Weekly market update: Monday 21 September 2026

Markets begin the week in a calmer mood than they have managed for some time. Oil is falling rather than rising: Brent crude has slipped back towards $101 a barrel, its lowest in more than a week, as Saudi Arabian exports recover and investors look to the United Nations General Assembly in New York for signs of a diplomatic opening in the Iran conflict.

Last week was dominated by central banks, and the message was consistent. The US Federal Reserve raised interest rates for the first time since 2023, the Bank of Japan followed with a rise of its own, and the Bank of England held steady but warned that the risks to inflation have tilted further upwards. Share markets took it all reasonably well: the Nasdaq Composite and Japan’s Nikkei 225 gained, the FTSE 100 and the S&P 500 were close to flat, and only the Dow Jones Industrial Average fell meaningfully.

This week is much lighter on scheduled data. The main set-piece is Thursday, when Chinese President Xi Jinping arrives in Washington for a summit with President Trump, alongside a cluster of smaller central bank decisions in Europe. Before that, Wednesday’s flash business surveys will give the first read on how September’s higher energy costs are affecting activity.

At a glance

 

Market snapshot

Levels as at 9am on Monday 21 September, with the move over the past week in brackets.

Equity index levels are the most recent available closing levels rather than an exact 9am snapshot; commodity, bond and currency levels are the latest available as at approximately 8am UK time on Monday 21 September. Weekly moves are calculated against the closest comparable level one week earlier. Past performance is not a reliable guide to future performance.

 

What happened last week?

US

The Federal Reserve raised interest rates on Wednesday for the first time since 2023, lifting its target range by a quarter of a percentage point to 3.75%–4.00%. The vote was unanimous, and the accompanying projections were more hawkish than most economists had expected: the median policymaker now sees one further rise before the end of the year, and twelve of the eighteen who submitted forecasts pencilled in at least one more.

Chair Kevin Warsh declined to offer forward guidance at his press conference, describing the Fed as “committed to a discipline, not a decision” and pointing to a strong economy, robust capital investment and geopolitics as reasons bond yields have risen. Goldman Sachs responded by bringing forward its call for the next increase to October.

Share markets took the news calmly. The S&P 500 finished the week down 0.08% at 7,650.50, the Nasdaq Composite rose 0.72% to 26,522.55, and the Dow Jones Industrial Average fell 1.69% to 51,682.64 – its worst week since March. August retail sales, published on Wednesday, rose 1.2% on the month against forecasts of 0.8%, another sign of a resilient consumer. One point worth noting beneath the surface: fewer than three in ten S&P 500 companies are now trading above their 50-day average price, so the index is being held up by a relatively narrow group of shares.

UK

The Bank of England held Bank Rate at 3.75% on Thursday in a 6-3 vote, with Megan Greene, Catherine Mann and Huw Pill again voting for an increase. The language was tougher than in July: the Monetary Policy Committee said inflation risks are tilted further to the upside and that it would not be “appropriate to wait too long” for evidence that higher energy prices are feeding into wages and other prices.

The bigger surprise was on bonds. The Bank set out a multi-year plan to run its gilt holdings down to zero by 2034, but paused its active gilt auctions until at least April 2027 while it considers selling directly to the Government instead, and will hold on to £120bn of the longest-dated gilts. Less supply hitting the market meant gilts rallied: the 10-year yield fell back to around 5.29% from roughly 5.35% a week earlier. Sterling slipped on the news, ending the week at about $1.3395.

On the data, August inflation rose to 3.1% from 2.9%, driven largely by petrol, diesel and airfares, with core inflation steady at 2.6%. Retail sales were stronger than expected, up 0.5% on the month. The FTSE 100 finished the week broadly flat at 10,659.13, having fallen 1.45% on Friday alone as banks and energy shares weighed.

Rest of world

The Bank of Japan raised its short-term rate by a quarter point to 1.25% on Friday in a 7-2 vote. Governor Kazuo Ueda signalled no urgency to move faster, and the yen weakened by more than 2% over the week – which helped the Nikkei 225 rise 1.57% to 65,018.95. Japanese inflation actually slowed slightly in August, to 1.9%.

In Europe, the Stoxx 600 eased 0.50% to 635.45. Elsewhere, Brazil’s central bank cut rates again, to 13.75%, while the ratings agency Scope downgraded France’s long-term rating to A+.

 

What happened over the weekend?

The Yemen conflict escalated. On Saturday, Yemen’s Houthi movement said it had struck “sensitive” targets in the Saudi capital, Riyadh, with missiles and drones, as well as a Saudi Aramco facility at the Red Sea export hub of Yanbu. Flames and smoke were reported near Riyadh’s main airport, and Saudi authorities had issued overnight alerts. Gulf stock markets, which trade on Sundays, closed lower as a result: the Saudi index fell 0.3% and Qatar’s 1.1%.

