# Banks, blockades and bears: the consensus is wrong _The UAE's exit from OPEC may matter more than the war itself for the future of energy prices. Meanwhile, Q1 results from UK banks and housebuilders are quietly demolishing the bearish consensus._ Neil Woodford · 1 May 2026 · 7 min read ![Oil storage tanks on Kharg Island, Iran, are nearly full. And the US naval blockade is aiming to keep them that way.](https://cdn.sanity.io/images/v3acfbvo/production/b8473cecbf7b4ab8d69c602d7a8775132a44bec7-800x550.jpg?w=1600&fit=max&auto=format) --- This has been an incredibly busy week for markets and for geo-politics. So busy in fact, that it's hard to extract the salient issues from the bewildering volume of announcements. With respect to the war in the Middle East, Iran's peace overtures have been rejected by the US, and the current impasse is likely to continue unless and until the proposals contain a substantive offer on the outstanding nuclear issues. In the meantime, the US blockade is continuing to build economic pressure on the Iranian regime and as the country's oil storage infrastructure fills, and according to some experts it is close to capacity, that pressure will only increase. Whether this pressure will catalyse a workable peace settlement and when, are difficult questions to answer definitively, but my guess is that on balance, the answers are that it will and soon. In the background, the US is apparently drawing up plans for further military strikes on targets in Iran which include key infrastructure sites. My sense is that although credible, these plans are designed to further increase pressure on the Iranian regime rather than being a leak of imminent military action. These developments have not been taken well by financial markets this week. The oil price has risen significantly, and equity and government bond markets have been pretty weak everywhere until yesterday (Thursday) when financial markets in the UK responded quite well to [the Bank of England's decision to hold rates](https://www.bankofengland.co.uk/monetary-policy-summary-and-minutes/2026/april-2026) and to the accompanying statement, which was materially less hawkish than was expected. This market reaction reflects the fact that consensus now holds a very bleak view of the UK economy's future and for interest rates, and consequently, the MPC's decision not to raise rates and to say reasonably sensible things about the outlook came as something of a surprise. Whether this slightly more positive tone persists does hinge on developments in the Gulf, but here again the consensus is downbeat, and the generally held view is that the war continues, and the Straits of Hormuz remain closed for a considerable period of time. As I have already outlined in this note and in this week's Noise Cancelling podcast, I am more optimistic. Something else of profound importance to energy prices and inflation happened this week and, in my view, it was far more noteworthy than developments in the current conflict between the US and Iran. On Tuesday, [the UAE announced that it would leave OPEC on the 1st May](https://www.cnbc.com/2026/04/28/uae-opec-oil-iran.html), the energy price-fixing cartel it had been a member of since 1967. I wrote about the significance of this decision in a note published earlier this week. I won't repeat here what is written in that note other than to say that this announcement is of profound importance to energy prices in the medium and longer term and may be the catalyst for the breakup of OPEC completely. Following this surprise announcement, [the Russian finance minister said that this move will drive a fall in energy prices once the Middle East conflict ends](https://www.reuters.com/business/energy/russia-stay-opec-hopes-uae-exit-does-not-spell-end-group-2026-04-29/) and added that Russia needed to adjust to this new reality. I could not agree more and might add that those central bankers that are completely focused on the crisis playing out in the Gulf right now might do well to start thinking about how central bank policy might need to adjust to much lower energy prices in the not-too-distant future. Aside from the MPC's interest rate decision, both the Fed and the ECB also announced that interest rates would be held in the US and in the Euro area. Both institutions, unsurprisingly, cited concerns over the inflationary consequences of the war but both sensibly decided that it was far from clear yet that rates should rise in response to those concerns. These central banks do however face quite different challenges. In the US, economic growth is at 2% YOY in Q1 and likely to strengthen throughout the year but in the Eurozone, once again, growth is much weaker at 0.8% YOY and slowing, especially in the larger core countries of France and Germany. We will have to wait for a couple of weeks before we get the UK's Q1 GDP data but based on what we already know about January and February, the growth rate, although weak, is likely to be much better than was forecast, at something close to 0.7%. By way of comparison, inflation is a little higher in the UK than in