Oil prices slump on potential Iran and Russia breakthroughs

European markets are in the red this morning despite better-than-expected growth figures out of the UK. We are seeing a rather perverse phenomenon where selling pressures is seen across the board, from risk assets such as oil, crypto and equities, to havens like gold and the dollar. This comes off the back of a period that has seen widespread optimism, with Trump’s decision to roll back almost all his reciprocal tariffs being accompanied by the first trade deals that now see huge investment being pledged by the likes of Saudi and Qatar. Those deals have helped shield the US indices from some of the underlying weakness seen elsewhere in the market, with stocks such as Palantir, Nvidia, Boeing, AMD, and Qualcomm all seeing major investment pledges this week. Nonetheless, there is a feeling that the recovery may have gone too far, with the Nasdaq having regained 30% from their April intraday low.

The UK managed to post an impressive 0.7% GDP gain for the first quarter, beating estimates across the monthly, quarterly, and annual metrics. While this has done little to help drive the FTSE 100 higher, we are seeing some upside for GBPUSD. Looking into the data, it is the services sector which continues to carry the UK economy, gaining 0.7% for the quarter. However, the smaller production sector also made significant inroads, rising 1.1% in a move that may highlight the potential front-loading of purchases ahead of the imposition of Trump’s tariffs. With the UK having struck a trade deal with the US, there is a hope that economic confidence improves as we go forward, with the global outlook stabilising after recent uncertainty.

Oil prices are sharply lower today, with a raft of key updates highlighting the potential for higher supply and lower demand going forward. Russian and Ukraine are set to meet for their first direct talks in over three years, and whilst Putin looks to be absent, there is a hope that this could pave the way for a ceasefire. Meanwhile, Donald Trump’s efforts to strike a deal with Iran looks to be paying dividends, with the Iranians apparently willing to forgo highly enriched uranium in a bid to lower sanctions on the nation. Finally, the IEA have updated their latest demand forecasts, predicting that weaker economic growth and higher EV usage will mean oil demand of roughly 540,000 barrels per day. This stands in stark contrast to the 990,000 barrels per day seen in the first quarter.