Lebanon ceasefire gives hope as US-Iran standoff continues

European markets continue to trend lower, as traders weigh up the prospective crisis looming large as Trump warns that he has all the time in the world to resolve the crisis in Iran. This is certainly not the case, with Asian shortages soon to reach European shores. as the final ships that left the Straits back in March reach their destination. The big-ticket story in Europe remains the airline cancellations, and while the cancellation of 20,000 Lufthansa flights may seem significant, that is likely to be the tip of the iceberg. Somewhat incredibly, the shareprice for UK airlines giant IAG remains in the middle of the 350-450p range exhibited over the course of the past 10-months. Is this this simply the calm before the storm?

This morning saw the latest UK retail sales report, wrapping up a week that has been dominated by UK data. A welcome 0.7% rise in retail sales built on the improved PMI surveys, and 0.5% monthly GDP figure. This would undoubtedly be the kind of recovery story that would have Starmer and Reeves shouting about if it wasn’t for the Iran war. However, it is notable that much of that strength in retail sales appears to be front-loaded fuel purchases as the Iran war took hold. With total retail sales excluding fuel rising by just 0.2%, this is yet another example of March stockpiling that paints a somewhat rosy picture that could yet sour in the months ahead. 

Yesterday saw a welcome three-week extension to the Israel-Lebanon ceasefire, although the ongoing standoff between the US and Iran brought little grounds for optimism. The hardened stance of the Iranian leadership means that they appear unwilling to even come to the table, while Trump has attempted to play it cool by stating that he has “all the time in the world”. Trump certainly appears to favour a negotiated agreement over a resumption of the military conflict, although he admitted that the decision to go back on the agreement that reopened the Straits last Friday was his own. The decision to extend the Lebanon deal is at least a nod to the fact that they are maintaining one of the key requirements requested by the Iranians; a decision which looks like Trump extending an olive branch to Iran. However, with both sides seemingly at an impasse, there is a fear that the impact on the global economy will only grow with each day that passes.