the Eurozone (3.3% compared with 2.6%) but that's because of what the government decided to do in its first budget in October 2024, but "base" rates in the Eurozone are at 2% and in the UK at 3.75%. Elsewhere, and especially for those still of the view that the UK economy is on the verge of collapse, there have been quite a few Q1 results this week that have shed light on what's really going on, as opposed to the fear-mongering of the financial media. A measure of how downbeat assumptions for the future are, was revealed in [NatWest's Q1 statement accompanying its results](https://investors.natwestgroup.com/results-and-presentations.aspx). In it the bank disclosed that its expected credit loss provision in 2026 had been increased by £150mn to reflect its assumption that growth this year would be down at 0.4% and that unemployment would reach 5.7% next year. And yet, in the same statement the bank revealed that "the bank started the year with positive momentum, underpinned by healthy customer activity" — in other words loans and deposits both increased in the quarter, demonstrating that customers had not changed their behaviour despite observing the shocking first five weeks of the war in the Gulf. NatWest also raised full-year guidance. This fact was also reflected in what [Lloyds Bank, the UK's biggest mortgage lender, said earlier in the week in its Q1 results statement](https://www.lloydsbankinggroup.com/investors/financial-performance.html). The CEO also added, in response to the question "why have you raised guidance", that "we have not seen any, to be clear, we have not seen any downside in terms of our lending activity over the first quarter or as we look forward, in the context of April and, indeed, beyond". [Data released yesterday by the Nationwide Building Society](https://www.nationwide.co.uk/media/hpi/) backed up these surprisingly positive statements. Its house price data series showed that house prices increased in April by 0.4% — the consensus, not surprisingly, was expecting them to fall by 0.3%. Wrong. Finally on this topic, [Persimmon, one of the UK's largest volume housebuilders, released its AGM statement this week](https://www.persimmonhomes.com/corporate/investors/) and as usual it contained an update on current trading. It too confounded the bearish consensus. The CEO stated that "Persimmon had started the year well, building on its strong performance in 2025", adding that "our private forward sales are up 7% on the prior year". To be clear, I am not suggesting that the UK economy is booming, far from it. What I am saying, though, is that the doom-laden, war-obsessed consensus, represented so well by the UK's leading economic forecasters and the media, is wrong about the underlying momentum in the economy. Clearly, just a little help from policy makers in the form of lower interest rates, required in part to offset the headwind of higher taxes, would take the double brake off the economy and enable it to grow more quickly which in turn would deliver better tax revenue to the Government, in turn helping to take pressure off debt interest costs — in other words, a virtuous circle. Last of all, we have also seen Q1 results from five of the Mag 7 this week. Without going into too much detail, the overwhelmingly important message from the results is that the AI boom if anything is gathering even more momentum, outlined in continued gigantic spending on AI infrastructure. [Alphabet, Amazon, Meta and Microsoft alone are now expecting to spend $700bn on AI in 2026](https://sherwood.news/tech/alphabet-amazon-microsoft-meta-plan-more-than-700-billion-on-capex-this-year/). That's an increase of 75% on spending in 2025 and is equivalent to just under 20% of UK's GDP. These astonishing numbers did not receive universal approval. In the case of Alphabet, which saw its share price rise on its report, the spending was in part welcomed because coincident with it was spectacular growth (63%) in its cloud computing revenues. On the other hand, in the case of Meta, which doesn't yet have a significant cloud computing business, its shares fell 9% on Wednesday when it announced a relatively modest $10bn increase in its AI investment target for this year. Looking forward, all of these companies are targeting increased spending again in 2027. ## What to look out for next week There is a quieter economic diary next week with the standouts likely to be labour market data from the US and PMI and more house price data from the UK. The quarterly results season on both sides of the Atlantic is also quieter thankfully. I suspect that financial market attention will be very focused again on developments in the war in the Middle East. Maybe naively, I still do not expect that fighting will resume despite the sabre-rattling. I do expect the back-channel discussions to continue but for the time being neither side appears willing to compromise on the key issues. I do however believe that pressure on the Iranian regime is building because of the blockade and its consequent and potentially damaging impact on the country's oil-producing infrastructure.