Yet oil fell rather than rose. Two things explain it. First, Saudi exports have recovered faster than expected: after the attacks on the kingdom’s East-West pipeline, Aramco redirected shipments through the Strait of Hormuz, lifting exports back above 4 million barrels a day in September from a low of 2.4 million in August. Second, investors are watching for diplomacy. President Trump said he would be open to meeting Iranian President Masoud Pezeshkian, who is expected in New York this week for the UN General Assembly, and Iran’s security chief said Tehran had passed conditions to mediators for restarting talks. China has also privately urged Iran to rein in the Houthis.

Brent crude fell to $101.73 a barrel in early Monday trading, its lowest in more than a week, having been above $107 seven days ago. As one analyst put it, a degree of risk premium is being taken out of the oil price on the hope that a diplomatic path emerges – a hope that may or may not prove well founded.

 

The key themes driving markets this week

1. Rate rises are now the norm, not the exception

Within eight days, the European Central Bank, the Federal Reserve and the Bank of Japan have all raised interest rates, and three of nine Bank of England policymakers voted to do the same. This is a meaningful shift. For most of the past two years the question was how quickly rates would come down; now it is how much further they go up.

For savers, that generally means better rates on cash and on newly issued bonds. For borrowers, and for companies that rely on cheap debt, it is less welcome. For investors, the main consequence is that the level of interest rates is once again a live variable rather than a settled backdrop, which tends to mean more day-to-day movement in share and bond prices.

2. The oil risk premium is deflating – for now

Brent crude has fallen more than 5% in a week, even as the conflict itself has escalated. That tells you how much of the recent price was a premium for feared disruption rather than actual lost supply. JPMorgan analysts noted that Middle East oil flows have held up better than expected, averaging 17.1 million barrels a day over the past ten days.

This matters well beyond energy shares. Petrol and diesel prices were the single biggest contributor to August’s rise in UK inflation. If oil stays near $100 rather than climbing towards $110, the case for further rate rises weakens over the coming months. If the attacks intensify again, the opposite applies.

3. Thursday’s summit in Washington

President Xi arrives in Washington on Thursday for his second meeting with President Trump this year. Trade is top of the agenda, including whether the existing tariff truce is extended, Chinese purchases of US farm goods and aircraft, American access to Chinese rare earths, and Beijing’s push for relief from US technology restrictions.

Reports last week suggested the two sides were discussing a reduction in tariffs on US liquefied natural gas. An extension of the truce would be read positively by markets; a breakdown would not. Either way, this is the kind of event that can move share prices quickly, and one reason to avoid drawing firm conclusions from a single week.

 

Coming up this week

Monday: A quiet start. Japanese markets are closed for a public holiday and China’s central bank sets its benchmark lending rates, which are expected to be left unchanged for a sixteenth month. In the US, the Chicago Fed National Activity Index is published and Chicago Fed President Austan Goolsbee speaks. World leaders begin gathering in New York for the UN General Assembly.

Tuesday: The Richmond Fed manufacturing survey is the main US release, alongside a $78bn auction of two-year Treasury notes. South Africa’s central bank announces its rate decision, with economists split on whether it raises.

Wednesday: The busiest day for data. Flash purchasing managers’ index surveys for September are published for the UK, the eurozone, the US and others – the first read on business activity since energy prices spiked. The UK composite reading is expected to hold around 52.5, with anything above 50 indicating growth. US existing home sales also land.

Thursday: President Xi’s state visit to the US, including the summit with President Trump. Switzerland, Norway, Sweden and Mexico all announce interest rate decisions, and Germany publishes the closely watched Ifo business climate survey. US weekly jobless claims and new home sales round off the day.

Friday: US durable goods orders for August and the final reading of the University of Michigan consumer sentiment survey. Chinese markets are closed for the Mid-Autumn Festival. Costco, Darden Restaurants and AutoZone are among the companies reporting results this week.

 

Why it matters for investors

After several unsettled weeks, markets have begun this one on a steadier footing. That is welcome, but it is worth being clear about why: not because the underlying conflict has been resolved, but because traders have revised their estimate of how much supply is actually at risk. Sentiment of that kind can turn again quickly.

This is exactly why diversification does the heavy lifting in a portfolio. Over the past week, an investor holding only UK energy shares would have had a poor few days; one holding US technology shares would have done well; one holding gilts would have seen a modest gain. Spreading money across regions, sectors and asset types means no single piece of news determines the outcome.

Higher interest rates are a genuine adjustment, and they do change the maths for some investments. But they also mean better returns on cash and on newly issued bonds, and they are being raised precisely because economies have proved more resilient than expected. Both sides of that are worth holding in mind.

For most long-term investors, the practical response to a week like this is the same as it was to last week’s: keep contributing regularly, stay diversified, and measure progress in years rather than headlines.

 

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