Next week will bring together three major concerns for investors: the conflict in Iran, the path of interest rates, and the rise of AI. Four of the world’s leading central banks will convene, pondering how long they can truly ignore the surge in energy prices due to the blocking of the Strait of Hormuz, while five of the ‘Big Tech Seven’ will release their results.
Here is what you need to know about the upcoming week in the financial markets, by Marc Jones and Dhara Ranasinghe in London, Lewis Krauskopf in New York, and Rae Wee in Singapore.
1/ THE CORRIDOR OF POWER Next week, like the eight before it, will be dominated by hopes of de-escalation in the war in Iran and the reopening of the Strait of Hormuz, the maritime chokepoint of the conflict. Iran has demonstrated its control over this shipping route. Although extensions of respective ceasefires between Washington and Tehran, and between Israel and Lebanon, have brought some respite, the fact that oil prices are once again trading well above $100 a barrel speaks to market concerns.
Diplomacy, signs of unofficial negotiations, and social media posts by U.S. President Donald Trump and Iranian Supreme Leader Ayatollah Mojtaba Khamenei will continue to fuel volatility. Especially now that Trump claims he will not rush into any agreement, desiring a ‘lasting’ outcome. This protracted conflict also deepens the rift between the United States and NATO. Trump has reiterated his criticism of alliance members for their lack of support during his strikes against Iran. According to officials, Washington is now considering sanctions on ‘difficult’ countries like Spain.
2/ KA-POWELL! The Federal Reserve, the world’s most influential central bank, is expected to keep interest rates unchanged on Wednesday. Attention will be on signals for the months ahead, with most economists currently ruling out rate cuts.
A side intrigue is in play: will this be Federal Reserve Chair Jerome Powell’s last meeting? His term as Fed governor, which extends until 2028, is also being questioned. The 73-year-old’s tenure as Fed chair ends next month; this meeting is expected to be his swan song at the helm of the institution. On Friday, the Department of Justice announced it was closing its investigation into Powell regarding renovation costs at the Fed headquarters, clearing a path for Trump’s pick, Kevin Warsh, to take over. Several key indicators will also be released: Q1 GDP and March’s PCE price index – the Fed’s preferred inflation measure – will be published on Thursday.
3/ TECH’S BIG WEEK The results of five of the ‘Big Tech Seven’ will be the highlight of an avalanche of quarterly earnings reports next week. This comes as investors’ near-unshakable AI-driven profit optimism supports stock indices near historic highs.
On Wednesday alone, Alphabet, Microsoft, Amazon, and Meta are in the spotlight. These four ‘hyperscalers’ are currently investing billions in data centers and cutting-edge infrastructure. Apple will announce the next day, just after the appointment of longtime hardware head John Ternus as successor to CEO Tim Cook, fifteen years after Cook took over from co-founder Steve Jobs. The tech sector won’t be alone in the spotlight; over a third of S&P 500 companies are reporting their results, including pharmaceutical giant Eli Lilly, oil major Exxon Mobil, and credit card leader Visa.
4/ OPTIONALLY The European Central Bank and the Bank of England are expected to keep their respective interest rates at 2% and 3.75% on Thursday, after dampening hopes for preemptive rate hikes in recent weeks. The fragile Iran ceasefire has offered some relief, but with oil back above $100, monetary markets still anticipate two hikes from each by year-end.
Optionality is the keyword. ECB President Christine Lagarde will face questions on the likelihood of a rate hike before summer. She will certainly want to avoid repeating the error of a premature hike made by another Frenchman at the helm of the ECB, Jean-Claude Trichet, just before the eurozone crisis exploded. In London, BoE Governor Andrew Bailey has warned markets they are getting ahead of themselves. Given the domestic political volatility injected into the Gilt market, he too is walking a tightrope.
5/ TEMPO The Bank of Japan completes the list of major central banks in action. Its meeting on Tuesday will kick things off, and like in the U.S. and Europe, what seemed to be a window for rate hikes now looks like a new phase of waiting. Sources have indicated to Reuters that Kazuo Ueda and his team will likely need more time to assess the Middle East war fallout, but observers expect them to leave the door wide open for a hike in June. Some fear the institution may be overtaken by events. Even the head of the Asian Development Bank warned that the yen could face further pressure if markets view the BOJ as too slow in the face of inflation risks. For now, the Japanese currency continues to hover near the 160 threshold against the dollar – a level investors have long seen as a potential trigger for intervention in the currency market. They are still waiting.
