Update for June 2026

This report covers developments in May and June 2026. The dominant theme was the announcement of an initial US-Iran peace agreement, which triggered a sharp rally in global equities and a significant decline in oil prices. Despite improving market sentiment, uncertainty remains over the durability of the ceasefire and the future of Iran’s nuclear programme.In the US, the economy remained resilient, with 172,000 jobs added in May and unemployment holding at 4.3%. Inflation rose to 4.2%, driven largely by energy prices, while core inflation remained relatively contained. The Fed left rates unchanged but adopted a more hawkish tone, with markets beginning to price in the possibility of a rate hike later in the year.In Europe, inflation increased to 3.2%, prompting the ECB to raise interest rates by 25 basis points to 2.25%, its first hike since 2023. Policymakers cited inflationary pressures stemming from the Middle East conflict and warned that the outlook remains highly uncertain.Global equity markets advanced, led by AI-related stocks. The S&P 500 gained 2.0%, while European markets also rebounded as falling oil prices improved the outlook for energy-importing economies. Japan’s Nikkei surged 17.7% to a record high, while Hong Kong equities remained weak.Oil prices fell sharply as investors anticipated a normalization of supply through the Strait of Hormuz. Brent crude dropped 27% to about $81 per barrel. Gold fell 7.5% and Bitcoin declined 17.3% as investors rotated away from defensive assets and cryptocurrencies.Bond yields generally declined as geopolitical tensions eased, while the US dollar strengthened on expectations of tighter monetary policy. In Cyprus, inflation rose to 3.5%, while government bond yields moved lower in line with broader European markets.