Weekly Market Review - 18-05-2026

6 days ago
5 min read

This week’s market update saw US equities continue to strengthen despite ongoing geopolitical uncertainty and rising inflation pressures linked to higher energy costs. Commodity markets remained volatile as oil prices surged on renewed concerns surrounding the Strait of Hormuz, while central banks maintained a cautious tone on inflation and interest rates. Political developments in the UK and wider geopolitical tensions also remained firmly in focus throughout the week.

Market Recap.

Equity markets delivered a broadly positive performance this week, with investor sentiment improving across US markets despite continued uncertainty around the global outlook.

UK equities moved slightly lower, with the FTSE 100 ETF falling 0.48%, reflecting a more cautious tone across large-cap domestic stocks.

In the United States, markets performed strongly. The Dow Jones Industrial Average ETF edged higher by 2.12%, while the S&P 500 ETF rose 2.39%, highlighting renewed strength across broader US equities and improving investor confidence.

Technology stocks also continued to perform well, with the Nasdaq 100 ETF posting a solid gain of 2.00%, supported by ongoing demand for growth-oriented companies.

News.

UK politics remained a major focus this week following local election results across England, Scotland and Wales, which renewed discussion around Labour’s leadership and future direction ahead of the next general election.

Attention has shifted toward the upcoming Makerfield by-election, where Greater Manchester Mayor Andy Burnham is expected to stand as Labour’s candidate.

The debate also reignited discussion around Brexit and the UK’s relationship with Europe after former Health Secretary Wes Streeting described Brexit as a “catastrophic mistake” and suggested Britain could one day move closer to the EU again.

Meanwhile, Deputy Prime Minister David Lammy reiterated that the government remains committed to Labour’s existing Brexit “red lines”.

Inflation.

Inflation pressures have intensified again in the United States, with consumer prices rising at their fastest pace since 2023 as the economic impact of the Iran conflict increasingly feeds through into the wider economy.

US inflation rose to 3.80% in April, up from 3.30% in March, driven largely by surging energy costs following disruption to global oil supply routes and the effective closure of the Strait of Hormuz. According to the Bureau of Labor Statistics, almost half of the increase was linked to rising fuel prices, while housing and food costs also continued to contribute to broader inflationary pressure.

The national average price for gasoline has climbed to around $4.50 per gallon, its highest level since mid-2022, reflecting the sharp rise in global oil prices in recent weeks. The increase has also fed through into other sectors of the economy, with airline fares rising 20.7% in April as higher jet fuel costs pushed up travel prices.

Central Banks.

European Central Bank President Christine Lagarde has warned that policymakers remain highly alert to growing volatility across global financial markets, particularly as rising geopolitical tensions continue to influence inflation expectations, bond markets and investor sentiment.

Speaking this week, Lagarde commented on the recent sell-off in global bond markets, stating: “I always worry — that’s my job,” highlighting the cautious stance being taken by central bankers as markets react to persistent inflation pressures and uncertainty surrounding the global outlook.

Lagarde acknowledged that recent market movements reflect a combination of elevated inflation concerns, higher energy prices and shifting expectations around future interest rate policy. Bond yields have risen sharply in recent weeks as investors reassess how long central banks may need to keep interest rates elevated in order to contain inflation.

Commodities.

Commodity markets remained volatile this week, with movements across precious metals and energy markets continuing to reflect heightened geopolitical uncertainty and shifting investor sentiment.

Precious metals moved slightly lower over the week despite continued safe-haven demand. Gold eased to around $2,330 per ounce from approximately $2,360 last week, while silver remained near $28 per ounce, broadly unchanged from the previous week, reflecting continued investor caution amid ongoing global uncertainty.

In energy markets, oil prices surged higher. WTI crude rose to around $104 per barrel, compared with approximately $87 last week, while Brent crude increased to near $110 per barrel from around $91 previously. The gains reflect escalating concerns surrounding geopolitical tensions, particularly around the Strait of Hormuz, and the growing risk of disruption to global energy supply routes.

ESG.

The European Union has unveiled plans to provide heavy industry with up to €4.7 billion in carbon cost relief through a proposed expansion of free emissions permits under the EU Emissions Trading System (ETS).

The proposal is designed to help energy-intensive sectors such as steel, cement and chemicals remain competitive as businesses continue transitioning toward lower-carbon operations. EU officials argue the temporary support will help prevent “carbon leakage”, where companies relocate production outside Europe to avoid stricter climate regulations and higher environmental costs.

Under the plans, eligible industries would receive additional free CO2 allowances to offset rising carbon costs while continuing to invest in decarbonisation and cleaner technologies. Policymakers stressed that the support is intended to balance climate ambitions with economic competitiveness during a period of elevated energy prices and geopolitical uncertainty.

Geopolitics.

Politics took on a musical note this weekend as the Eurovision Song Contest final in Vienna became overshadowed by wider geopolitical tensions linked to the ongoing conflict in Gaza.

Bulgaria secured its first ever Eurovision victory, with singer DARA winning the contest with 516 points for her song Bangaranga. However, much of the attention surrounding this year’s event focused less on the music itself and more on the political controversy surrounding Israel’s participation.

Several countries, including Ireland, Spain, Iceland, Slovenia and the Netherlands, boycotted the contest in protest over the Gaza conflict, making it one of the largest Eurovision boycotts in decades. Demonstrations also took place across Vienna during the week, with organisers increasing security around the event amid heightened tensions and public protests.

Week Ahead.

United States

In the United States, attention this week will focus on Federal Reserve commentary, housing data and business activity indicators. Markets will closely watch the release of the FOMC meeting minutes on Wednesday 20 May for further insight into the Federal Reserve’s outlook on inflation and interest rates. On Thursday 21 May, Housing Starts and Building Permits data will provide an update on the health of the US housing market amid elevated borrowing costs. The week concludes on Friday 22 May with the preliminary University of Michigan Consumer Sentiment Index and S&P Global Flash PMI data, offering fresh insight into consumer confidence and business activity across the manufacturing and services sectors.

United Kingdom In the UK, inflation and consumer activity will remain the main focus. The latest UK Consumer Price Index (CPI) figures are due on Wednesday 20 May and will be closely watched for signs of persistent inflationary pressure and implications for future Bank of England policy. Retail Sales data follows on Friday 22 May, providing further insight into consumer spending trends and the resilience of the UK economy. Markets will also continue to monitor commentary from Bank of England officials throughout the week.

Eurozone

Across the Eurozone, attention will centre on inflation and forward-looking business sentiment indicators. Final Eurozone inflation data is expected on Wednesday 20 May, offering confirmation on the latest trajectory of price pressures across the bloc. On Friday 22 May, S&P Global Flash PMI releases for the Eurozone, Germany and France will provide an early snapshot of economic activity and investor sentiment across the region. Investors will also continue to monitor commentary from European Central Bank policymakers for signals on inflation, interest rates and the broader monetary policy outlook.

It is important to note that the geopolitical situation remains highly fluid, and developments are changing rapidly. As such, the outlook may shift quickly as new information emerges.