Client Update - 19th June 2026

The Bank of England kept interest rates unchanged yesterday at 3.75%, as falling oil prices eased some of the inflation risks created by the recent Middle East conflict. The Monetary Policy Committee voted 7–2 to hold rates, with two members favouring a small increase due to concerns that higher energy costs could still feed into wages and business pricing.

Oil prices had surged when the Strait of Hormuz was disrupted earlier in the year, but they have since declined following a new interim agreement between the US and Iran. This has reduced pressure on UK inflation, which remained at 2.8% in May — above the Bank’s 2% target but stable.

Governor Andrew Bailey said the Bank is prepared to tolerate slightly higher inflation temporarily but will act quickly if broader price pressures re emerge. The Bank now expects inflation to rise modestly later this year, though forecasts are lower than previously estimated.

The market reaction was muted: the pound was little changed, and traders still expect at least one rate rise before year end. Analysts noted that the UK economy remains subdued, with slow underlying growth and a cooling labour market, including the weakest private sector wage growth in more than five years. That is before we throw in the Andy Burnham left field threat to Sir Keir Starmer after winning the Makerfield by-election and the subsequent upheaval it will bring to parliament and probably taxation and fiscal policy.

With regards to the ceasefire, the United States and Iran have agreed to an electronically signed interim deal that extends their ceasefire and begins easing tensions following months of conflict. According to public statements, the agreement includes steps by both sides to reopen the vital Strait of Hormuz and lift certain US sanctions, though the arrangement has already drawn criticism within Washington.

President Donald Trump confirmed he approved the memorandum of understanding (MoU) while attending the G7 summit in France. Under the deal, Iran will gradually reopen the Strait of Hormuz — a waterway that carries roughly 20% of global oil supply — which has been largely closed since the US and Israel began military operations against Iran in February. In return, the US will begin lifting its naval blockade and allow Iran limited oil exports during a 60 day ceasefire extension.

Early signs of renewed confidence appeared quickly, with several tankers and cargo vessels transiting the strait shortly after the announcement. Oil prices fell as markets reacted to the easing of tensions.

The MoU outlines broader ambitions for a final settlement, including the potential lifting of all sanctions and a future nuclear agreement. It also proposes a $300bn international reconstruction fund for Iran, though the US says it will not contribute financially. Iran would be required to dilute its stockpile of enriched uranium under International Atomic Energy Agency supervision.

Some US lawmakers and regional allies have criticised the deal, arguing it offers too many concessions and does not address Iran’s ballistic missile programme or its support for regional militant groups. The administration maintains that further negotiations will cover regional security issues.

A formal signing ceremony is expected in Switzerland, hosted by Pakistan and Qatar, as both sides prepare for the next phase of talks. As always, we appear to be in a one step forwards, one step back geopolitical scene for the time being and after a strong US earnings season, markets are holding their ground pretty well. UK equities have been more subdued, and I am sure next week we can focus on the UK political scene post the by-election results. But until then, please do have a good weekend.