Markets entered Friday in a cautious mood as a stark demonstration of Iranian control over the Strait of Hormuz reinforced the sense that the conflict in the Middle East is far from resolved. State television in Iran aired footage of commandos in a speedboat boarding and seizing a container ship, an incident that followed the breakdown of peace talks Washington had hoped would reopen a vital shipping corridor.
Just days after saying he would indefinitely extend what had been a two-week ceasefire with Tehran, U.S. President Donald Trump said he had directed the Navy to "shoot and kill" Iranian vessels laying mines in the strait and to intensify demining efforts. The standoff between the U.S. and Iran has now been in place for about eight weeks, with both sides remaining in deadlock.
Investor sentiment has swung between optimism that an end to the fighting could be imminent and anxiety that hostilities will persist. That uncertainty has coincided with oil prices climbing above $100 a barrel, and traders are operating on the assumption that the Strait of Hormuz is effectively closed for the time being. Corporate earnings have held up reasonably well to date, but the fragile geopolitical backdrop and the jump in oil prices introduce meaningful risks for business planning and market valuations.
Economic data in focus
Market participants will be watching UK retail sales for March later in the day for a read on consumer spending amid the conflict-driven uncertainty. A survey published on Thursday showed British consumer morale fell this month to its weakest level since October 2023, with households raising their expectations for future price increases. Separately, British manufacturers reported their most pessimistic outlook since the start of the COVID-19 pandemic, and a gauge of inflation expectations jumped.
These readings add to a picture of softening domestic demand in the UK and rising cost concerns among households and producers, which could feed through into future spending and pricing decisions.
Currency and technology developments
The yen remained perilously close to the widely cited 160 per dollar threshold that many view as an intervention trigger. Japanese Finance Minister Satsuki Katayama reiterated warnings about possible currency intervention on Friday, saying authorities would take "decisive action" and coordinate closely with the United States.
In technology news, Chinese artificial intelligence startup DeepSeek began previewing a major upgrade to its leading AI model on Friday, underscoring the continued momentum in the AI sector despite the wider market unease.
Key calendar items that could sway markets
- UK retail sales (March)
- University of Michigan Consumer Sentiment Index (April)