# Still in La La Land? The oil consensus unwinds

_Brent crude is back to where it sat before the Middle East war, and the consensus that called for far higher prices looks distinctly foolish. Oil, gilt yields, and Micron's astonishing numbers._

Neil Woodford · 26 June 2026 · 5 min read

![Iranian fast patrol boat in the Strait of Hormuz](https://cdn.sanity.io/images/v3acfbvo/production/1edcfddd11f10c2db166f9ba0c417c799cd7a5dc-1480x833.jpg?w=1600&fit=max&auto=format)

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In a week when the oil price (Brent crude at $72.7 per barrel) returned to where it had been before the war in the Middle East started at the end of February this year, I couldn't resist the temptation to show you the front page of [the Economist from early May](https://www.economist.com/weeklyedition/2026-05-02) when the oil price was hovering around $110 per barrel.

![Cover of The Economist, 2 May 2026. Still in La La Land: Why oil prices are not yet high enough.](https://cdn.sanity.io/images/v3acfbvo/production/b5599806f769ffde7052afa42a2bc149f9bc3719-1280x1709.jpg?w=1600&fit=max&auto=format)

_Cover of The Economist from 2 May 2026_

Whilst the passage of time can, of course, make fools of all of those engaged in the forecasting game, this headline serves as an excellent reminder to always question consensual thinking, especially when it is very crowded and appears to be well argued and informed.

Although this conflict could reignite if the peace discussions go badly, given a good outcome, I am becoming a little more confident in my view that oil prices might dip further below their pre-war levels in the very near term. In the medium and longer term, the factors that I wrote about several weeks ago, including a flat demand profile, rising production and less supply discipline, are still very much in place, and I expect energy prices (oil and gas) to be weak in the years ahead, possibly very weak, with obvious implications for inflation and interest rates.

Interestingly, I read today that the "market" is shifting its views on further interest rate rises in Europe. Following the collapse in the oil price in recent weeks, which has already made the ECB’s rate hike decision look at best overly hasty, some economists are now saying that they do not expect any further increases this year, having previously expected up to three.

## UK politics

Now that the world's attention is no longer fixated on the conflict, it has felt like a quiet week. Aside from the political theatre playing out in the UK, there is not much geopolitical news to report on.

Some of the rumours doing the rounds about who the PM-in-waiting is listening to and what plans might emerge are, however, quite interesting. At least it appears that Andy Haldane is having more influence than one might have hoped for a few weeks ago. At the heart of some of his thinking is a belief, for example, in the benefits of financial deregulation, which would in my view be very welcome, and a greater focus on what the government could do to help create better growth outcomes for the economy.

They might include changes to how the Treasury is organised and to the Bank of England's mandate, for example. Although one might hope that a new PM and his new Chancellor might have the political bravery to take on these pillars of the establishment, I am sceptical whether any such plans would see the light of day, despite the fact that Andy Haldane is in effect an ex-insider, having been the Chief Economist at the Bank for seven years and having been employed there for 32 years. You might think that, as a result, he was perfectly placed to know why the Bank is dysfunctional and what needs to change.

## The new AI darling

Aside from these relatively parochial events, the other things that have captured my attention focus on what's going on in the US equity market and, more specifically, the wider AI trade. This week has been somewhat volatile, with standout features being the notable setback in SpaceX’s price Space Exploration Technologies Corp. Class A (SPCX), which has unwound most of the post-IPO premium, and continued share price weakness across some of the Mag7, including Alphabet, Microsoft, Nvidia, Amazon and Tesla and some of the leading AI players, including Oracle and Broadcom. However, against this backdrop, all eyes were focused on the new AI darling, Micron , which reported its Q3 results and Q4 revenue projections after the close on Wednesday. (It has an August year-end.)

_[Micron Technology, Inc. (MU)]_

Expectations, which had naturally been increasing in recent months, were for Q4 revenues of $43.2bn and Q4 net profit per share of $25.3. In the announcement, the company guided to an outcome considerably better than expected, with revenue of $50bn and profit per share of $31, some 23% better than expectations. Other financial metrics were also pretty astonishing, including gross margins at 85%, and Q3 revenue growth of 346% from Q3 last year.

Quite clearly, Micron (and SK Hynix and Samsung for that matter) has found itself at the epicentre of the AI industrial revolution, and the impact is pretty hard to comprehend. In the space of about 18 months, Micron has been transformed from a highly cyclical, some have argued, commodity business into one of the "hottest" trades in global equities. Although this unprecedented upcycle will come to an end, albeit somewhat later than had previously been assumed, Micron is using its current market power to push its customers into extended multi-year agreements that include cash deposits, pricing ranges and minimum purchases, all of which should at least mute the down part of this extraordinary cycle.

## Government bond markets

One other thing that stands out this week in financial markets, but has received virtually no attention, is what’s happening in government bond markets, especially in the UK gilt market. Not that long ago, in fact, as recently as 15 May, ten-year gilt yields peaked at close to 5.2% while the established consensus droned on about how high oil prices would go and how severe the energy price shock would be.

Now, just over a month later, the oil price is back to $72, and the ten-year yield is down at 4.67%. Not only has the yield fallen, but the much-discussed premium in the UK ten-year yield over equivalent US Treasuries has shrunk from 600 basis points to 311, indicating that the buyers’ strike in UK government debt might exist in journalists’ minds but not in reality.

## What to look out for next week

Later today, the US releases important inflation and GDP data, which I will comment on next week. I suspect that they will attract quite a lot of attention, given what's happened to the oil price in recent weeks.

Next week, the most important data will be the job market releases on Tuesday and Thursday (non-farm payrolls), and in the UK, it's all pretty quiet. The corporate calendar is also very subdued, thankfully, although I suspect something somewhere will crop up to capture everyone's attention.