04/04/2026 by Tony Redondo
Next time you hear the Government blame energy prices on an overseas crisis or accuse retailers of price gauging, remember these figures. With no tax/VAT, unleaded petrol would retail at 76p/litre and diesel at 101p/litre as opposed to the current full pump price of 155p/litre for unleaded and 185p/litre for diesel. The government takes 79p/litre on petrol and 84p/litre on diesel.
Economists often frame the 1973 crisis as the first oil shock and 1979 as the second. In those instances, oil production was the primary weapon. The Arab embargo of 1973 quadrupled prices because OPEC (Organisation of the Petroleum Exporting Countries) producers then controlled more than 50 per cent of global supply. Iran’s stranglehold on the Strait of Hormuz has triggered the third oil shock but does the path to stability lie in appeasement and de-escalation with the current Iranian regime or end, once and for all, Iran’s ability to hold the Strait of Hormuz hostage?
The current third oil shock is a “maritime, not a production shock”. While roughly 20% of the world’s oil still traverses the Strait of Hormuz, the threat is no longer a collective political embargo by a massive cartel, but the tactical weaponisation of the shipping lanes themselves by a single pariah state.
This crisis is different and the likes of the UK and Europe will feel it more acutely than the US. It’s a matter of domestic resilience. The US is far more energy resilient than it was in 1973 or in 1979. It is insulated because it now possesses far greater domestic supply resilience. In contrast, by accelerating decarbonisation while underinvesting in domestic energy capacity, the UK has increased its exposure to maritime oil shocks. Some, such as Germany, even gave up on nuclear power, a policy verging on strategic self-harm.
While we may not yet have 1970s-style petrol queues at the pumps, the City of London remains the nerve centre for pricing this maritime war. In a world of energy-resilient powers, the nations that neglect both their resources and their sea lanes will be the first left in the dark.
Davos 2026: Trump’s “Energy Realism” and the New Global Economic Order – Cosmos Currency Exchange
In the front-line Gulf Arab states, attitudes about Iran have hardened since the war broke out, with many seeing “no return of normal relations with Tehran”. People in Bahrain, Kuwait, Qatar, Saudi Arabia, and the UAE long saw Iran as a destabilizing force but were still shocked the Islamic Republic chose to strike civilian infrastructure in retaliation for US attacks. Most strikingly, there is little appetite among Gulf citizens “to blame Israel or the US for starting the war”. Instead, safety and stability are top of mind, with the growing consensus that Iran is “now an enemy to be confronted and contained.”
The UN is projecting the Iran conflict will cost the Middle East nearly $200 billion in lost economic output but global firms, for now, say they remain committed to the Gulf. The CEO of a large private credit manager that is looking to expand into the Gulf commented that the war has “no impact on our excitement about going all in… We’re thinking about the future in decades.”
Currency Exchange Rates Update
The Pound Sterling experienced a highly volatile “rollercoaster” performance this week.
Against the Euro, the Pound finished the week nearly 0.6% lower and close to a 4-week low.
Against the US Dollar, the Pound fell 0.55% this week and hit a 4-month low on Tuesday.
The longer the Iran war goes on, the higher the risk the war will damage the already stagnant UK economy and destabilise already record high public finances.
In the coming week, the key economic data releases and significant events include:
Monday US ISM Non-Manufacturing Index
Tuesday EU PMI Composite
Wednesday UK Halifax Housing Index
NZ RBNZ Interest Rate Decision
Germany Manufacturing and Industrial Orders
Thursday US GDP
Friday China CPI Inflation Index
Germany CPI Inflation Index
Canada Employment
US CPI Inflation Index, Consumer Sentiment & Factory Orders
What’s in the news?
