# Roundup of the week: 27 March 2026 _The Fed's measured response to the Gulf conflict contrasts with the Bank of England's hawkish misstep. Meanwhile, UK households are far better positioned for this energy shock than the doom mongers suggest._ Neil Woodford · 27 March 2026 · 9 min read --- Once again financial markets have endured a week dominated by the twists and turns of the conflict in the Persian Gulf. The week started with markets in a black mood following President Trump's threat to target Iran's energy infrastructure if it didn't open the Straits of Hormuz, which was immediately and predictably followed by further threats from Iran to completely close the Straits. Understandably this caused further stress in global energy markets but was then followed by announcements that the two sides were engaged in discussions mediated by Pakistan. Although Iran has disputed this, it does appear that proposals were put to Iran and that it has responded with its own demands. Discussions are apparently ongoing, but it is unclear at the moment if these will lead to an agreement. In fact, based on the rather one-eyed consensual media view, one might conclude that there was no chance of a cessation of hostilities and that the world is confronting prolonged shortages of oil, gas and fertiliser and many other essential commodities and of course much higher energy prices. That or an inevitable escalation of the conflict involving ground troops. Many in the western media, motivated by their hatred of Trump and by other agendas, also appear keen to declare victory in this war to the Iranian regime. My sense is that this is both premature and wrong. Indeed, the stance of much of the western media reminds me of the [Black Knight in Monty Python and the Holy Grail](https://www.youtube.com/watch?v=ZmInkxbvlCs) — limbless but defiant, insisting he's still winning the fight. I do not wish to trivialise this war but the parallels with Iran's position are hard to ignore. As I write this update more news is emerging, some of which is conflicting and some consistent with a "deal" narrative. My sense is that if the Iranian regime doesn't want to negotiate a cessation of this conflict, which appears to directly contradict views gleaned from Pakistani interlocutors, then I would imagine that there will be increased efforts by the US, probably in cooperation with partners, to secure access to shipping through the Straits of Hormuz which will alleviate considerably the pressure on global energy prices. ## The Fed and the Bank of England Different central bank responses to these events have once again demonstrated the lack of judgement amongst some, and on the other hand, the calm, measured responses of others. Not surprisingly, the Bank of England got it wrong, and the Fed aced it. This of course resulted in different fixed interest market responses on either side of the Atlantic. The Fed, in typical accomplished fashion, accompanied its decision not to change rates with a calm supporting narrative which said very little about the conflict other than stating the obvious, but importantly it highlighted the two-sided risks of what had happened and added that it would be willing to look through the price shock for now given the uncertainties with respect to its duration and the scale of its consequences. On the other hand, the Bank of England bungled its narrative which accompanied its decision to hold rates and decided to lurch to a much more hawkish tone. The Committee scrapped its easing bias which had been in place since 2024 when rates started to come down and then failed to resist the temptation to resort to central bank virility signalling, by suggesting that rates would rise if inflation persistently overshot the 2% target. The words central banks use to accompany their decisions do matter and in this case, all too predictably, the wrong words chosen by the MPC resulted in a much more adverse market reaction than we saw in the US. This totally unnecessary own goal resulted in ten-year gilt yields temporarily hitting 5.1%, the first time this has happened in nearly two decades. Later, buried in the Bank of England's statement the governor did say something sensible — "the starting point for this shock is a real economy with limited pricing power" — but the damage was already done. This is all the more strange and ill-judged when put in the context of recent UK history. Interest rates started to come down in 2024 (there were two cuts that year) and then continued to fall in 2025 when there were four further cuts, despite the fact that inflation rose from 2.5% at the start of the year to 3.8% in September. This increase in inflation was in part the product of base effects but also the result of measures the government introduced in its October 2024 budget — higher taxes on households and businesses and higher utility bills — administered inflation as it is now referred to. Higher energy prices act just like an additional tax on consumers and businesses and yet, whereas the Bank of England looked through the increase in inflation last year (caused by higher taxes) and carried on cutting rates, this time, as soon as energy prices increase, a completely different stance on rates is adopted. This glaring inconsistency is very unhelpful and once again illustrates that the MPC, when required to exercise judgement, seems always to choose the wrong option. This error is all the more glaring when set against the fact that the economy has flatlined for the last nine months, unemployment has increased to 5.1%, wage growth has slowed considerably, and vacancies have collapsed. It's also telling that the Fed chose much more emollient language against a backdrop of 2% economic growth, and the ECB has also held rates, but they are way down at 2%, not the 3.75% that prevails here in the UK. Interestingly, the ever-gloomy OECD has today opined on what it thinks will happen to growth and inflation in the G7 and the wider world economy as a result of the war in the Gulf. Its track record makes the Bank of England look perspicacious, so I tend to ignore its academic ramblings. I was however interested to see that