Iran and the US reached a deal during June that allowed the Strait of Hormuz to reopen to commercial shipping. Following the announcement, the price of Brent crude oil fell to US$72.92 per barrel by the end of the month, compared with an intra-day peak of over US$126 during the conflict.
- The UK economy contracted in April
- The UK faces its seventh Prime Minister in a decade
- The BoE maintained interest rates at 3.75%
Oil price subsides on ceasefire: Iran and the US reached a deal during June that allowed the Strait of Hormuz to reopen to commercial shipping. Following the announcement, the price of Brent crude oil fell to US$72.92 per barrel by the end of the month, compared with an intra-day peak of over US$126 during the conflict. The FTSE 100 Index – which has a relatively large exposure to energy companies – rose by 0.8% over June, while the FTSE 250 Index fell by 1.8%.
“‘The UK’s economic challenges will not disappear with a change of prime minister’” (CBI)
Supply chain resilience: the Organisation for Economic Cooperation & Development (OECD) highlighted the economic vulnerabilities caused by “single chokepoints” like the Strait of Hormuz and urged governments to step up their efforts to improve supply chain resilience. During June, investors refocused on defence stocks as the UK government unveiled plans to increase spending on defence.
Economic activity takes a hit: the UK economy shrank by 0.1% during April as the war in the Middle East pushed up costs and dampened activity. The OECD expects UK economic growth to decline from 1.4% in 2025 to 0.9% in 2026, and then to rise to 1.1% in 2027. Unemployment is set to increase, while inflation is predicted to peak at 3.7% this year. The OECD called on the UK government to continue its ongoing fiscal consolidation.
Food-price inflation slows: despite higher energy prices, the annualised rate of inflation remained at 2.8% during May as the rate of increase in food prices slackened to its slowest pace since December 2024. Bank of England policymakers left interest rates unchanged at 3.75%, although two of the nine members of the Monetary Policy Committee voted for an increase. Inflationary pressures resulting from the war in the Middle East are expected to take some time to cool down.
Political uncertainty: the resignation of Prime Minister Sir Keir Starmer and the expected succession of Labour MP Andy Burnham as the UK’s seventh prime minister in ten years triggered fresh uncertainty in June, particularly with regard to government spending and taxation policy. Business groups called for clarity and stability. The British Chambers of Commerce commented: “Businesses can only deliver growth if the environment they operate in gives them the confidence to act” while the Confederation of British Industry warned: “The UK’s economic challenges will not disappear with a change of prime minister.”
To view the series of market updates through June, click here
