Do you ever get the feeling you ae living in a parallel universe? [Ed – every day I deal with you!] The UK Consumer Prices Index (CPI) fell to 2.6% in the 12 months to June 2026, down from 2.8% the previous month, as lower energy prices brought inflation down according to Professional Adviser. Transport – particularly motor fuels – and food and non-alcoholic beverages made the largest downward contributions to the monthly change in CPI, according to the latest data from the Office for National Statistics on 22 July. But I’ve watched the petrol prices at my local forecourt rise by 10ppl over the last week. I’m going to assume that the poor oil companies are raising prices in anticipation of further delays in supply (although when did the previous delays get resolved?) as the conflict in the Middle East threatens to spread out from the Straits of Hormuz to the Red Sea.
Timing, as they say is everything.
And talking about timing our latest new prime minister kissed the King’s hand this week (which if literal rather than metaphorical wouldn’t have been pleasant for either of them, I’m sure) and set about introducing a series of changes designed to reduce costs for electricity users, bus travellers, and the hospitality industry, just as oil prices went above $100 a barrel. Together with gas prices are the highest they have been for three months and the effects of this will more than likely dwarf the policy effects. As political slogans go; ‘You would have been more worse off’ hardly cuts it. [Ed – apologies to anyone from a marketing department for this pathetic attempt, which I hope is a deliberately poor effort!]
Louis Coke, Director of Private Clients at Charles Stanley has provided a further ad-hoc update of the situation.
Since my last correspondence on 10th July, the situation in the middle east has changed, and markets are starting to react to the potential consequences.
The April ceasefire agreement between Iran and the US has recently moved beyond the fragile truce that characterised its early period and towards a more unstable and potentially dangerous phase. While a return to full-scale conflict is not inevitable, recent developments have increased the risk of further escalation and the associated economic consequences. Investors are therefore paying closer attention to the military, political and supply-chain pressures that could shape the next stage of the crisis.
Over the past week, tensions have been fuelled by continued military exchanges, threats to commercial shipping in and around the Strait of Hormuz and further US military action targeting Iranian assets. At the same time, meaningful diplomatic engagement between Washington and Tehran appears to have stalled, leaving the parties some distance from any clear path towards de-escalation.
In a significant new development, the Iran-backed Houthi movement in Yemen has opened what could become a second front in the regional confrontation by threatening and attacking shipping routes in the Red Sea, including vessels linked to Saudi Arabia near the Bab el-Mandeb Strait – the southern gateway to the Suez Canal. The timing is notable because it complements Iranian pressure on the Strait of Hormuz, potentially giving Tehran and its regional proxies influence over two of the Middle East’s most strategically important maritime trade routes.
Any sustained disruption in the Red Sea would pose a significant challenge for global supply chains. Approximately 12%-15% of global maritime trade passes through the Red Sea and Suez Canal corridor, and any prolonged interference could force vessels to divert around the Cape of Good Hope. Such rerouting increases costs, lengthens delivery times and creates additional uncertainty for businesses already managing complex supply networks.
Although the level of fighting remains below the peak reached earlier this year, the recent deterioration points to an increasingly unstable political and military stand-off. As a result, predicting either the trajectory of the conflict or the timeline for a lasting resolution remains extremely difficult.
The longer these disruptions and complexities persist, the greater the potential economic impact. While supply chains can absorb short-term shocks, prolonged restrictions to major shipping routes could result in more meaningful inventory drawdowns and supply shortages. Over time, this would increase the risk of upward pressure on both energy prices and broader inflation. As I mentioned in my 10th July note, we have already had sizeable oil inventory drawdowns from the early part of this conflict, so we now enter this second phase with a much smaller buffer. From a European perspective, now is also the time when Europe would normally be refilling gas storage, ahead of winter. European gas storage is at low levels both in absolute terms (as expected at this point in the year) but also relative to storage levels of prior years.
Political considerations may also become increasingly important in the coming months. With the US midterm elections drawing closer, persistently elevated energy and fuel prices could place additional pressure on Washington to find a resolution. Equally, any further escalation risks exacerbating inflation concerns, complicating the outlook for interest-rate decisions by central banks and weighing on economic growth.
Recent events are likely to have long-lasting implications. While investors have broadly looked through the geopolitical noise so far (helped by spending and development of artificial intelligence), the past quarter has served as a reminder of how quickly external shocks can emerge and affect markets. It has also reinforced the importance of maintaining well-diversified portfolios that are capable of weathering a range of economic and geopolitical outcomes.
From an equity market perspective, strong corporate earnings and resilient investor sentiment remain important supports. This has helped major global indices such as the S&P 500 and Nasdaq continue to trade near record highs, despite the increasingly uncertain geopolitical backdrop. The risks arising from a conflict such as this, which is far from being resolved, should not be underestimated. We therefore remain vigilant, monitoring all developments closely.
