Earnings Strength Overshadows Gulf Stalemate

For the week ending 1 May 2026

As of midday Friday, global equities were trading close to record territory amid astonishing earnings growth from megacap technology companies. The yield on the US 10-year Treasury note rose to 4.39% from 4.30% last Friday, while the price of a barrel of West Texas Intermediate crude oil rose about $8 to $102.75 as the standoff in the Strait of Hormuz continues. Volatility, as measured by futures contracts on the Cboe Volatility Index (VIX), was little changed at 19.3.

IRAN CRISIS

Oil prices extended their gains this week as in-person negotiations between US and Iranian officials were canceled. Iran had proposed that they would reopen the Strait of Hormuz if the US lifted its naval blockade of the waterway (setting aside nuclear negotiations to a later date), but the US rejected the proposal late this week. This news came amid reports that US President Doanld Trump is both planning to extend the naval blockade against Iran, potentially for months, and preparing for a potential “short wave” of strikes on Iran if they don’t come to the table for nuclear negotiations. So far, Iran has been firm that they want to retain the right to enrich uranium. Iran reportedly submitted a new peace proposal to the US via Pakistan on Thursday.

Brent crude futures reached $126 briefly on Thursday before easing.

This week, the Pentagon estimated that the war has cost $25 billion, to date.

The blockade is pressuring Iran’s oil sector, which is quickly running out of storage capacity. Analysts say that old equipment and mature fields make forced production cuts particularly risky.

Meanwhile, earlier this week, Trump floated a new strategy to reopen the strait. Under his plan, the US would continue its blockade on Iranian ports while coordinating with allies to impose higher costs on Iran’s attempts to subvert the free flow of energy, according to a senior administration official. The effort, called the “Maritime Freedom Construct,” was spelled out in an internal State Department cable sent to US embassies on Tuesday that called on diplomats to pressure foreign governments into signing up.

Amid continuing friction between Trump and a number of European leaders, the president mused this week about reducing the number of US troops in Germany, Italy and Spain.

MACRO NEWS

Fed holds rates steady; Powell to stay on

Jerome Powell’s final FOMC meeting as chair was anything but uneventful. The US Federal Reserve held rates steady, as widely expected, but four voters dissented. Governor Stephen Miran voted to lower rates a quarter-point, while three others voted against including an easing bias in the policy statement. Early in his press conference, Powell surprised many by announcing that he will stay on at the Fed as a governor for “a period of time to be determined” to defend the central bank’s independence against what he described as “unprecedented” legal and political attacks from the Trump administration. Regarding monetary policy, with inflation holding above target for the past five years, the disagreement among committee members over the appropriateness of the current easing bias suggests that a shift to a more neutral policy stance could take place as soon as the June FOMC meeting.

US Treasury Secretary Scott Bessent criticized Powell’s decision, saying it breaks with Fed tradition, while President Trump said Thursday that he doesn’t care if Powell remains on the Fed’s board.

Powell’s term as chair ends on May 15, but he can remain a governor until January 2028. On Wednesday, the Senate Banking Committee advanced the nomination of Kevin Warsh as Fed chair, though a vote of the full Senate has not yet been scheduled.

Elsewhere, the Bank of Japan, the Bank of Canada, the Bank of England and the European Central Bank all held rates steady this week.

UAE quits OPEC

The United Arab Emirates’ decision this week to abandon its membership in OPEC could weaken the cartel’s ability to maintain production caps on its remaining members. The UAE has long produced much less than its estimated capacity of 4.8 million barrels per day. After leaving OPEC, the UAE can independently increase output. While the move is unlikely to impact oil prices in the near term due to the ongoing closure of the Strait of Hormuz, increased production should help dampen prices in the long term.

QUICK HITS

Outside the US, manufacturing PMIs continued to rise in April. Amid supply chain disruptions from the war in Iran and demand for AI-related equipment, new orders jumped as companies looked to build precautionary inventories. The ISM prices paid index rose to its highest level since April 2022, shortly after Russia invaded Ukraine. 

The S&P 500 Index gained 10% in April, it’s biggest monthly gain since November 2020.

