The Iran conflict dominated markets in April and triggered significant price swings. At the beginning of the month, Trump had suspended attacks on energy infrastructure for ten days, but fears of further escalation resurfaced as the deadline approached. On April 5, he threatened to target power plants and bridges should Iran refuse to reopen the Strait of Hormuz.
Initial relief came from his April 7 announcement to pause military action for another two weeks. Talks between the US and Iran in Islamabad further fueled hopes for a diplomatic breakthrough. However, optimism faded after US Vice President JD Vance stated that no agreement had been reached, followed by Trump’s announcement that ships would be blocked from passing through the Strait of Hormuz.
Nevertheless, markets continued to price in hopes of de-escalation, particularly after Trump later claimed that the conflict was “close to being over.” On April 17, reports that Iran would keep the Strait permanently open sparked strong market optimism: Brent crude fell to USD 90.38 per barrel, while the S&P 500 climbed to a record high.
As the ceasefire expired, Trump extended it again on April 21 until Iran presented a formal proposal. However, the lack of tangible progress and ongoing disruptions to shipping traffic pushed oil prices higher once more. A planned US visit to Pakistan was cancelled on April 25, and by April 29 speculation about renewed military strikes intensified. Brent crude ended the month at USD 114.01 per barrel.
Rising oil prices also intensified inflation concerns. US inflation accelerated to 3.3% in March, up from 2.4% in the previous month, while euro area inflation increased to 3.0% in April from 2.6% in March. This fueled stagflation fears and reinforced expectations of a more restrictive stance from central banks.
Although the Fed left interest rates unchanged, three regional Fed presidents pushed back against a more dovish policy path. Fed funds futures for December 2026 priced in only 3 basis points of rate cuts by month-end, compared to 7 basis points at the start of April.
Government bonds suffered under these developments, with yields in some markets reaching multi-year highs. Japanese 10-year government bond yields climbed above 2.5%, their highest level since 1997. German 10-year Bund yields closed at 3.11%, the highest since 2011, while UK 10-year gilt yields ended at 5.07%, their highest level since 2008. US 10-year Treasury yields rose to 4.37% (+5.4 bps).
Equity markets, by contrast, proved comparatively resilient. US equities and many emerging market equity indices posted particularly strong gains.
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