it is suggesting that the UK economy is facing the biggest hit to growth from the war out of all of the G20 major economies and is also forecasting inflation to hit 4%. Once again this looks way too gloomy to me. UK inflation will fall in April as a result of the 7% reduction in the energy price guarantee and base effects. If the war continues, I would expect inflation to pick up later in the year, possibly to 3.5% but much depends on what the UK government decides to do with the energy price guarantee for the three months from July (decision is taken in May). If it decides to intervene and provide all households with support (approximately £30 per month) that will cost the government about £3 billion per quarter. Importantly this type of non-means tested intervention would mean that household energy bills would not increase and so inflation would be lower than it otherwise would be, and critically for the month of September which is the month when £300 billion of state benefits are indexed. Clearly lower inflation as a result would benefit the interest bill on government debt and result in a lower increase in state pensions etc. In other words, this sort of fiscal intervention would immediately pay for itself. But is it what this clueless government will do? Politics might once again get in the way of common sense and yet another politically motivated own goal might ensue in which only means-tested households get the benefit. In this scenario the higher cap would result in higher inflation in the three-month period from July to September. Let's hope common sense will prevail over self-destructive political dogma. For those determined to get very depressed about the inflation and growth consequences of this war in the UK, I thought I would put what's happened in context by comparing it with the events that unfolded back in February 2022 when Russia invaded Ukraine. Then a massive increase in European gas prices resulted in the household energy price cap going from £1,277 in March 2022 to a peak of £4,279 a year later. So far, based on no government intervention, the price cap will go from £1,649 now, to about £1,972 in July. At that level it will amount to about 6% of average earnings. Back in 2023, the cap reached 15% of average earnings, albeit that as a result of the guarantee scheme introduced by Liz Truss in her very brief premiership, it was capped at just under 10% of average earnings. So, thus far nowhere near the same level of stress on households. It's also worth pointing out that the savings rate back in February 2022 was less than 5%. Today it's just about double that at 10%. In other words, households are much less susceptible to this energy price shock now than they were four years ago. Partly because it's much smaller, and partly because households have a much thicker savings cushion to support current levels of consumption even if higher energy prices erode household cashflow. These are some of the reasons why I believe the doom mongers on the UK are wrong again. ## A late breaker For those readers who think I might once again have lost my mind in calling for lower interest rates in the wake of the war in the Persian Gulf, I was very encouraged to find out this morning that I am not the only lunatic on this matter. I discovered that the ex-Chief Economist at the Bank of England, the highly regarded Andy Haldane, who is currently the president of the British Chambers of Commerce, has pretty much done the same thing. In an article written for the financial media, Andy urges the Bank of England not to hit the economy with higher interest rates. In fact, he goes on to say that he thinks it is pretty unlikely that rates will rise, something which “traders” in the financial markets appear to believe is a near certainty (following this week’s bungled statement from the MPC). He adds that the energy price shock comes on top of tax increases that have already damaged the private sector and at a time when the economy is flatlining. Furthermore, he rightly points out that the scale of this energy price shock is nowhere near the magnitude of the one following Russia’s invasion of Ukraine (inflation was at 6%, twice the current level, even before the war in Ukraine started). Most encouragingly he concludes that barring a further leg up in energy prices, growth in the economy calls for lower interest rates, not higher ones. I hope the nine members of the MPC are listening to these wise words which for me are yet another reminder that the MPC is in dire need of wise counsel, something it is not getting from any of its current membership. ## Company news It's been a generally quiet week for corporate news on both sides of the Atlantic. One interesting piece of uplifting news however did catch my eye in what has generally been a difficult period for investors, and that was an announcement from a company I've been watching that had a very difficult 2025. The company is the US biotech business Sarepta, which yesterday announced positive results from early (Phase I and II) clinical trials of an experimental treatment (siRNA) for two rare diseases, FSHD and DM1, which are both dystrophies for which there are no cures and no disease-modifying treatments available. The news was greeted enthusiastically by the US market, albeit that it only lasted for a day, but the news is significant nonetheless. ## What to look out for next week Last week I wrote that I expected to see moves this week to de-escalate the conflict in the Persian Gulf. My sense is that those efforts will continue and are doing so right now. Where they will lead is not at all clear at the moment but there are clearly more options becoming available to the US side as more military infrastructure and troops arrive in the region. Clearly the priority is to open the Straits of Hormuz to shipping and if this is secured financial markets will breathe a sigh of relief as will governments across the world. If the Iranian regime fails to reach an agreement with the US, my sense is that this number one priority will clearly dictate what happens next and I suspect the US will not be acting alone in securing this outcome.