Weekly market update: Monday 7 September 2026

The week starts with oil close to $100 a barrel after a weekend of tit-for-tat strikes between the United States and Iran around the Strait of Hormuz. Plus, a much stronger-than-expected US jobs report has left investors seriously entertaining the idea that the Federal Reserve’s next move is up, not down.

Shares themselves have been remarkably calm about all of this. The S&P 500 finished last week roughly where it started, the FTSE 100 is still hovering around 10,800, and European markets have edged only slightly lower. The action has been in oil, in bonds and in currencies rather than in equities.

That may not last. This week brings an expected interest rate rise from the European Central Bank on Thursday and the August US inflation report on Friday, the final major data point before the Federal Reserve meets on 15-16 September.

At a glance

 

Market snapshot

Levels as at 9am on Tuesday 8 September, with the move over the past week in brackets.

Figures reflect the most recently available verified levels rather than an exact 9am snapshot in every case: US index levels are Friday 4 September closing prices because Wall Street was shut on Monday for Labor Day, and the FTSE 100 figure is Tuesday’s opening level. Weekly moves are calculated against levels one week earlier, on Tuesday 1 September. Past performance is not a reliable guide to future performance.

 

What happened last week?

US

For all the noise, last week was almost a non-event for US share prices. The S&P 500 ended it up about 0.1%, closing Friday at 7,718.60, with gains in energy shares just about offsetting falls among consumer names. The Nasdaq Composite finished at 26,506.99 and the Dow Jones Industrial Average at 53,414.25.

The real story was Friday’s employment report. US employers added 162,000 jobs in August, roughly three times the 53,000 economists had pencilled in, while the unemployment rate held at 4.1%. On any ordinary reading that is good news. In the current environment, where the worry is inflation rather than recession, markets took it as evidence that the economy is running too warm.

Bond yields rose in response and traders moved quickly. Futures markets went from pricing roughly a 50% chance of a Federal Reserve rate rise this month to close to 60%, and UBS told clients it now expects two increases before the end of the year. That is a striking reversal from a market that spent much of 2025 debating how fast rates would fall.

UK

The FTSE 100 spent the week going almost nowhere, closing Friday at 10,828.14 and Monday at 10,822.13. Beneath the flat surface there was a clear split: BP and Shell gained around 1% on Monday as crude climbed, while airlines, retailers and transport companies came under pressure from the same move.

The domestic data was not encouraging. Figures from the British Retail Consortium published this morning showed total UK retail sales growth slowing to 0.7% year-on-year in August, down from 1.3% in July and the weakest in four months. Food sales rose 2.6% but non-food sales fell 0.8%, with shoppers holding off on furniture and household appliances. Barclays reported consumer confidence dropping back to 26% from July’s 21-month high of 30%.

Gilts remained the pressure point. The 10-year yield edged up to 5.18% on Tuesday, still near multi-decade highs, as investors scaled back their expectations of Bank of England rate cuts and began pricing in the possibility of increases instead. That matters for the public finances: the rise in global borrowing costs is estimated to have cut Chancellor John Healey’s fiscal headroom from around £26 billion to roughly £13.8 billion ahead of his Budget on 28 October.

Rest of world

European shares drifted lower, with the Stoxx Europe 600 slipping to around 648 as the combination of expensive energy and an imminent ECB rate rise weighed on sentiment. Preliminary August figures showed euro area inflation accelerating to 3.3% year-on-year, driven by a 14.3% jump in energy costs, and German 10-year Bund yields have hovered near multi-year peaks around 3.36%.

Japan was the week’s biggest mover. The Nikkei 225 jumped 2.1% on Monday before falling 1,130 points, or 1.7%, on Tuesday to close at 65,269 as the yen strengthened to 153.37 per dollar, its firmest since February. July wage growth was the fastest since 1997 and second-quarter GDP was revised higher, leaving markets pricing a roughly 75% chance that the Bank of Japan raises its key rate to 1.25% next week.

 

What happened over the weekend?

The weekend belonged to the Strait of Hormuz. US Central Command said American forces permanently disabled two Iranian oil tankers and destroyed a third after Iran’s Revolutionary Guard Corps fired ballistic missiles towards a US aircraft carrier and destroyer. No US vessels were hit and no personnel were injured. Iran said it had struck three US-linked ships in retaliation.

