Written by David Gorman, Investment Manager and Chair of Equity Sub Committee, TEAM plc

At the weekend, yet another geopolitical event took the markets by surprise, but it still did not challenge the stability of the market. President Trump’s decision to join Israel and bomb three nuclear refining facilities within Iran, seems to have been planned, executed and considered very carefully. He also revived his ‘Make America Great Again’ slogan but this time he called it MIGA (Make Iran Great Again), suggesting that the present regime is incapable of making the country prosper.

All eyes have been on what Tehran’s response would be and whether shipping will be able to continue to pass through the Strait of Hormuz. This avenue accounts for 25% of seaborne oil supplies and if blockaded (should Iran be willing and able) could easily have sent oil prices up by a third or mor and over $100 per barrel.

However, the Iranians did retaliate with a symbolic (and signposted) attack on a US base in Qatar. What immediately followed was an agreed ceasefire from Israel and Iran. Drop the bomb and then negotiate has seemingly worked the trick for the Trump administration and Israel. Even so, many uncertainties remain. The relief in the oil market has seen prices drop over 10% providing much needed help for hard stretched car drivers as pump prices will now likely fall in the weeks ahead.

Stock markets have been well behaved with little movement in the immediate aftermath of the attack and are pressing ahead again on the ceasefire news. US equity indices are now within 3% of all-time highs. Even safe haven money favourites such as gold and precious metals have seen subdued price action. It sadly feels as if the markets (and indeed all of us) have become conditioned to all the awful news stemming from Russia/Ukraine, Israel/Palestine and now Israel/Iran. Diplomacy is clearly better than war but a successful outcome to Iran/Israel is not yet a one-way bet.

Elsewhere, Central banks were in the news as the Bank of England decided to keep interest rates unchanged but did give a clear signal that a rate cut is on the table for August. The Federal Reserve also kept rates the same, but through Chairman, Jerome Powell’s press conference, markets are anticipating ‘a wait and see’ mode until October.

With global trade tariff uncertainty and the potential for Middle East oil disruptions, any forecasts should be read with ‘a large pinch of salt.’ The lack of inflation in Switzerland saw a cut in rates to zero from 0.1%, so are we again on the path there to negative interest rates?

Even though most investors will be watching events in the Middle East, there will be eyes on the 9 July deadline and an end to the temporary pause on certain US tariffs. Another eye-catching event is whether the Republican party can put through Congress the ‘One Big Beautiful Bill’- a sweeping piece of legislation, increasing debt and providing huge tax cuts that President Trump would like to pass before US Independence Day on 4 July?

This week the US has the latest reading for the Purchasing manager indices which continue to point to a further activity slowdown. Although a possible lifting of trade tensions may have helped, there are so many geo-political uncertainties that sentiment is unlikely to turn quickly.

Jerome Powell, the Fed Chairman, is likely to be in the news headlines again with his semi-annual testimony to Congress where he will be asked to clarify thinking on interest rate cuts and US bank stress test results amongst other matters.

The Federal Reserve’s preferred measure of inflation is released later in the week which will prove a useful additive to the debate on the timing of any further rate cuts.

Finally, the NATO summit on 24/25 June takes place at the Hague, in Amsterdam. Of interest will be how Members plan to make NATO stronger in the wake of the challenges ahead such as cyber- attacks, critical infrastructure weakness in certain member states along with keeping the US and President Trump happy. Sir Kier Starmer is set to pledge to NATO that the UK will increase spending on national security to 5% of GDP by 2035.