and LNG carriers remain paralysed within the strait, the ‘shadow fleet’ managed by Iranian and Russian-affiliated entities—some paradoxically hosted within those very Gulf nations—continues to reap the benefits of an energy war Tehran did not even initiate.

Britain prepares ‘Skyhammer’ drones for the Gulf

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A Cambridge start-up is to supply high-tech interceptor missiles designed to counter Iranian suicide drones to the British Armed Forces and allies in the Gulf.

The Ministry of Defence said it was preparing to sign a multi-million contract with Cambridge Aerospace, which was founded less than two years ago, and has developed an anti-drone technology dubbed “Skyhammer”.

Its lightweight, low-cost interceptors are intended to counter cheap, high-volume drones that have been deployed by Iran against American forces, the UAE, Qatar and Bahrain. The technology has been compared to Israel’s “Iron Dome” missile defence system.

John Healey, the Defence Secretary, said: “Our government backing for Cambridge Aerospace is a prime case of a veteran-founded UK defence start-up scaling at pace to deliver new interceptor missiles within weeks for our Armed Forced and Gulf partners, and good jobs and security here in the UK.”

Blair urges Miliband to open North Sea

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Sir Tony Blair has called on Ed Miliband to urgently ramp up drilling in the North Sea to combat rising energy costs caused by the Iran war.

In a damning intervention likely to increase pressure on the Energy Secretary, the former prime minister’s think tank said the Government should immediately approve the Jackdaw and Rosebank oil and gas fields.

The Tony Blair Institute (TBI) said this would not only reduce reliance on volatile imports but also boost the UK’s energy security.

Rosebank is the largest untapped oil field in the North Sea, estimated to contain up to 300 million barrels of oil, while Jackdaw has the potential to produce the equivalent of 6pc of the UK’s future gas supply.

Tone Langengen, an energy policy expert at the TBI, said the oil and gas crisis caused by the conflict in the Middle East and the resulting closure of the Strait of Hormuz only made the argument stronger for approving new drilling in the North Sea.

Japan releases more oil to ease energy strain

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Japan will release an extra 20 days of oil reserves from May as it seeks to ease the spike in prices driven by the war in Iran.

Sanae Takaichi, the Japanese Prime Minister, confirmed a second release of Japan’s stockpiles, a month after it released 50 days’ supply from its reserves.

“To ensure the stable supply of crude oil, we will release, starting in early May, the equivalent of roughly 20 days’ worth from the national reserves,” Ms Takaichi said on Friday.

Japan depends on the Middle East for about 95pc of its oil supplies. Most of its oil imports flow through the Strait of Hormuz.

Tokyo is also seeking to source oil from allies including the US, as well as suppliers including Malaysia, Azerbaijan, Brazil, Nigeria, and Angola, Reuters reported.

Analysis: Why the ‘Tehran tollbooth’ will never work

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Iran’s so-called “Tehran tollbooth” threatens to make the restoration of normal oil and gas supplies from the Gulf impossible.

Experts have said the plan – to allow oil tankers to pass through the Strait of Hormuz if they undertake an Iranian inspection – would see the number of ships reduced to a trickle compared to pre-war levels, given the physical constraints involved.

The high risks mean many ship owners may also boycott the tollbooth altogether, leaving the Strait effectively shut.

Around 120 vessels that Iran permitted through the Strait during the weeks of conflict are believed to have used the route.

However, Lloyd’s List, a shipping intelligence publication, estimates that up to 700 oil tankers, liquefied natural gas carriers and cargo ships remain stuck in the Gulf.

That is too many to be extricated during the current two-week ceasefire. Many ship operators may be reluctant to risk the journey, analysts at Lloyd’s List said.

Gulf refiners prepare oil shipments as ceasefire holds

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Middle Eastern oil depots have begun asking shipping companies for their loading plans as Gulf states prepare to ramp up oil production as a fragile ceasefire with Iran holds.

Reuters reports that Saudi Aramco, the region’s top exporter, has asked customers to submit for loading from the ports of Yanbu and Ras Tanura.

The news agency also reports that commodities giants Glencore and Taiwan’s CPC have booked ships to load oil from the Middle East, suggesting flows are beginning to unlock.

However, Saudi Arabia’s state news agency on Thursday reported that it had suffered a fresh hit to oil supplies after a drone attack on its Red Sea oil pipeline.

The strike has cut oil throughput by 700,000 barrels per day, the Saudi Press Agency reported.

Gas prices dip on Hormuz hopes

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European natural gas prices have dropped this morning on hopes that fuel could soon start flowing again through the Strait of Hormuz.

