WeekWatch

Tech falters despite weaker oil prices

Markets endured a tough period last week, despite oil prices finally falling to their pre-Iran conflict level. 

Following a 60-day ceasefire and a memorandum of understanding signed earlier in June, Brent has fallen rapidly from its mid-May peak of $110 a barrel, reaching just over $72 a barrel last week. The last time prices were this low was on 28 February, the day the US and Israel began strikes on Iran. 

Current oil prices suggest traders believe the US lacks the political will to reopen hostilities. It is worth noting that oil prices at the start of the year were closer to $60 a barrel, so there is still potential for it to fall further. 

However, nothing is certain and there is no guarantee the two sides will be able to find common ground for a lasting peace. It is also important to remember prices can go back up as well as down.

And while it seems the world will escape the worst of the inflationary scenarios offered by economists just a few months ago, that is not to say those pressures will disappear.

Countries such as China and the US have burned through much of their oil reserves these past months, so will look to refill or develop new reserves. This means demand will likely increase. At the same time, much of the infrastructure in the Middle East needed to supply oil has been damaged. Some of this will take months to fully repair – meaning supply could take a while to return to prewar levels. 

Carlota Estragues Lopez, equity strategist at SJP, says: “The economic shock is no longer getting worse, but we're still dealing with the aftermath of the oil price volatility and what that means for input costs and for companies. In other words, the economic impact is still there, despite oil prices being down.”

From an investment perspective, a key consideration will be the impact falling oil prices have on interest rate decisions by central banks. While multiple rate hikes this year now seem less likely, many economists are still expecting one hike in the UK and US, while others anticipate no change for the time being. Few, if any, are predicting a rate cut in the near term.

Mind the tech drop

With the price of oil dropping, and with fewer interest rate hikes priced in, it might be surprising that last week proved painful for several tech companies.

SpaceX, for example, saw a notable fall at the start of the week. Its share prices were down to around $150, from a peak of over $210 the week before. 

The company was just one example in a tech sector that saw a notable reverse over the period. The tech-heavy NASDAQ finished the week down more than 4%, for example.

With emerging markets also tech heavy, many of these saw severe swings as well. The South Korean Kospi finished the week down 7.1%, after a 5.8% meltdown on Friday led by semiconductor giants SK Hynix and Samsung. 

Recent months have seen a general shift in sentiment away from hyperscalers (those building the large data networks required for AI, like Microsoft and Meta), towards semiconductor manufacturers. Microsoft and Meta have both dropped more than 10% year to date. In contrast, memory chip producer Micron is up over 270%.

According to Carlota, there were a number of catalysts behind the tech sector corrections last week. Some of it might have been profit-taking after a lengthy period of growth. There may also be growing nerves around the level of capital expenditure (capex) required for AI. These concerns were evident at the start of the year but were overshadowed as the Iran conflict came to dominate conversations. With AI costs now even higher, the sustainability of capex at current levels is an ongoing question. As an example, Apple shares fell after it announced price rises for much of its range.

Burnham enters stage left?

Monday 22 June saw Sir Keir Starmer announce his resignation. So far, no one has stepped in to challenge his presumptive successor, Andy Burnham. 

Questions are naturally being asked about who Burnham will pick as his chancellor – whether that is Rachel Reeves or someone new such as Ed Miliband or Shabana Mahmood. Regardless, they’ll face the same challenges that already exist: a high level of public debt, an aging population, comparatively high tax levels, and competing priorities.

In this environment, so far markets have not reacted in any meaningful way. The FTSE 100 (which is light on tech) and gilts have remained relatively stable since Starmer’s resignation announcement, and the pound has even strengthened. 

Cash held in investment ISAs to be hit with 22% charge 

The government has confirmed a 22% charge will be applied to the interest on cash held in investment ISAs from April 2027.

It follows widespread rumours that such a charge would be levied, as the government looks to stop people holding large sums in cash in equity ISAs once cash ISA limits are cut.

Chancellor Rachel Reeves announced a reduction in the annual tax-free cash ISA allowance for under-65s in the 2025 Autumn Budget. Since then, ISA providers and investors have been calling on the government to give clarity on the treatment of cash holdings in non-cash ISAs, such as equity ISAs and innovative finance ISAs. 

From April 2027, the annual cash ISA allowance will fall from £20,000 to £12,000 for savers under 65. The annual limit for contributions to non-cash ISAs will remain at £20,000. The annual cash ISA allowance for those aged 65 and over will also remain at £20,000.

But the government had not explained how uninvested cash held within investment-based ISAs would be viewed under the new rules. Many investors hold cash in their stocks and shares ISAs, for example, to have the flexibility to be ready to invest at the point they wish.

The 22% charge on cash interest will apply universally to all investment ISA account holders, regardless of their age and their income tax bracket. It will also apply to ISA savers who are non-taxpayers.

Explaining the move, the government said it would ‘minimise the opportunity for the lower cash ISA limit to be circumvented, while preserving the flexibility needed for legitimate investment activity within non-cash ISAs’.

However, it has confirmed that partial allocations of money market funds (and other cash-like assets) held in an investment ISA can continue to be treated as non-cash under the new rules from next year. It means they won’t be subject to the new 22% charge provided these funds do not make up 100% of the non-cash ISA account. 

The rules on transferring ISA funds have been tightened for certain groups. From April 2027, if an investor is under the age of 65 it will not be possible to transfer funds built up in non-cash ISAs, such as a stocks and shares ISA, into a cash ISA. However, transfers in the opposite direction will be permitted.

First-time buyer ISA unveiled 

The government has announced plans for a new, simpler first-time buyer (FTB) ISA to replace the lifetime ISA (LISA).

The new savings product, which will be available to anyone over 18, is expected to launch early next year. It will be possible to save in cash or in stocks and shares with a bonus paid at the point the saver accesses the money to buy a first home. This is according to the proposals outlined in a Treasury consultation document. 

The bonus will only be paid on contributions into the FTB ISA, not on any interest earned or investment growth.

Unlike the LISA, there is no maximum age limit for the new FTB ISA, and there is no retirement savings feature. There also won’t be a penalty fee for withdrawing money. 

In contrast, with the LISA, there is a 25% withdrawal penalty if you take the money out for anything other than a first home deposit.

There have been growing calls for a replacement to the LISA due to its perceived complexity.

The tax treatment of ISAs may be subject to changes in legislation in the future.

Please note that cash ISAs and lifetime ISAs are not available through St. James's Place.

Sources

¹HM Revenue and Customs. ISA reform 2027: anti-circumvention rules factsheet - 23 June 2026
²HM Treasury. First-time buyer ISA: Consultation - 22 June 2026