Artemis II, NASA’s most daring mission in generations launched to the Moon, marking the first time since 1972 that humans will have left lower Earth orbit. The ten-day flight will be packed with milestones including the first woman and first black person to fly into cislunar space. Once there, the astronauts will have a brief view of the moon’s far side, including views no human has seen before, and be further into space than anyone has ever gone. Just nine spaceflights, all under the Apollo Program, took human beings beyond Earth orbit at all. And they all took place in a four-year burst between December 1968 and December 1972. Since then, we have had trips back and forth to the ISS (International Space Station) which orbits the Earth at a distance of a mere 250 miles above our heads. Artemis II will take humans 250,000 miles from home.
UK
The Governor of the BoE (Bank of England), Andrew Bailey has suggested that future interest rate rises are not inevitable and investors may be overestimating the need for increases. Analysts are now forecasting at least two rate increases this year as the Bank looks to tackle rising inflation, but Bailey says, “I think they’re getting ahead of themselves.” He said officials will “have to, obviously, act on monetary policy if we think it’s appropriate to do so. But it strikes me… that the most important thing to do is to tackle the source of the shock.” He added, “We have to do so in a way that… causes the least damage in terms of activity in the economy and in terms of jobs.” In a unanimous vote, the Bank held interest rates unchanged at 3.75% in March.
However, the Bank’s Financial Policy Committee is warning of ‘overlapping’ financial shocks due to ongoing market volatility and the Middle East conflict “likely to interact with vulnerabilities” in the UK economy, adding that while the financial system has been “resilient so far… the shock will weigh on growth, increase inflation and tighten financial conditions.”
According to The Sunday Times, the professional composition of the 2024 Labour intake reveals a striking homogenization of the political class. Out of 238 new MPs, a staggering 224—nearly 94%—emerged from just three sectors: 72 from charities, 72 from roles as political employees, and 70 from communications or lobbying agencies. Consequently, roughly 90% of these legislators lack any professional background in defence, manufacturing, engineering, medicine, or law enforcement. This shift has produced a governing body whose collective DNA is rooted in compassion, accommodation, and message management—traits that, while valuable in stable times, may be fundamentally ill-suited for an era defined by war and geopolitical shocks.
The core issue facing Britain is not a lack of intelligence; MI5 continues to thwart plots, and the Walney Report has clearly documented Iranian influence operations within the charitable sector. The problem is an absence of the professional formation, instincts, and plain-spoken language required to act on such knowledge. Having spent their careers in “soft” sectors, this new political class is ill-equipped to recognize emerging threats. Even as radicalization manifests in Golders Green or through extremist chants on the Embankment, these leaders remain tethered to the tools of their previous lives: seeking to manage the message and accommodate the actors, rather than demonstrating the resolve to speak the truth and act decisively.
Good news
Chancellor Rachel Reeves has thrown her support behind expanded oil and gas drilling in the North Sea, signalling a potential split at the top of Government over energy policy and a clash with Energy Secretary, Ed Miliband. Reeves told BBC Radio 2 that she is “very happy” to endorse exploration at both the Rosebank oilfield and the Jackdaw gas field, two of the most closely watched developments in the UK’s domestic energy sector, saying, “It would, of course, create jobs and tax revenue, and that is why we continue to support oil and gas for decades to come. We have now got the disruption in the Middle East and it’s hard to get the oil and gas out of the Strait of Hormuz, which is pushing up prices. It does show that we have got to take control of our own energy supplies here in Britain.”
Bloomberg reports that global dealmaking had a bumper start to the year despite all the geopolitical turmoil. The 20% year-on-year increase in transaction values resulted in the largest first-quarter haul on record thanks largely to several mega mergers and acquisitions. Post-pandemic dealmaking fell after wars broke out in Ukraine and Gaza and then came the tariff-driven volatility last year but has picked back up in recent months. Investment bank Morgan Stanley says AI-driven disruption to companies’ business models is more likely to pause corporate decision-making than the Iran war.
