Red alert at the White House over black gold

Oil prices spiralling out of control are Iran's strongest line of defence and the worst nightmare for the United States and most of the rest of the world. Unsurprisingly, as we have argued here repeatedly, Washington is trying to shorten the crisis. Failing the collapse of the regime or a clear-cut military victory, negotiations now look like the only workable option after 24 days of war. Meanwhile, financial markets have not fully bought into the rumours of talks.

Monday's session was heading badly off course in Europe when Donald Trump reached for his favourite weapon: the media bombshell. The US President, after saying one thing and then the opposite over the weekend, revealed that negotiations with Tehran over a ceasefire were under way. The talks were said to be constructive enough for the White House to drop its threat to wipe out all Iranian energy facilities within 48 hours. The announcement came shortly after midday yesterday. Before that, European indices were down by around 2%. Afterwards, all hell broke loose. The STOXX Europe 600 swung from -2.25% at its worst level of the day to +2.29% at its best. Oil slumped 10% and Wall Street opened with a flourish in the wake of the move. Iran quickly denied that any real progress had been made with the Americans. The euphoria faded somewhat, but the trend never turned negative again. The STOXX Europe 600 closed up 0.6%. The S&P 500 ended the day 1.15% higher.

With Trump, it is always a bit like the boy who cried wolf: after so many contradictory statements, credibility starts to wear thin. Yesterday, traders tried to revive the TACO trade, shorthand for Trump Always Chickens Out. In practical terms, that means buying aggressively on the assumption that the US President will backtrack when his decisions unsettle markets or voters too severely. This time, however, the trade did not work entirely, because any easing cannot come from a unilateral decision in the way it could with tariffs.

The market, in the broad sense of anyone with even a passing interest in finance, is torn. The thinking goes something like this: he is still the President of the United States, so he would hardly float something like that out of nowhere simply to push oil lower and buy time. There is no smoke without fire, in other words. There is talk, at least in the well-connected circles to which I do not belong, that Donald Trump's allies put him under heavy pressure by warning of a looming disaster. That, at any rate, is what several English-language media outlets are reporting, pointing in particular to the Gulf states, Egypt, Turkey, Pakistan and Europe. It is worth spelling that out, because the idea of who counts as a US ally has become rather more fluid than it once was. In short, pressure on the White House has intensified, because the surge in energy prices triggered by the attack on Iran is a global problem. For the time being, the Iranian crisis is also costing Donald Trump popularity at home and fracturing his base. Experience suggests, however, that public opinion can turn quickly when the narrative shifts, provided the conflict comes to an end. The key, then, is how quickly a negotiated solution can be put on the table. The same goes for the spike in energy prices, which is closely tied to the prospect of a way out of the crisis.

The market swings seen in the previous session show that investors are not yet convinced by that scenario. For that to happen, Iran would need to send a positive signal that it is open to talks. For now, Tehran knows that time is on its side, as long as the regime holds. The Wall Street Journal has also circulated a rumour that Saudi Arabia and other countries could enter the conflict militarily, which hardly points to de-escalation. Oil, which remains the most reliable barometer for now, was moving higher again this morning: spot Brent was trading at $102.60. It had reached $114.40 yesterday morning at the high and fallen to $95.96 yesterday afternoon at the low. Even at $102.60, it is still up 69% since 1 January, which amounts to a major economic shock.

Staying with the macroeconomic picture, the market will be watching the March PMI activity readings for the major economies. Those business surveys were conducted when the war in Iran was already under way. They should therefore show the first signs of the conflict's impact. India's and Japan's PMIs, released overnight, mostly came in below expectations.

In Asia-Pacific, the market's confusion over the latest statements is showing through in a hesitant rebound after the previous day's sharp sell-off. South Korea, having fallen by more than 6% yesterday, is recovering only 2.8%. Japan is up 1%, but only after Monday's 3.3% drop. The MSCI Asia Pacific index is up 1.5%, after shedding 3.5% the previous day. Wall Street futures have slipped back into the red. Europe is expected to open lower.

Today's economic highlights:

On today's agenda: the manufacturing and services PMIs in Japan; the current account in Switzerland; the services, composite, and manufacturing PMIs in France and Germany; the services, composite, and manufacturing PMIs for the Euro Area; in the United Kingdom, the manufacturing and services PMIs followed by the CBI distributive trades; in the United States, the composite, services, and manufacturing PMIs, the API crude oil stock change, and the Fed Barr speech. See the full calendar here.

• GBP / USD: US$1.34
• Gold: US$4,383.2
• Crude Oil (BRENT): US$102.75
• United States 10 years: 4.38%
• BITCOIN: US$70,674.8

In corporate news:

• ME Group International posted a 6.5% rise in pretax profit to GBP78.2 million for the year ending October 31, 2025, and launched a GBP18 million share buyback program.
• Applied Nutrition reported a 77% increase in pretax profit to GBP20.9 million for the half-year ending January 31, 2026, while warning of potential sales disruption in the Middle East.
• Goodwin announced trading in line with expectations but is considering a dividend cut due to order delays caused by the Iran conflict.
• Trustpilot Group plans to appeal a EUR4 million fine imposed by the Italian Competition Authority over alleged unfair commercial practices.
• Relx initiated a GBP350 million share buyback program as part of its GBP2.25 billion repurchase plan for 2026.
• Hutchmed began phase-three trials of its lymphoma treatment HMPL-760 in China.
• New car registrations rose by 1.4% in February across Europe.
• Estée Lauder is in talks to acquire the Spanish company Puig.
• The Agnelli family (Exor) is withdrawing from the Italian media sector by selling *La Repubblica* to the Greek firm Antenna.
• Saab is launching an AI partnership with Cohere.
• Apollo Global Management is also limiting redemptions from its private credit funds in the face of a sharp rise in demand.
• Netgear soared by 13% in after-hours trading after the FTC banned the import of consumer wireless routers manufactured overseas.
• Apple will hold its annual developers’ conference in June.
• Gilead Sciences is set to acquire Ouro Medicines for up to USD2 billion.
• JPMorgan launched a basket of CDSs on Alphabet, Amazon, Meta, Microsoft and Oracle last month for hedging strategies, according to Bloomberg.
• Eli Lilly is to stop marketing certain forms of insulin in several countries, according to the EMA.
• OpenAI warns that its ties to Microsoft pose a risk ahead of a potential IPO, according to CNBC.

See more news from UK listed companies here

Analyst Recommendations:

• Croda International Plc: Deutsche Bank maintains its hold recommendation and reduces the target price from GBX 3100 to GBX 3000.
• Ibstock Plc: Deutsche Bank maintains its hold recommendation and reduces the target price from GBX 144 to GBX 110.
• 3I Group Plc: Citi maintains its buy recommendation and reduces the target price from GBP 47.50 to GBP 42.80.
• Ig Group Holdings Plc: UBS maintains its buy recommendation and raises the target price from GBX 1600 to GBX 1680.
• Oxford Nanopore Technologies Plc: RBC Capital maintains its outperform rating and reduces the target price from GBX 300 to GBX 225.
• Centrica Plc: UBS maintains its buy recommendation and raises the target price from GBX 200 to GBX 230.
• Next Plc: Barclays maintains its equalweight recommendation and reduces the target price from GBP 137 to GBP 131.
• Travis Perkins Plc: JP Morgan maintains its overweight recommendation and reduces the target price from GBP 7.12 to GBP 6.80.
• Sage Group Plc: Jefferies maintains its buy recommendation and reduces the target price from GBX 1350 to GBX 1100.
• Shell Plc: Evercore ISI maintains its in-line recommendation and raises the target price from USD 80 to USD 100.