And in this week’s Markets in a Minute from RBC Brewin Dolphin, Head of Market Analysis, Janet Mui, breaks down the recent semiconductor stock sell-off and the latest U.S. economic data.
Key highlights
- Tensions in the Middle East intensify, lifting oil prices and reminding investors that inflation risks remain uncertain, reinforcing a cautious approach from central banks.
- Semiconductor stocks sell off sharply despite strong results from TSMC and ASML, suggesting the weakness reflected profit-taking, leveraged positioning and valuation concerns rather than deteriorating AI fundamentals.
- The U.S. economy remains resilient, with healthy consumer spending, a stable labour market and solid bank earnings continuing to support the broader outlook.
The Section Trying to Second Guess What the New Prime Minister Might Do
John Wyn-Evans and Senior Asset Allocation Analyst at Rathbones, Adam Hoyes look at what Andy Burnham’s arrival in Number 10 – and John Healey’s surprise appointment as Chancellor next door, in Number 11 – could mean for markets and the UK economy, in the attached paper.
Burnham’s call for fiscal “flexibility” has already nudged gilt yields higher, a reminder that investors remain wary of any hint the government might become more liberal in its fiscal policy.
Healey brings deep Treasury experience to the role, but also a likely desire to find more money for defence after resigning from that brief last month.
The big challenge is growth. With debt high, borrowing costs elevated, taxes heading for record levels, and public services under strain, the new Chancellor’s best route to healthier public finances is a larger, more productive economy.
Rathbones have set out five recommendations that could help get the UK moving again. These include using pensions to support productive investment, and reforming business and property taxes.
According to Steve Berridge, who is pensions technical services manager at IFGL Pensions, what is undeniable is that Burnham has a huge task ahead of him.
Those of us in the pension world will be intrigued to see how things develop. In April 2027 for example, defined contribution pensions are due to fall within the remit of inheritance tax for the first time. This is going to be a big deal for many people either approaching retirement or in retirement, who hold sizeable unused pension pots.
The inheritance tax changes were of course announced by Rachel Reeves who has already been replaced as chancellor by John Healey in a surprise appointment. What do we know about Healey? Well, he is a long-standing MP, having been elected at the time of Tony Blair’s initial triumph in 1997. He served as economic secretary to the Treasury from 2002 to 2005 and then as financial secretary to the Treasury from 2005 to 2007 under Gordon Brown. Most recently he was British secretary of state for defence and resigned in June 2026, arguing the Defence Investment Plan agreed by Rachel Reeves was insufficient to meet the UK’s security commitments and defence objectives.
It seems Healey is viewed as an experienced pair of hands, one who it is hoped can steer the treasury towards calm waters after what has been a somewhat turbulent period involving some controversial legislation.
Returning to Burnham, it is believed he may favour further increases to Capital Gains Tax (CGT) and possibly a wealth tax. Any such moves might impact the pension industry. The former could in fact make pensions more attractive, given that gains from pension investments are free from CGT, but debate rages over whether the latter might lead to an increase in the departure of high-net-worth individuals from these shores, which would not be such good news for the UK pension industry.
It is interesting to note that Healey was involved at the Treasury during the era that Gordon Brown introduced the 2004 Finance Act, a piece of legislation that still stands as a colossus in the pension world over 20 years later. Will he make any last-minute changes to the UK Finance Bill 2025-26, which is introducing the forthcoming sweeping changes to IHT? We know that commitments have been made to the old age pension, but currently little has been said about the private pension world which so many UK workers rely on.
What is certain is it will be a fine balancing act for the new front bench team. Trying to manage the public finances, already affected by the increasing costs of borrowing, while trying to retain confidence in UK plc, is a tough ask
Market News
As usual we start off with the team from Tatton Investment Management and the Tatton Weekly covering the following topics, and with another great cartoon from Blower:
- Hiatus in optimism – UK bond markets did not welcome our new PM, and global bond markets are not happy with the US and Japan, even before the Red Sea was added to the Strait of Hormuz as an economic weapon.
- Oil rises but who wants it? – Back to $100 a barrel, the oil price is volatile, but the global supply crisis has not materialised. We look at why oil demand has not matched the doomsday speculation caused by the Iran war, yet.
- When momentum runs out – The AI boom sent stock prices for chip makers booming, but recent swings point to momentum trading rather than an underlying issue for the sector.
In their latest Weekly Digest, Head of Market Analysis at Rathbones John Wyn-Evans looks at why investors need enough shots on target to keep portfolios moving forward, without leaving the defence wide open.
He argues that markets are no longer relying solely on the early AI winners, with investors rotating across sectors rather than heading for the exits. That phenomenon is encouraging. It’s helped by a strong start to the US earnings season and renewed strength in areas such as healthcare, energy, and financials.