Not so good news
Research by the IoD (Institute of Directors) recorded UK business confidence plunging to another record low as directors fear the war will damage investment plans and increase costs. Cost expectations rose to the second highest level on record after last September at the height of pre-Budget tax speculation while revenue expectations for the year dipped. Business leaders’ confidence in their own organisations, which has typically been in positive territory, dropped to minus two. This data will add to the pressure on the government as it faces calls not to ignore businesses when Rachel Reeves announces further “targeted” support in the coming weeks. Anna Leach, chief economist at the IoD, said manufacturers were at the “sharp end of results” as many had reported an immediate negative impact.
S&P Global’s PMI survey for the UK shows the sharpest supply chain strain and fastest input cost inflation since late 2022, driven by shipping delays and material shortages. Output contracted for the first time in six months, and business confidence fell to a series low, underscoring mounting domestic pressures. The UK’s structural rigidities with regulated utility prices and inflation linked public sector wages are making price pressures far stickier than in peer economies. That stickiness has fed directly into higher gilt yields and a more cautious tone from the BoE.
UK growth predictions for 2026 cut following conflict in the Middle East – Birmingham Live
The CEBR (Centre for Economics and Business Research) think tank has calculated that the resident doctor strikes will deal a £43m blow to the economy and the cost of each strike day will be around £7.2m if the turnout is similar to last year’s walkouts. Junior doctors will begin six days of industrial action on 7 April. It is the 15th round of strikes in three years, with 59 days lost during that time.
The FDF (Food and Drink Federation) fear food inflation will soar from the current rate of 3.3% to 9% by the end of 2026, signalling the worst shock to food prices since the energy crisis in 2022, when food and non-alcoholic drink inflation rose by 16.9% over the year. The FDF forecast assumes that the Strait of Hormuz, the crucial shipping passage which has been blocked during the conflict, reopens within two to three weeks. This suggests food inflation could soar even higher if the disruption continues.
The latest research from accountancy firm BDO points towards the UK’s tax instability driving two-thirds of the UK’s wealthiest to pack their bags and leave the UK over the past twelve months. The main concern is not tax rates per se but the “relentless cycle of policy change” and the uncertainty it creates. Elsa Littlewood, Tax Partner at BDO, said, “In recent years, the wealthy have had to face constant changes to tax rules, and our research identifies this instability is wearing people down. For many, the final straw came when the government started making big changes to inheritance tax and hinting at further changes to Capital Gains Tax. They lack trust in how UK tax will apply over the long timescales needed to manage intergenerational wealth and feel they’re under constant pressure to pre-empt new demands.” According to wealth manager Rathbones, nearly 6,000 owners moved abroad, with the UAE found to be the most attractive destination followed by Spain and the US.
Entrepreneur James Dyson has accused the Labour government of ‘revenge economics’ which is damaging the nation and its security and specifically criticises Rachel Reeves’s ‘death taxes’ on farmers and Ed Miliband’s refusal to scrap carbon taxes. In an article for The Times, Sir James said, “Reeves is sacrificing key elements of our national security to make a politically vindictive attack on enterprise and wealth creation. The amount her death tax on family firms generates, which no foreign, private equity or publicly listed business has to pay, will be dwarfed by the loss of income tax and corporation tax as businesses disappear. The combination of tax hikes and ever more restrictive employment laws will ramp up unemployment, already above 5% and rising and further erode the tax take. Labour has adopted revenge economics as a central policy, which is already damaging the nation and its security.”
Dyson also said the Government had been “incredibly slow” to act on North Sea gas drilling and continued to block fracking while “recklessly” buying energy from other countries. Energy secretary Ed Miliband is rumoured to be considering whether to approve the first major North Sea gas field project, known as Jackdaw, but remains opposed to any development of the giant Rosebank field, which predominantly contains oil reserves. Dyson says, “This is folly. As President Trump likes to remind us, the US has its own energy so can survive without the Strait of Hormuz being open, while Britain, under Ed Miliband’s perverse destruction of our energy assets, cannot. We have further huge reserves of gas and oil in the North Sea and untold quantities of gas under our land that can be quickly extracted through fracking. There is no possible justification for not making the UK self-sufficient.”
