Despite the Strait of Hormuz still being closed, the US-Iran conflict still ongoing and oil remaining above $100 per barrel, global markets rebounded after the sell-off in March. Newslines remain conflicted with some days President Trump announcing an end to the war and other days threatening to bomb Iran again. In one instance he even went as far as saying, and i quote in part, »A whole civilization will die tonight« as Iran refused to accept the US's terms to end the conflict.

The Iran conflict, closure of the Strait of Hormuz and consequently soaring oil price had an immediate impact on various macroeconomic data, most importantly on inflation. US inflation in March soared by 0,9 percentage points in a month, the largest increase in nearly four years when inflation popped worldwide in the aftermath of COVID. On annual basis inflation climbed from 2,4% in February to 3,3% in March, driven by higher energy prices such as for fuel oil and gasoline. Core inflation, which excludes food and energy products only climbed slightly from 2,5% in February to 2,6% in March, but we expect that to increase in the longer term as the higher energy prices will trickle into prices of other produced goods.

As a result expectations of an interest rate cut in 2026 by the Federal Reserve have considerably reduced while expectations of a rate increase are gaining traction. A rate increase would hamper economic growth. Also US consumer sentiment dropped to an all-time low of 47.6 in April from 53.3 in March. The deterioration in sentiment was across age, income and political party affiliation, though the survey noted that almost all the responses came before a ceasefire agreement earlier this week in the U.S.-Israeli war with Iran.

Also in other regions inflation increased sharply. In the Eurozone inflation popped from just 1,9% in February to 2,5% in March with further increases likely. We're sure you noticed the prices of gasoline strongly increasing in Slovenia also. This is the direct consequence of the closure of the the Strait of Hormuz through which around 20% of global oil is transported. The higher inflation puts the ECB in a difficult position as Eurozone GDP growth is once again struggling to achieve even 1% growth on an annualized basis. If high inflation perists, we expect the ECB to raise the interest rate again, but only modestly.

Despite the negative macroeconomics, the US markets soared in April, countering the March correction, supported by a fragile US-Iran ceasefire and by strong US employment numbers. Particularly the semiconductor industry soared on growing capital investment in chips for artificial intelligence. The Dow Jones, S&P500 and Nasdaq Composite indices soared 7,14%, 10,42% and a staggering 15,29% respectively. The dollar lost a modest 1,55% to 1,1732$/EUR.

In Europe the DAX, CAC and Eurostoxx indices also gained, adding 7,11%, 3,81% and 5,60% respectively. Also Slovenia's SBITOP gained 7,66% and UK's FTSE index gained a modest 1,99% with the pound Sterling adding another 1,28% currency gain. In Asia the Nikkei gained a strong 16,10% and Hong Kong Hang Seng index gained 3,99%. Over the whole month the energy sector underperformed after its strong gain in March as a result from the higher oil price.

Oil remained firmly above $100 per barrel with WTI futures adding 3,64% to close at 105,07 dollars per barrel. Precious metals had little change with gold futures dropping 1% to 4629 dollars per ounce.

Rudy Marchant

Fund manager Primorski skladi

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