Oil set for highest close since 2014

It’s been another good week for oil bulls with Brent crude hitting a 3 ½ year high above the $80 a barrel mark as the fallout from the US withdrawing from the Iranian Nuclear deal continues to drive prices higher. Prices has gained more than 3% on the week and is up by almost 80% since last June’s low.

EU seek to sidestep Iranian sanctions  

The latest leg higher in this rally has come due to supply concerns surrounding Iranian production with the reimposition of US sanctions threatening to take as much as 1m barrels per day (bpd) off the table. This number doesn’t just reflect US purchases from Tehran, with Washington hoping that others, notably the EU, will follow suit for fear of damaging their ties with the US. Despite this the EU is looking to revive a piece of legislation that was first introduced in 1996 to circumvent US sanctions on Cuba but never actually used, with the so-called “blocking statute” seen as a way of allowing Iranian trade to continue. Should this play out then the impact on Iranian crude exports may not be as severe as first thought and therefore price may retrace some of its recent gains. 

UK cabinet agree on backstop option for customs union

Brexit developments are coming back into focus as far as the markets are concerned, with the pound clearly sensitive to recent reports on a future customs union between the UK and EU. The proposal that the whole of the UK will remain in a customs union with the EU after 2021 until an alternative solution is found to having a hard border in Ireland is to presented to a European Council meeting next month and essentially would provide a backstop option intended to avoid causing friction in a highly contentious area. 

FTSE looking to end the week at record peak

Barring a dramatic reversal this afternoon the leading UK stock index will have posted 8 consecutive weekly gains and could well be set for another all-time closing high after ending Thursday fractionally above its previous peak set back in January. The market has this morning fallen just short of its previous intra-day high at 7791 but with the benchmark benefitting from both a softer pound and an improved global risk sentiment then there could well be a Friday rip higher into uncharted territory ahead of a weekend containing two big events for Britain with the royal wedding and FA cup final.