Benchmark futures were down 3.4pc on Friday, Bloomberg reported, and are set to end the week about 10pc down.

Gas prices have been hit sharply by the US conflict with Iran. About 20pc of all global oil and gas flows through the Strait of Hormuz.

During the conflict, Qatar’s Ras Laffan hub, the world’s largest liquefied natural gas hub, was damaged in strikes.

The attack wiped out about 17pc of its capacity and is expected to cost $25bn to repair.

Gas costs are still about 40pc higher compared to when the war began.

German inflation rockets as Iran hits costs

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The Iran conflict has fuelled faster inflation in two of the world’s largest economies, as the squeeze on Gulf energy exports ripples outwards.

Germany’s annual inflation rate jumped to 2.7pc in March, the highest since January 2024. Inflation had previously been slowing: the rate was 1.9pc in February and 2.1pc in January.

The increase was powered by surging petrol and diesel prices, which rose 20pc from a year earlier. Heating oil costs soared 44pc.

In China, the producer price index – which measures prices at the factory gate – rose 0.5pc in March, the fastest increase in more than three years.

Factories’ rising bills for petrochemicals and fuel have brought to an end a spell of deflation in producer prices that began in September 2022.

Beijing’s domestic fuel price caps, and its ban on petrol and diesel exports, have stopped prices rising faster.

FTSE 100 drops as Trump threatens Iran

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The FTSE 100 opened in the red this morning, dropping about 0.25pc in early trading to around 10,578.

The blue chip index was off to a slow start on Friday with few major movers. Compass Group led the falls, dropping 3.4pc.

On the FTSE 250, stocks were up 0.27pc just after the opening. 

AO World led the charge, with shares up close to 12pc, as the retailer revealed that annual revenues had grown 11pc. It said its adjusted profits were expected to be at the high end of guidance, at around £45-£50m.

John Roberts, AO’s chief executive, said: “The numbers speak for themselves again and I am delighted to keep doing our talking on the pitch.”

Elsewhere, Aston Martin also enjoyed a 4.5pc boost among the early movers. Oxford Nanopore was up 5pc.

Why North Sea is at record highs

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Oil prices have swung wildly in the past week as traders follow Donald Trump’s every Truth Social post - and subsequent climbdown.

But for traders in physical oil, prices have been going in one direction.

While the price of Brent Crude effectively tracks the price of contracts for future oil shipments, oil that is already in transit and ready for use is trading at a premium.

This oil is also normally used as a hedge against volatile swings in futures prices.

But there is now a growing gap between the price of Brent and physical oil barrels as supplies tighten.

Forties oil, which is North Sea oil that is ready for use, has been trading above $146 this week, according to Reuters, citing data from LSEG. That is more than double its price at the start of the year when it was closer to $60.

It is also its highest price since the summer of 2008, ahead of the global financial crisis.

North Sea oil prices surge

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Good morning, Matthew Field here with Friday’s markets news. Thank you for joining me.

The price of North Sea oil has spiked to highs not seen since the 2008 financial crisis. Forties Blend, effectively physical oil barrels that are ready to use, hit almost $147 this week, far outstripping futures for Brent Crude. It comes as Donald Trump accuses Iran of undermining efforts to reopen the Strait of Hormuz.

Later, we will have US CPI data to unpack. FTSE 100 futures were seen up in early trades about 0.1pc.

5 things to start your day

1) OpenAI blames Britain’s high energy prices as it halts flagship project | ChatGPT maker puts data centre investments on hold until power costs drop and conditions improve

2) Khan accuses social media sites of spreading lies about London | Disinformation on crime and racial segregation in the capital is being fuelled online, claims Mayor

3) Army called in as fuel protests cripple Ireland | Escalating disruption has now ‘crossed into criminal behaviour’, warns defence minister

4) Reeves’s £100,000 tax trap is putting people off working | Economists flag dysfunctional tax rules that reduce incentives and growth potential

5) Iran war risks triggering 2008-style financial crisis, warns Bank of England chief | Conflict could spark a meltdown in private credit industry that snowballs, Andrew Bailey says
 

What happened overnight

US markets edged up yesterday as the shaky ceasefire in the Middle East held. The S&P 500 closed up 0.62pc at 6,824 and the Dow Jones ended up 0.58pc at 48,185. The pound slipped slightly against the dollar at $1.34.

In Asia, the Nikkei 225 was up 1.8pc while Hong Kong’s Hang Seng climbed 0.5pc. South Korea’s Kopsi was up 1.4pc and MCSI’s Asia index was up 0.5pc.