Ed Miliband has decreed that imported electricity will count as being as ‘clean’ as wind and solar even when it comes from burning coal and gas, in a move critics have branded “cheating” and “bonkers”. He has pledged to make the grid 95% gas-free by 2030, but 15% of UK power comes from neighbours like Belgium, the Netherlands and France, which have coal and gas-fired power stations. Miliband has ruled that all such imported power is be classed as zero-carbon, making it look as green as wind or solar because the emissions occur outside UK borders.
The CPS (Centre for Policy Studies) has published ‘Patently Absurd’, a new report based on UK and global patent filings which shows that despite world-class universities and a strong science base, Britain produces fewer patents per person than most major economies, including France, Germany, Sweden and the United States. The UK has also fallen out of the world’s top five in the Global Innovation Index for the first time in over a decade. More concerning still, innovation in Britain is declining at the same time as it is accelerating in other global markets. The report highlights the fact that between 2000 and 2024, there has been a 50% decline in resident patent filings in Britain, compared to huge increases in Singapore (268%), South Korea (169%), and the United States (66%).
USA
The BLS (Bureau of Labor Statistics) reported that the US labour market bounced back in March from a dismal February, with US employers beating expectations and adding 178,000 jobs, instead of the 65,000 jobs predicted by the majority of analysts. The unemployment rate, expected to hit 4.4%, instead fell to 4.3%. Sizeable gains from the health care sector, construction, manufacturing, and hospitality accounted for the job creation growth. Equally significant, wage growth remains at 3.5% for the year and below inflation.
Federal Reserve Chair Jerome Powell, speaking at Harvard University, said he saw the inflation outlook as stable, meaning the central bank would not need to increase borrowing costs due to oil prices.
The Fed chief also said he believes the current rate target is “a good place” for the Fed as it waits to see how the war and tariffs impact prices. Rate hike odds among traders fell sharply after Powell’s speech.
Twelve months after President Donald Trump announced his sweeping “Liberation Day” tariff regime, the US trade deficit increased in February as a rise in imports offset strong exports. The US Supreme Court struck down most of the duties in February, compounding corporate uncertainty, but Liberation Day did not cause the economic apocalypse some expected.
The ISM manufacturing index rose to its strongest level since August 2022, reinforcing the recent rebound in industrial activity. But the underlying details were less encouraging with prices paid jumping sharply to their highest level since mid-2022.
The EU
Just weeks ago, the eurozone economy and inflation were in a “good place,” according to Christine Lagarde, the President of the ECB (European Central Bank). Energy prices in February across the eurozone were falling at an annual rate of 3.1%, while headline inflation hovered just below the Central Bank’s target of 2%. It was welcome progress for a continent that had to overcome an energy shock spurred by Russia’s full-scale invasion of Ukraine in February 2022.
Then came the Iran war. The impact on Europe has been immediate with European gas prices surging more than 70%, freeing inflation from its tight leash. Annual inflation in the eurozone jumped to 2.5% in March. On a month-over-month basis, consumer prices rose 1.2%, the steepest increase since October 2022. As it stands, the CEBR (The Centre for Economics and Business Research) expects the ECB to hold key policy rates at their current levels through 2026, though risks are now firmly tilted to the upside.
Gas Infrastructure Europe reported that German gas storage levels ended this winter roughly 22% full, their lowest level in seven years. Germany’s economy minister said her country should rethink its opposition to nuclear energy, saying it leaves Europe’s biggest economy vulnerable to fossil fuel price swings.
Italy has delayed its plan to close its coal-fired power stations by more than a decade. In a significant reversal, the country will now continue to burn coal in at least one, and possibly up to three, power generation plants until 2038.
