Market snapshot: two steps forward, one step back 

An all too familiar theme has emerged, with markets taking two step forwards and then one step back, and almost entirely driven by news flow from the Middle East.

• Invest with ii: Open a Stocks & Shares ISA | ISA Investment Ideas | Transfer a Stocks & Shares ISA

On Friday, Iran reportedly declared that the Strait of Hormuz was “completely open”, lighting a fire under stocks and in particular those affected by the conflict so far, such as the airlines and cruise ship operators, while oil prices plummeted on the prospect of some kind of return to normality.

However, as has been the case over the last couple of months, a weekend packed with developments will set the tone for the beginning of this week. Iran apparently declined to join another round of peace talks ahead of the impending ceasefire deadline this week, while President Trump announced on Sunday that the US had fired on and seized an Iranian cargo ship, while the blockade in the Strait remained in full force.

• Stockwatch: a rare but risky example of rapid growth
• Shares for the future: nothing dull about this FTSE 100 stock

A familiar playbook emerged again, with oil prices spiking by 6%, although to lower highs, with the price currently standing at around $95 per barrel. Dow futures are now pointing to a weaker open by as much as 0.7%, unwinding some of the progress made during what was a strong week, which left the S&P500 and Nasdaq at record closing highs.

Meanwhile, the US quarterly reporting season ratchets up this week with a slew of company earnings due, including the likes of Boeing Co (NYSE:BA), American Express Co (NYSE:AXP), International Business Machines Corp (NYSE:IBM) and Intel Corp (NASDAQ:INTC). While the general tone has been positive and the numbers pleasing so far, the latest developments will put extra focus on any outlook comments from companies. A possible result is that more boardrooms decline to offer guidance for the next quarter, amid the higher energy prices, slower growth and supply chain disruptions which are clouding prospects.

• Week Ahead: AB Foods, Relx, Rio Tinto, Sainsbury’s, WH Smith
• Sign up to our free newsletter for investment ideas, latest news and award-winning analysis

In the meantime, and ahead of an inevitable pullback today, the Dow Jones is currently up 2.9% in the year to date, with record closing highs for the S&P500 and Nasdaq propelling gains of 4.1% and 5.3% respectively. The smaller cap Russell 2000 index has also popped on the prospect of easing monetary conditions, taking its gain so far this year to around 11%.

While short-term traders are attempting to navigate a parlous course which involves violent swings and uncertainty, longer term investors are tending to look through the noise and concentrate on a return to normality with a relatively benign economic backdrop currently in place. The FTSE100 has been something of a poster child for this investment mentality, and despite a weaker open after the weekend’s developments, the index remains firmly ahead by 7% in the year to date.

• ISA investing: nine ii experts reveal their ISA tips for 2026-27
• Funds and trusts the pros are buying and selling: Q2 2026

Even so, shorter term hits in opening exchanges were widespread, with International Consolidated Airlines Group SA (LSE:IAG) dropping on the fresh upward pressure on oil prices, Fresnillo (LSE:FRES) and Endeavour Mining (LSE:EDV) following the gold price lower and the banks and housebuilders falling foul of the renewed economic uncertainty. The rise of BP (LSE:BP.) and Shell (LSE:SHEL) at the open mitigated the overall loss, given their combined market caps of more than £265 billion, which is an important weighting within the index.