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The conflict in the Middle East continued to dictate much of the price action in markets last week. The blockade of the Strait of Hormuz by Iran remained in place, putting severe pressure on global oil supply. The International Energy Agency launched a record release of 400 million barrels of emergency crude oil reserves — a move of unprecedented scale that underlined how seriously global leaders are taking the threat to the economy. World equities fell 0.6% in euro terms, with Japanese stocks down 2.3% leading the decline.

The strengthening dollar, which moved from 1.162 to 1.142 per €1, offset losses in US equities for European investors. Thanks to America’s relative oil self-sufficiency, the dollar has re-emerged as a key safe haven since the outbreak of the war. The Pentagon told Congress that the first week of the war against Iran cost $11.3 billion and is reportedly seeking $50 billion of additional funding.

Renewed inflation fears have materially shifted rate expectations. The Federal Reserve had been expected to cut rates in July, but a rate cut is no longer fully priced in for 2026. The Bank of England had been expected to cut rates twice this year and is now projected to keep them on hold, while in Europe the market is pricing in two rate hikes in 2026.

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Smart Financial Insurance Limited trading as Smart Financial is regulated by the Central Bank of Ireland. Past performance is not a reliable guide to future performance. The value of your investment may go down as well as up.