Markets Columnist

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PREMIUM

April 28 2026

Good morning. The tension between benign asset markets and more worrisome energy markets is unlikely to go away this week. If anything, it’s likely to get more pronounced. Société Générale points out that companies worth a total of $29tn (!) in market cap report earnings this week, or 44 per cent of the S&P 500. Without some really ugly surprises, that probably means we see further stock market gains. That does not mean the energy stress has gone away. Where do you think this leaves risk appetite? Email us: unhedged@ft.com

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Oil prices: higher for longer

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Stock markets are keen to unfurl the “mission accomplished” banner and move on from the Iran shock. Heck, Nvidia is a $5tn company now, what’s not to like?

As we note above, it’s a monster week for US earnings. Chart from SocGen below:

US earnings week chart

Wahey!

But the fun sponges in the energy market are still at it with their warnings that oil prices are going to be higher for longer.

Over the weekend, Goldman Sachs bumped up its Brent forecasts for the fourth quarter of this year to $90 a barrel, from $80 previously. It also took its WTI forecast up to $83 a barrel, from $75. Both are below the prevailing front-month futures prices ($105 a barrel for Brent, $95 for WTI) but equally, neither is ideal. This all represents a roughly $30 upward revision per barrel from before the Hormuz shock.

Similarly, the bank said it didn’t think Gulf exports would get back to normal until the end of June, having previously pencilled in the middle of May.

Worse:

The economic risks are larger than our crude base case alone suggests because of the net upside risks to oil prices, unusually high refined product prices, products shortages risks, and the unprecedented scale of the shock.

And:

While not our base case, we don’t rule out US oil export restrictions.

Oh.

It’s not just Goldman. A note from Citi also sketches out a world where disruption in the strait lasts to the end of June (a scenario for which it has a 30 per cent probability), Brent hits $150 a barrel, and averages hover around $130 in this quarter and the next, and then eases back to $100 a barrel as the year winds down.

It says:

With both sides still far apart on their red lines we see the risks surrounding our bullish near term and our 2H’26 central case oil price forecasts as skewed to the upside, and continue to recommend clients hedge these risks.

Ah, you might argue, but why can’t you see these extreme risks in the market today? Citi is among the banks that have thought of that:

The lack of extreme oil pricing in recent weeks, considering the scale of the loss of supply, is in our view mostly due to the large inventory build we had over the year preceding the conflict, which has provided a substantial buffer, alongside IEA stock releases, and an assumption that the conflict is too big not to be resolved relatively quickly.

When I write, as I often do, about the fund managers who are unnerved about all this, I get grumpy emails from men in Florida with Hotmail addresses telling me I’m an idiot. I hope the act of correspondence makes them feel better. But it is a fact that investors are jumpy about this dynamic and unsure how to navigate a safe route through it.

As Edmond de Rothschild Asset Management put it this week:

Behind the facade of market rebounds, economic fundamentals have been gradually deteriorating. The energy shock is still acute and now spreading to the most dependent economies, particularly in Europe and Asia. The prolonged rise in gas and commodity prices will hit growth and company margins. This disconnect between buoyant financial markets and the real economy is the main weakness today.

We need to stay invested but without being led astray by illusions. Markets look stable but this is largely a false impression, one that assumes that the shock is merely transitory and that central banks will continue to provide support. But in fact energy, budgetary and financial imbalances persist and are shifting.

It looks for now like miraculously resilient asset markets are able to take the strain. That seems to be down to one of a few things, or possibly a combination: investors believe in buying the dip, safe in the knowledge that fiscal or monetary assistance would kick in and prevent disaster; they believe in backtracks and simply don’t think the US administration would allow an apocalyptic rise in prices at the pump; or they think enhanced energy efficiency at a corporate and state level can get us all through this rough patch.

But a consensus is building that energy prices are not backing down any time soon.

Swapping out of the dollar

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If you have not done so yet, do yourself a favour and read our weekend piece by Princeton’s Brendan Greeley, titled There’s no such thing as the petrodollar.

Brendan is a friend of, and indeed, contributing editor to, the FT. You can hear him talking about stablecoins with me and Rob a couple of months ago here.

But back to bucks, and their role as the glue that holds global finance together . . . Right now there’s a lot of chin stroking going on about two things. One is petrodollars, and what happens to them given the situation in the Middle East, especially now that China and maybe also India are paying for Iranian oil not in dollars, but in yuan.

Brendan’s point is that “the petrodollar story gets cause and effect exactly backwards”. In other words, dollars don’t slosh around the global system because oil is primarily priced in the US currency. Instead, the US currency works uniquely well for this purpose largely because of the well-established ecosystem for offshore dollar creation.

And that ecosystem works so well in part because of the second point of obsession in markets right now: the network of dollar swaps provision, which we wrote about the other day.

Generally speaking, swaps are used as liquidity provision of last resort in periods of market stress, primarily for OECD countries (although Brazil and Singapore have also had access to them in the past). The possibility, now floated, that they could be extended to Gulf countries feels like an acknowledgment by the US that it has to work on keeping this ecosystem healthy — a point Gillian Tett addressed, also over the weekend.

One thing in the dollar’s favour is that there really is no credible workable alternative to the greenback at a scale large enough to facilitate global trade and a serious rival reserve currency.

A recent speech by Thorsten Beck, of the Advisory Scientific Committee of the European Systemic Risk Board, at a hearing at the European parliament, illustrated this point rather nicely. In it, he noted that “the hegemony of the dollar as a global reserve currency is being questioned” and called for the euro to step up and take some of the strain. His seven-point plan towards getting this done started with 1: create a unified safe asset and 2: deepen capital markets.

He’s right, of course. But what a to-do list. It’s like putting “1: win lottery” at the top of your retirement plan. If you have spotted signs of meaningful progress towards these laudable aims, we’re all ears.

One good read

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Water wars.

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Thanks for reading. Can’t get enough of Unhedged? Listen to our podcast, hosted by Robert Armstrong and Katie Martin, for a 15-minute dive into the latest markets news and financial headlines twice a week. Catch up on past editions of the newsletter here.

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