Markets stabilise as Iran deadline looms

Important information - the value of investments and the income from them can go down as well as up, so you may get back less than you invest.

The Middle East conflict has entered its sixth week - but it is still very unclear what happens next.

Over the Easter break, President Trump gave Iran a deadline of 8pm today (Eastern time) to reopen the Strait of Hormuz or face fresh attacks on civilian infrastructure such as bridges and power plants. This could have a significant human impact.

Amid the uncertainty, markets are fairly stable this morning. Nobody knows for certain how Iran will react or whether the US will follow through on its threats. This is not the first deadline, after all.

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Asia stumbles

Asian stock markets are a particular concern at the moment. After a dizzying 2025, the MSCI Asia Pacific index has fallen sharply over the past month, underperforming its US and European counterparts. This is because Asia gets about 60% of its crude oil from the Middle East., making it particularly vulnerable to higher energy prices.

Currency pressures have started to emerge, particularly in oil-sensitive economies such as India and Thailand. Governments in the region are trying to help. The Reserve Bank of India has taken action to prop up the rupee, for example, while authorities in Japan have stepped up their yen intervention threats.

Inflation watch

Asian economies are not the only ones affected, of course. On Friday, we will get a glimpse of how the Middle East conflict is affecting inflation in the US.

Analysts are expecting the headline rate of inflation to jump from 2.4% in February to over 3% in March. The US is more insulated from an energy crisis than Asia and Europe, as it has plenty of its own resources, but it is unlikely to emerge unscathed.

Inflation has a direct bearing on interest rates. For now, bets that the Bank of England and Federal Reserve will increase rates in response to the conflict have been scaled back. However, fears of ‘stagflation’- when inflation meets stagnant growth - loom large.

We will learn more later this month. The Bank of England is due to announce its next interest rate decision on Thursday 30 April. It held rates at 3.75% in March following a unanimous decision from the Monetary Policy Committee. The Federal Reserve will report its own decision on Wednesday 29 April.

In the meantime, mortgage rates in the UK have been rising. The average two-year fixed rate has jumped from 4.83% at the start of March to well above 5% today, according to the financial information service Moneyfacts. Mortgage borrowers coming to the end of five-year fixed deals face a particularly nasty shock, given they would have secured their previous deals when the base rate was just 0.1%.

• Read: Where next for interest rates?

New tax year

Economic news in the UK is fairly light following the Easter break. However, as we push into a new tax year, investors will be thinking about what to put in their ISAs and pensions.

It is a nerve-wracking time to be making money decisions. Cast your mind back to last April, however, and the world was reeling from so-called ‘Liberation Day’. America’s sweeping tariff regime threatened to upend global trade and caused markets to briefly tumble. A year later, our worst fears have not been realised.

This is not to underplay the significance of the Middle East conflict - or the human cost. It is simply a reminder that events can unfold very quickly, and trying to time the market is often a fool’s errand.

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