This week’s market update is a globe-trotter. We start with oil prices changing in the wake of increasing hostilities between Iran and Israel.
Then, we head over to Europe, where inflation sits lower than it does in the UK for another month. We also turn our attention to the Swiss national bank’s decision to lower interest rates to 0% in the face of ever-weakening inflation.
Brent crude at a 6-month high
Brent crude oil reached a 6-month high rising to over $77 on Thursday. The jump in prices reflects growing concerns that the ongoing military exchanges between Iran and Israel could threaten oil supplies. That worry is amplified by the strategic importance of the Strait of Hormuz, a vital transit point for global energy shipments.
The price increases follow a series of airstrikes and missile attacks targeting military sites and energy infrastructure, including Iranian nuclear and missile facilities—and subsequent Iranian retaliation.
Source: Bloomberg. Past performance is not indicative of future results.
Euro area inflation down to 1.9%
Euro area inflation eased to 1.9% in May 2025, down from 2.2% in April. This is markedly lower than the 2.6% recorded a year earlier. The decline was largely driven by a drop in energy prices. Meanwhile services and food, alcohol, and tobacco remained the main contributors.
Among member states, inflation rates varied widely, from Cyprus at a low 0.4% to Romania at a high 5.4%.
Source: Bloomberg. Past performance is not indicative of future results.
Bank of England keeps rates steady at 4.25%
Much like the US and as expected, UK interest rates have remained on hold at 4.25%. Rising food prices and the risk of an oil price surge (due to the tensions in the Middle East) have put pressure on the central bank not to make further cuts too quickly.
Source: Bloomberg. Past performance is not indicative of future results.
UK inflation eases to 3.4% as food prices rise offsetting transport cost falls
UK inflation eased in May to 3.4%, down slightly from 3.5% the previous month. This was driven by cheaper airfares and petrol but offset by rising food costs. This was especially true of chocolate, sugar, jam, and meat – with chocolate prices up by 17.7% following cocoa harvest issues.
Despite this cooling, inflation remains well above the Bank of England’s 2% target, prompting expectations of a paused interest rate in the short term, with potential future cuts later in the year.
Source: Bloomberg. Past performance is not indicative of future results.
Swiss national bank lowers interest rate to 0%
Switzerland’s central bank has reduced its policy rate by 25 basis points to 0%. This marked the sixth consecutive cut since March 2024, in response to weakening inflation and a strengthening Swiss franc.
Inflation slid into negative territory in May. This was primarily due to lower tourism and oil prices, prompting the SNB to act even as it avoids moving into negative rate territory. The central bank forecast inflation to average 0.2% in 2025, rising gradually to 0.7% by 2027 if the rate remains at zero.
Source: Bloomberg. Past performance is not indicative of future results.
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