WeekWatch

Searching for the exit 

Shares in the US and Europe enjoyed their first positive week since the start of the Iran war. In contrast, bond yields and the price of gold fell. Major indices in the US rose by at least 3%. The US technology-heavy Nasdaq Composite delivered its best weekly returns since November 2025. However, stocks in Japan and China weakened.

In a nationwide address on Thursday, President Trump remarked that the war would end in a few weeks but was otherwise short on details. With the Strait of Hormuz still blocked to almost all traffic, Trump’s threats of further action against Iran caused a further spike in the price of oil. WTI, the US domestic oil benchmark, rose by nearly 12% to its highest price in nearly four years.

For US motorists, the price of petrol has risen by just over $1 since the start of war to $4 per gallon. This is expected to contribute to a rise in headline inflation (which includes energy and food prices) in March. The US Bureau of Labor Statistics is due to release this information later this week.

With weakening personal poll ratings, Trump, as well as markets, are hoping that he will be able to conclude the conflict in weeks rather than months. This optimism is helping to support the bull case for markets, even as the longer-term effects of the war on the global economy remain unclear.

European governments under pressure to help consumers

The jump in the oil price at the outbreak of war initially led to fears of a rebound in inflation in the UK, Europe and even the US. 

Initially, this led some analysts to suggest interest rates would need to rise. The conflict’s impact on the economic outlook has caused a pivot, with markets now more concerned about the consequences of weaker economic growth. If central banks raise interest rates, this will dampen the already mediocre growth expectations in western economies. 

Higher interest rates would also increase the pressure on already high government debt. For example, the Bank of Italy has cut predicted annual domestic economic growth in both 2026 and 2027 to only 0.5% due to the Iran war. At the same time, the Italian government is facing pressure to ease some of the additional costs, principally from higher energy prices, by tax cuts. This is despite the country having one of the highest government debt to economic growth (GDP) ratios in the eurozone.

There are similar demands elsewhere in Europe. In the UK, there is pressure to extend the freeze on fuel duty and provide other support. While governments in Europe will be conscious of the need to do something in response to the energy shock, they risk provoking the fixed income markets. Unfunded tax cuts will be punished by higher bond yields.  

US job creation spikes in March

March 2026 was the best month for US job creation in over a year. 178,000 new jobs were created, reducing the national unemployment rate slightly to 4.3%. The start of the Iran war had little impact on what is backward looking data. However, it has supported expectations that the US central bank, the Federal Reserve, will leave interest rates at their current level for the remainder of this year.

No reprieve for tech 

In recent weeks, some analysts have been highlighting the merits of the US technology sector, which they suggest is more insulated from the global market turmoil. Yet, since the beginning of the war, the tech sector has fallen in line with broader indices in the US. The tech sector’s strong multi-year returns make it an obvious choice for investors seeking to crystallise profits. Despite the selloff for technology, the sector still accounts for about one third of the value of the S&P 500. 

The weakness over the first quarter of the year has been even more pronounced. The Magnificent 7 group of leading tech companies have markedly underperformed the S&P 500. A further catalyst may be AI-related, with many mega-tech companies committing to extremely high levels of capital expenditure on data centres. Investors remain concerned the levels of investment are so high that it will be difficult to ever generate an attractive investment return. 

Government rejects call to double IHT deadline for pensions  

The government has rejected calls to double the amount of time bereaved families will have to pay inheritance tax (IHT) on pension assets and on estates with qualifying agricultural and business property. 

The House of Lords had proposed that the current six-month deadline for IHT payments on estates should be increased to one year for these specific assets.  

This was to give families longer to deal with the complexities involved in settling IHT due on pensions and business assets. 

St. James's Place has backed the recommendation to extend the payment deadline, including providing evidence on the negative impact of the six-month timeframe. 

Unused pension assets will become liable to inheritance tax from April 2027. 

Industry experts are concerned that, in many cases, six months will not be long enough for people to locate all the deceased’s pensions, calculate the IHT due on the estate and pay it to HMRC. 

This timeframe is also likely to be challenging for asset-rich, cash-poor farms and businesses that may even have to sell their business to meet their IHT liability. Valuations may need to take into account assets such as shops and rental businesses, creating further complexities that could take time to resolve. 

Late payments of IHT, made after the six-month deadline, incur a charge of four percentage points above the Bank of England’s base rate, which is currently 3.75%. 

The levels and bases of taxation and reliefs from taxation can change at any time. Tax relief is dependent on individual circumstances.