Please see the below article from Brooks Macdonald detailing their discussions on the Geopolitical environment currently stimulating markets. Received this morning 22/09/2026.
What has happened?
Global equity markets rallied yesterday as hopes of a diplomatic solution in the Middle East helped ease concerns over energy prices. Brent crude oil (-3.40%) briefly fell below $100/bbl, while in the US, the S&P 500 (+1.43%) rose for a third consecutive session and recorded its best day in seven weeks, leaving it just -0.44% below last month’s record high. Tech stocks led the gains, with the Nasdaq (+2.26%) reaching new high. Meta (+11.43%) rallied amid optimism surrounding its Muse AI agent, while AMD (+9.95%) became the latest company to reach a $1trn valuation. European markets also advanced, with the STOXX 600 (+1.02%) and DAX (+1.07%) finishing higher.
Diplomatic hope ease the pressure on energy markets
The improvement in sentiment followed more encouraging headlines from the Middle East, including President Trump signalling that he would be open to meeting Iran’s President at the UN this week. Hopes of diplomatic progress drove energy prices lower, with European natural gas futures (-7.88%) recording their largest daily decline since July. Lower energy prices also eased some inflation concerns, prompting investors to scale back expectations for further rate hikes. Markets continued to fully price another European Central Bank rate hike by year-end, but the probability of a second hike fell from 52% to 40%. The reaction in the US was more muted, with 33 bps of Federal Reserve hikes still priced by year-end following hawkish comments from several regional Fed officials.
German politics enters unfamiliar territory
In Germany, Chancellor Merz’s CDU failed to meet the 5% threshold in Sunday’s state election in Mecklenburg-Western Pomerania, leaving it outside the regional parliament for the first time in Germany’s post-war history. Despite speculation over Merz’s position, he retains the backing of CDU leaders. Importantly for markets, any leadership change would not necessarily signal a shift in economic policy, given the limited opposition within the CDU/CSU to the government’s current fiscal stance.
What does Brooks Macdonald think?
Attention is increasingly turning to US-China trade relations ahead of the meeting between Presidents Trump and Xi later this week. The key issue for markets is what happens when the current one-year trade truce expires in November. Although the tone of negotiations remains constructive, the two sides have yet to agree on an extension. Reports suggest the US has proposed a six-month extension, while China favours a longer period. For markets, therefore, the significance of this week’s meeting may lie less in whether every outstanding issue is resolved and more in whether both sides can provide a credible path towards a more durable period of stability.
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Alex Clare
22/09/2026