The conflict is now in its seventh month, and on Sunday US Energy Secretary Chris Wright said Washington might not reach a deal to constrain Iran’s nuclear programme. On Tuesday, Iranian military officials went further, warning they would respond to any further US or allied strikes by targeting energy infrastructure across the Persian Gulf directly.

Markets reacted through the oil price rather than through shares. Roughly a fifth of the world’s oil normally passes through the Strait of Hormuz, and traffic has thinned dramatically, with an average of about ten commodity ships a day crossing the waterway over the past ten days. Brent crude climbed to around $98.62 a barrel, up roughly 8.6% over the week and about 19% over the month.

 

The key themes driving markets this week

1. A Federal Reserve that may raise rates rather than cut them

Friday’s jobs report changed the conversation. With 162,000 jobs added in August against forecasts of around 53,000, and unemployment steady at 4.1%, the labour market looks stronger than the Federal Reserve’s cautious tone had assumed. Markets now put the odds of a rate rise at the 15-16 September meeting at close to 60%.

For savers and borrowers the implications run in opposite directions. Higher rates for longer mean better returns on cash but more expensive mortgages and corporate debt. For share prices, the question is whether company earnings can keep growing fast enough to justify current valuations if the cost of money rises rather than falls.

2. Oil, the tanker war and the inflation problem

Brent crude approaching $100 a barrel is the single biggest change in the market backdrop over the past month. Energy prices feed into almost everything: transport costs, manufacturing inputs, food distribution and household heating bills. Euro area inflation has already picked up to 3.3%, with energy components up 14.3%.

What has changed is the nature of the risk. Markets initially treated the Hormuz disruption as a shipping delay. The threat to strike Gulf energy infrastructure directly moves it towards something more structural, and that is why the oil price has kept climbing even as the headlines have become familiar.

3. Central banks tightening in unison

For the first time in several years, three major central banks appear to be moving in the same hawkish direction at once. The ECB is expected to raise rates by 0.25 percentage points on Thursday, the Bank of Japan is likely to lift its key rate to 1.25% next week, and the Federal Reserve is a genuine coin-toss.

The Bank of England has not signalled a rise, but markets have quietly removed the cuts they were expecting and are now pricing in the possibility of increases. When several central banks tighten simultaneously, government borrowing costs tend to rise together, which is much of what has been happening in gilt and Treasury markets over the past fortnight.

 

Coming up this week

Monday: US markets were closed for Labor Day. London slipped 0.1% as oil climbed, with energy shares the main support and Asian markets broadly higher.

Tuesday: Wall Street reopens after the holiday. UK retail sales data from the British Retail Consortium showed growth slowing to a four-month low, and Dunelm and Computacenter report results in London.

Wednesday: Chinese inflation figures are published, with consumer prices expected to rise to 0.9% year-on-year. Apple holds its autumn product event, the first under new chief executive John Ternus.

Thursday: The European Central Bank announces its decision, with a quarter-point rise almost fully priced in. German final inflation and US producer price data follow, and Oracle and Adobe both report earnings.

Friday: The busiest day. UK GDP for July is published early in the London session, followed by US consumer price inflation for August, expected at 0.4% month-on-month and 3.4% year-on-year, and the preliminary University of Michigan sentiment survey.

 

Why it matters for investors

A week that features a possible interest rate rise, a conflict affecting a fifth of the world’s oil supply and an inflation report that could move markets sharply is not a comfortable one to read about. It is worth noting, though, how modest the actual moves in share prices have been.

The S&P 500 was up 0.1% last week. The FTSE 100 has barely budged. Global shares have absorbed a great deal of difficult news over the past month without anything resembling a rout. Markets are not ignoring the risks; they are pricing them in gradually, which is usually a healthier process than a sudden repricing.

This is also a reminder of why diversification does real work. Over the past week energy shares rose while consumer-facing companies fell, Japanese equities dropped while the yen strengthened, and bonds and shares moved in different directions on different days. A portfolio spread across regions, sectors and asset types tends to smooth out exactly this kind of week.

For most long-term investors, the sensible response to a busy news week is not to respond at all. Keep investing regularly, hold a mix of investments that suits how long you plan to invest for, and try to judge progress over years rather than over a single week of headlines.

 

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