But the risks have not disappeared. Inflation, oil prices and the Middle East remain potential trip hazards, while sharp share price reactions to disappointing results show why diversification and measured risk-taking still matter.
7IM’s Quirky Look at Things
Have you been putting your suncream on? Have you?
36% of Brits don’t use suncream regularly in the summer. Half of the population get sunburnt at least once a year – for younger people (18-32) it’s two thirds …*
And yet, everyone knows they should be wearing it. So why does the lotion stay in the drawer?
Well, academically, the reason is “intertemporal discounting.” Or as Homer Simpson would put it “That’s a problem for future Homer!”
When you’re thinking about the future, you’re considering two versions of yourself. But one of them is a vague, fuzzy person you haven’t met, while the other is RIGHT HERE RIGHT NOW!
Which means that the benefits of putting on suncream (reduced likelihood of melanoma) are often outweighed by the temptation to simply close your eyes and not get up from the lounger.
And of course, we see the same behaviour with investing.
Saving for your pension is difficult to think about – and the younger you are, the harder it is (as with suncream). But! If you can somehow make the future more visible/concrete/tangible, you can trick your brain a little bit.
In an experiment in 2011**, psychologists offered people the chance to choose a savings amount for retirement.
The trick was that some of them saw an aged photo of themselves at retirement age (see below with Ben Kumar).
Those who saw themselves in a few decades time allocated twice as much to their retirement account. Suddenly, “future Homer” was more real and easier to think about.
A study in 2026*** pushed it even further, getting participants to write a diary about their future self for a week, using the aged photo for inspiration. Those who had done so were still thinking about retirement planning six MONTHS later …
So, while most of the planning industry thinks the chart below is all the evidence you need to start saving …
Source: 7IM. For illustrative purposes only. The return assumptions used are not guaranteed, and actual outcomes may be higher or lower.
… don’t be surprised if we to start by taking a picture of you at the next review meeting and add some grey hairs before talking about the maths!
Has Your Time Been Profitable
I hesitate to include the following because the actual amount anyone needs is completely dependent upon their circumstances, but it is a question we are often asked; “How much should I have built up so far?”
Data from the ONS shows the average net worth in Great Britain peaks for people between the ages of 60 and 64. Those in this age group have a median net worth of £380,100. When using the mean measurements, the age at which net worth peaks moves up to 65 to 69 at £597,200. Above this age group, the average net worth starts declining as many enter retirement and start drawing an income from their pension wealth.
The table below shows how net worth changes by age. Note the latest data covers survey findings between 2018 and 2020.
| Average wealth by age | ||
| Age band | Median net worth | Mean net worth |
| 16 to 19 | 14,000 | 19,100 |
| 20 to 24 | 15,300 | 23,600 |
| 25 to 29 | 24,200 | 46,800 |
| 30 to 34 | 44,700 | 85,500 |
| 35 to 39 | 74,300 | 142,500 |
| 40 to 44 | 131,000 | 241,900 |
| 45 to 49 | 173,500 | 310,100 |
| 50 to 54 | 224,800 | 380,700 |
| 55 to 59 | 306,500 | 515,000 |
| 60 to 64 | 380,100 | 586,900 |
| 65 to 69 | 355,800 | 597,200 |
| 70 to 74 | 319,700 | 504,700 |
| 75 to 79 | 281,400 | 431,200 |
| 80 to 84 | 252,700 | 367,500 |
| 85 to 89 | 286,600 | 384,300 |
| 90 plus | 223,900 | 322,400 |
Source: Office for National Statistics, Distribution of individual total wealth by characteristic in Great Britain: April 2018 to March 2020 (7 January 2022)
Regardless of your current ‘worth’ if you want to know whether it is going to be enough for you personally, please speak to your usual JB Wealth advisor.
Miscellaneous
Torsten Bell has stayed in his role as pensions minister in a move welcomed as bringing “certainty and continuity”. According to the government’s list of ministerial appointments, Bell will remain parliamentary secretary jointly in HM Treasury and the Department for Work and Pensions. Steve Webb, partner at pensions consultancy LCP, and former Pensions Minister, said it was good news the country was not going to see its “third new pensions minister in barely two years”.
Alternative investment management firm Boldhaven has disclosed a 5.6% stake in Manchester United. The London-based form has built up 3.1 million class A shares in the Premier League club, which is listed on the New York Stock Exchange (NYSE), according to a filing made on to the Securities and Exchange Commission (SEC) on Tuesday (21 July). Here’s one I hadn’t given much thought to, but how forgiving of that investment would you be if you are from the blue side of Manchester?
It wasn’t quite time-travel but as the King and Queen used the Tardis to arrive at the Commonwealth Games in Glasgow and Scotland’s Duncan Scott and Faye Rogers win swimming golds for the host nation on day one, I’m off to watch what I hope will be an excellent 11days.
I hope to catch up with you again before the end of it.