Please see the below article from Brooks Macdonald discussing the market relief rally as easing US-Iran tensions pushed oil prices lower and reduced inflation concerns — received this morning – 12/06/2026.
What has happened?
Markets rallied as hopes of a US-Iran agreement eased concerns about a prolonged energy shock. Brent crude fell towards a three-month low of around $88/bbl after reports that planned US strikes had been cancelled and that talks with Iran had progressed. The prospect of the Strait of Hormuz reopening helped pull the oil futures curve lower and reduced fears of another inflationary shock. The improvement in sentiment was broad-based. The US rose +2.2%, with technology, semiconductors and small caps rebounding strongly, while Asian markets also advanced overnight. Government bonds rallied as investors pared back expectations for rapid further rate hikes, with US Treasury yields falling across the curve. Elsewhere, the ECB raised rates by 25bps to 2.25%, while US PPI inflation came in stronger than expected at the headline level.
Oil repricing drives the relief rally.
Oil remains the key variable for markets. Recent fears centred on the risk that escalation around Iran and the Strait of Hormuz could create a stagflationary backdrop of higher inflation and weaker growth. The latest headlines have reduced that risk, at least for now, helping both equities and bonds rally. However, the speed of the reversal also highlights how sensitive markets remain to geopolitical newsflow. If a deal is delayed or proves less durable than hoped, volatility could quickly return.
What does Brooks Macdonald think?
The fall in oil prices is helpful for markets, as it reduces the immediate risk of an energy-led inflation shock and gives central banks more room to avoid a more aggressive policy response. Our short-duration fixed income positioning remains important in this environment, helping to limit sensitivity to renewed volatility in bond yields if oil prices or inflation expectations were to rise again. Overall, the recent rally is welcome, but the speed of the reversal reinforces the need for balanced portfolios that can participate in improving sentiment while remaining resilient if the geopolitical backdrop deteriorates again.
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Marcus Blenkinsop
12th June 2026