Matt Britzman, senior equity analyst, Hargreaves Lansdown: “Global markets are heading into the week on edge as the Iran conflict continues to cast a long shadow. Fresh worries that troops could be drawn further into the conflict are keeping volatility elevated and confidence fragile. With the volatility index (Vix) closing last week at 31, its highest level since last April's tariff tantrum, investors should be prepared for another turbulent week.
UK stocks look set for a choppy start, as the FTSE 100 opens slightly higher this morning. With only a light run of company updates ahead, geopolitics is likely to be the main driver of sentiment. Investors are also adjusting to a backdrop where interest rate expectations have shifted, with markets now firmly pricing in rate hikes this year – though we know how quickly these odds can shift.
US markets remain under pressure, with the S&P 500 now 9% below its January peak as investors brace for a heavy week of data. The spotlight will fall on Friday's March jobs report, where payrolls are expected to rebound after February's surprise drop. A busy calendar also brings the ISM Manufacturing PMI, retail sales, JOLTs job openings, and the monthly trade balance, all of which will help shape views on the strength of the economy.
Oil prices jumped about 3% to start the week, with crude holding at its highest level since mid-2022 amid the Iran conflict. Doubts over a quick resolution have grown after Iran-backed Houthi militants stepped up attacks in the region, and the US moved additional troops closer to the conflict. With the Houthis threatening Red Sea shipping lanes and key energy infrastructure, and rumours that Washington is preparing for ground operations, traders are bracing for more supply risk and further price volatility.”
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