On Thursday, the US House of Representatives approved a bill to fund most of the Department of Homeland Security, ending a 76-day partial shutdown.

S&P Dow Jones Indices has proposed a rule change that would shorten the amount of time a company needs to be public before being included in its indices from one year to six months. The move comes ahead of a number of expected megacap IPOs later this year. Earlier this year, Nasdaq adopted its own “fast entry” rule, which will allow megacaps listed on that exchange to join the Nasdaq 100 index after just 15 trading days.

Bloomberg reported this week that China’s state-owned refiners have begun applying for government permits to resume fuel exports in May, citing plentiful domestic stockpiles. Inventories across China have swelled due to weak demand, which has been impacted by higher domestic fuel prices and electric vehicle use.

US energy exports have been a big beneficiary of Middle East tensions, with exports of crude and petroleum products hitting a record of nearly 14.2 million barrels per day for the week ending April 24.

The Case-Schiller US national home price index rose 0.7% year-over-year in February, down from 0.8% YoY in January.

The Conference Board Consumer Confidence index came in at 92.8 in April versus expectations for 89.0, the highest reading this year. The gap between respondents reporting that jobs were plentiful and those indicating jobs were difficult to obtain improved for the second consecutive month.

Germany is planning to increase defense spending by 20% in 2027 compared with this year, according to the Financial Times.

On Thursday, Fitch Ratings maintained the US Government’s AA+ rating with a stable outlook while pointing out that widening deficits and climbing debt are challenges. A large, dynamic economy, the dollar’s reserve status, and the depth and liquidity of US capital markets are key strengths, Fitch said.

US durable goods orders rose 0.8% in March while core goods orders spiked 3.3%, led by demand of AI-related equipment, the largest monthly increase in that measure since June 2020.

President Trump spoke with Russian President Vladimir Putin on Wednesday, and the Russian leader reportedly offered to help with the issue of Iranian uranium enrichment. Trump said he would rather that Putin end the war in Ukraine. Trump later told reporters that Putin may soon announce a short ceasefire in the war in Ukraine to coincide with the anniversary of the end of World War II.

The Japanese yen rebounded from levels above 160 to the US dollar on Thursday amid reports of intervention to support its currency by Japan’s Ministry of Finance. Persistent inflation concerns and fears the BOJ are behind the inflation curve have undermined the yen.

US weekly jobless claims fell to a 57-year low of 189,000 this week.

US core PCE rose 0.3% month-over-month in April, down from 0.4% in March. On a year-over-year basis, the core rate rose to 3.2% from 3%.

Canadian GDP rose 0.2% month-over-month in February and 1% year-over-year.

The eurozone economy slowed at the start of 2026, growing 0.8% year-over-year, down from a 1.2% pace in Q4. Consumer prices in the region rose 3% year-over-year in April, up from 2.6% in March. The unemployment rate fell back to 6.2% in March from an upwardly revised 6.3% in February.

President Trump signed an executive order Thursday ordering the Treasury Department to set up a federal savings program for workers whose employers don’t offer a 401(k). Individuals who enroll will be eligible for a 50% government match on their first $2,000 in contributions, for a maximum of $1,000 in government contributions.

Following a state visit from King Charles III of the United Kingdom, President Trump said he would remove some tariffs on Scotch whiskey.

The US Senate on Thursday unanimously approved a ban on members and staff trading on predictions markets.  

EARNINGS NEWS

With about 63% of the constituents of the S&P 500 Index having reported, blended earnings per share (which combines reported data with estimates for those that have yet to report) rose an astounding 27.1% compared with the same quarter last year, led by a 50% jump in tech earnings, according to data from FactSet. Blended sales rose 11% over the same period. 

THE WEEK AHEAD

Monday: US factory orders; eurozone manufacturing PMI

Tuesday: Reserve Bank of Australia meeting; US services PMI, JOLTS, new home sales

Wednesday: UK and eurozone services PMI

Thursday: US nonfarm productivity; eurozone retail sales

Friday: US employment report; Japan services PMI

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Sources: MFS research, Wall Street Journal, Financial Times, Reuters, Bloomberg News, FactSet Research.