# Borrowing up, forecasts down _A Hormuz deal that keeps almost arriving, Brent back at $80, and a UK lending dataset saying something very different from the forecasts built on top of it._ Neil Woodford · 6 August 2026 · 6 min read ![US workmen](https://cdn.sanity.io/images/v3acfbvo/production/7942230985f5109d49c96d88684c324143afa1af-2592x1728.jpg?w=1600&fit=max&auto=format) --- A strangely quiet week, even though quite a lot appears to be going on. The moves to establish a peace agreement between Iran and the US appear to be moving forward, and a deal between Oman and Iran may lead to the resumption of normal levels of traffic through the Strait of Hormuz. This, at least, is what the oil market appears to believe, given that Brent is trading at $80 a barrel, having been over $100 in the last week of July. Global equity and bond markets have responded relatively positively to this latest episode of diplomacy, with a notable contraction in the UK yield premium over Treasuries, which is now down to 27bps having been as high as 60 earlier in the year. The extraordinary volatility in the tech sector has continued, albeit at a slightly reduced level; the results season in the US has continued to deliver extremely good earnings growth across the board; and some macro data in the UK, although largely ignored, has made me even more confident that the consensus is wrong again about how well the UK economy is performing right now. I will cover all this and a bit more in this week's update. _[Watch: Watch this week's Noise Cancelling podcast — Britain Doesn't Have an Inequality Problem](https://www.noisecancelling.co/the-show)_ ## The Gulf: a deal that keeps almost arriving _[Embedded media](https://www.aljazeera.com/news/2026/8/5/iran-oman-us-close-to-hormuz-deal-what-do-they-all-want)_ First to the potential for an extended ceasefire in the war in the Gulf. My understanding is that the sides are engaged, but clarity on a manageable deal is still absent. The talks between Oman and Iran appear to have gone well, which is a positive, but this apparently won't translate into a two-to-four-month opening of the Strait of Hormuz until the deal has been approved by Iran's Supreme Leader, who has not been seen in public since the first days of this war. President Trump has said as recently as Wednesday that a deal regarding the Strait is ["imminent"](https://abcnews.com/International/live-updates/iran-live-updates-tehran-progress-made-strait-hormuz/?id=135110405) and that his administration is in contact with Iran. So the omens are reasonably positive, but nothing concrete has yet been agreed. ![The mitigation the models missed](https://r4at4qm6kmohrtvq.public.blob.vercel-storage.com/charts/chart-uae-crude-exports-aug26-f952943a5447-light.png) _In June, UAE exports came back at 4.26mn barrels a day, some 27% above the pre-war average, via shuttle runs and the pipeline that bypasses the Strait entirely. This is what I mean by unanticipated mitigation. The disruption was real, and then it was routed around._ Whilst this uncertainty persists, oil is still flowing through the Strait, and through adaptations, alternative routes and operational workarounds, all of which involve additional costs. Indeed, on Bloomberg today there is an article about how the UAE has managed to move more oil through the Strait than any other producer over the past two months. Apparently it has sold over 130 million barrels in seven tenders since the start of June, with the buyers mostly in the form of Asian refiners in Japan and China. _[Embedded media](https://www.bloomberg.com/news/articles/2026-08-06/uae-s-adnoc-defies-hormuz-risks-to-keep-crude-flowing-to-global-market)_ Apart from anything else, this remarkable feat is yet another example of the unanticipated mitigation I have spoken about in recent blogs, which have together eased the strain on the oil market and rendered models of what would happen to energy prices in the event of a blockade utterly useless. > Unanticipated mitigation has rendered models of what would happen to energy prices in the event of a blockade utterly useless. Whilst it is very difficult to anticipate what happens next, recent events and the constrained conflict that preceded them, I think, add up to a situation where both sides appear to recognise that continued escalation delivers diminishing returns. This is why I remain hopeful that these latest interactions will lead to an extended ceasefire period, which could see oil prices return to the $70 level and possibly below in the very near future. ## Tech: the same volatility, marginally quieter [Last week I wrote about](https://www.noisecancelling.co/read/104bn-in-a-quarter-the-shares-fell-anyway) the extraordinary volatility in the tech sector, which saw daily double-digit percentage moves up and down in the share prices of a number of $1trn-plus market cap companies. This week that volatility has continued, albeit at a slightly lower level. What is causing these extreme moves is not entirely clear. _[Embedded media](https://fortune.com/2026/07/17/china-moonshot-kimi-k3-markets-china-ai/)_ There are genuine concerns about the sustainability of AI infrastructure spend, the returns on that investment and the financial legacy of this giant capex boom, but none of these concerns are new. The new open-weight Chinese models from companies like Alibaba and Moonshot AI have also caused additional concerns, as have some of the extremely levered positions in the sector that a number of high-profile funds have taken. _(Neil in the margin: Models whose trained parameters are published freely, so anyone can download, run or fine-tune them without paying the developer. The concern for the US giants is pricing power: if a Chinese lab matches frontier performance at a fraction of the spend and gives the weights away, the economics of the closed models look very different.)