European Union lawmakers advanced a plan to deport migrants to “return hubs” outside the bloc. Rejected asylum-seekers could be detained for up to two years or sent to “third countries” under the plan. The EU is spending millions to deter migrants, but the new proposal is more in line with Italy’s firmer policy, which involves two detention centres in Albania. “There is a new consensus in Europe,” one politician said. “The era of deportations has begun.”
German Chancellor Friedrich Merz said 80% of the more than one million Syrians living in his country should return home. The decision was welcomed by Syria’s president on a visit to Germany, arguing that the return would allow hundreds of thousands of Syrians “to contribute to the reconstruction of their homeland”. Since becoming chancellor last year, Merz has tightened Germany’s immigration policies.
Others
China’s RatingDog manufacturing PMI fell below expectations whilst the official PMI showed a modest improvement, but the broader picture remains mixed. RatingDog flagged a tougher operating environment, with policymakers opting for a flexible 4.5%–5% growth target while stopping short of large-scale support measures. At the same time, geopolitical strains are keeping oil prices elevated and raw material markets unstable, which is likely to push imported costs higher.
China’s industrial profits jumped 15.2% year on year in January and February, a sharp acceleration from the modest 0.6% gain recorded across all of 2025 but rising input costs are squeezing business margins, and the economic fallout from the Iran war could emerge in the coming months.
There are signs suggesting that the worst may nearly be over for China’s troubled property sector with large developer Country Garden reporting its first annual net profit since 2022, while a Bloomberg analysis found that China’s property market could stabilize by 2027 as declining construction brings supply closer in line with demand. A recent rise in second-hand home sales also signals increased confidence among buyers. But prices for new homes continued to slide in February, showing the industry’s full recovery remains far off.
A new Gallup poll shows China has a better approval rating across the world than the US does. A median of 36% of those polled across more than 130 countries approve of China’s leadership, while 31% approve of US leadership giving Beijing its largest lead over Washington in almost two decades. US approval across the globe slid from 39% to 31% between 2024 and 2025, during which time President Trump began his second term. The poll was conducted in 2025 and does not account for recent foreign policy moves by the new administration in Venezuela and Iran.
The latest RBA (Reserve Bank of Australia) minutes say a prolonged Middle East conflict could weigh on both growth and inflation. It warned that if oil prices climb to USD100 a barrel, headline inflation could rise to around 5% year on year in the second quarter of this year and that scenario may force the RBA to act if inflation expectations continue to drift higher.
Australia’s S&P Global manufacturing PMI slipped into contraction in March. New orders dropped for the first time in five months as demand cooled and business confidence weakened. Cost pressures intensified, with input prices jumping to their highest level in three and a half years, largely due to disruptions linked to the Middle East conflict. New export orders provided a rare bright spot, rising at the fastest pace since May 2021, but weaker domestic demand continued to weigh on overall activity.
In a major victory for President Javier Milei, Argentina’s poverty rate fell last year to its lowest level since 2018. Since becoming president in 2023, Milei has overseen a remarkable turnaround of South America’s second-biggest economy. His cuts to subsidies and pensions have led to the government’s first budget surplus in 14 years and helped tame annual inflation from more than 200% at the start of his term to around 30%.
The ISW (Institute for the Study of War) reported that Russia made no territorial gains in March, the first time its progress has stalled entirely in more than two years, and Ukrainian forces even recaptured small areas of territory. Moscow’s advance has been slowing since late 2025. It took just 123 square miles in January and 47 in February, the smallest gains since April 2024. The ISW said Ukrainian counteroffensives were one reason, as well as technological issues that have hindered battlefield communication. Starlink has cut Russia’s access to its satellite internet, and the Kremlin prevented its own troops from using the messaging app Telegram in favour of a state-run option.
Quote
Margaret Thatcher, “Governments do not create the wealth. They consume it. It is the people that create the wealth and they need the incentive of tax cuts to do it”.