_ Most likely the volatility is not caused by one new concern but by the aggregation of many, combined with rapidly shifting sentiment getting overblown in both directions. Given how far some of these share prices have fallen, and over such a short time period, it is hard to keep tabs on what is being discounted here. But my guess is that the strong underlying arguments that drove enthusiasm towards the sector in the first place have not gone away. They may well have been taken too far, but I see nothing on the horizon that might bring this incredible industrial revolution to a halt. ## The race to the most bearish forecast I will finish this weekly update with a brief section on my favourite hobby horse. Once again, this week yet another economic forecasting group has issued a downbeat assessment of the outlook for the UK economy. _[Embedded media](https://www.ey.com/en_uk/newsroom/2026/08/ey-upgrades-uk-economic-outlook-but-challenges-remain)_ On this occasion the institution concerned is EY, in its UK Economic Outlook. In some kind of bizarre race to the bottom, this group has now said that the war in the Gulf will, if extended, lead to lower growth and higher inflation outcomes, with the risk that it turns really nasty next year and the economy contracts by 0.2%. In amongst all this gloom, I thought it was quite amusing that the organisation actually upgraded its growth forecast for this year from its previous 0.8% to a heady 0.9%, citing, basically, greater resilience in the face of higher energy prices than it had anticipated. I wonder if it ever occurred to EY to model what might happen if, instead of continuing, the war came to an end and peace was sustained. To be fair to them, the baseline does assume the Strait reopens by the end of the third quarter. But even on that assumption, the best they can manage for next year is 1.2%, and the number that travels is the 0.2% contraction. That tells you exactly where the anchor sits. ## UK bank lending: the data nobody looked at Whilst I was musing about this latest dose of gloom, I found myself poring over the latest UK bank lending data. Whilst folks at EY, NIESR and the Bank of England appear to be grappling with second-round effects, output gaps, inflation expectations and other unmeasurable nonsense, this very interesting data set appears to have received very little attention, and yet for me it says much more about what is actually going on in the economy. _(Neil in the margin: The idea that a one-off price shock feeds through into wage demands and then back into prices, making inflation persistent. It is central to how the MPC justifies holding rates, and it is not directly observable, which is Neil's objection.)_ _What I wrote about second-round effects:_ [Still don't get it: why higher rates make second-round effects more likely](https://www.noisecancelling.co/read/still-don-t-get-it-why-higher-rates-make-second-round-effects-more-likely) — The Bank held at 3.75%, as I expected. What I did not expect was three votes for a rise, justified by second-round effects the committee itself has conceded are not there. In summary, despite elevated rates, mortgage lending growth is running at just over 3.5% and consumer credit growth is tracking along at 9%. As a reference point, from 2010 through to 2019 the average growth in mortgage lending was a miserly 2%. Quite clearly, these two data points are not consistent with the type of economic weakness consensus economics is anticipating. In fact they are consistent with a much more buoyant consumer environment, which is also reflected in the much better than expected retail sales data we have seen in recent weeks. ([Next's numbers](https://www.proactiveinvestors.co.uk/companies/news/1096561/next-surges-after-another-profit-upgrade-as-online-marketplace-thrives-1096561.html), out this week, were also much better than forecast, prompting a third profit upgrade of the year.) Not wishing to over-egg this particular pudding, I should also mention that [new car sales in July](https://www.smmt.co.uk/huge-ev-boost-in-july-yet-mandate-gap-persists/) were nearly 12% better than in the same month last year. **9.1%** — Annual growth in UK consumer credit in June, with mortgage lending at 3.6% _[Embedded media](https://www.bankofengland.co.uk/statistics/money-and-credit/2026/june-2026)_ In other words, whilst organisations like EY and NIESR seem to be engaged in a bizarre competition to have the most bearish forecast in the industry, the reality is that the sort of data I like to focus on is telling a completely different story. I am not suggesting we are in the midst of a consumer boom, but equally neither is this environment anywhere near as bleak as these forecasters believe. Ultimately the proof will be in the eating: I expect the data on growth to be significantly higher than consensus forecasts. _Related: who is actually putting up prices?:_ [Who is actually putting up prices?](https://www.noisecancelling.co/read/who-is-actually-putting-up-prices) — Food prices have fallen this year and supermarket forecourts sell the cheapest fuel in the country. Blaming the supermarkets for the cost of the Iran war is political deflection, if not outright dishonesty. ## US labour market data Today's important job numbers from the US show a sharp slowdown in the US labour market which was not expected. The weak numbers had an immediate impact on financial markets with both bonds and equities rallying. In summary, these data take the immediate pressure off the Fed to increase rates at the next meeting in September. The headline numbers were quite a bit weaker than was expected but in addition, downward revisions to previous months data indicate that underlying assumptions about the jobs market were too optimistic. ## What to look out for next week Next week sees some important releases, in the form of inflation numbers on Wednesday and jobless claims on Thursday. In the UK the highlight will be GDP data for June and Q2 on Thursday. Stand by for consensus upgrades would be my expectation. The results season eases off next week, but there are still lots of numbers coming out in the UK.