July monthly investment update - Reflections on June 2026

The month of June will long be remembered as historical for many reasons. None more so, than for the month in which the US and Iran signed (what is hoped) will be a significant agreement to mark the end of the four-month war in the Middle East. Other news saw the British Prime Minister step down, and the new Federal Reserve Chair set out his agenda, stateside.

President Trump’s Memorandum of Understanding (MOU) - a 14-point peace treaty - was discussed in talks held in the Swiss mountaintop resort of Burgenstock, on 21 June. With US and Iranian officials present, along with Qatari mediators, it signalled an immediate end to military operations in the Middle East on all sides (including the conflict in Lebanon). 

Seen as a major step towards peace and stability in the region, the MOU included the lifting of the US naval blockade of Iranian ports, and, importantly, the reopening of the Strait of Hormuz. Vessels were making the crossing as soon as the day after the treaty was signed, carrying vital supplies of oil and liquified natural gas (LNG) shipments. This is welcome news, no doubt, for global economies after many months of on/off negotiations to resolve the shipping crisis. However, it is anticipated it will take some time for pre-crisis shipping levels to be achieved in the crucial waterway.

Investors tread with ‘cautious’ optimism

News of the agreed framework of the MOU, brought much-needed relief to investment markets during the month, as stocks rose and oil prices fell (Brent crude, the global oil benchmark, dropped more than 5%), and by month end, they were roughly back to pre-conflict prices.

Just how investment markets react in the coming weeks, and months, ahead will largely depend on all 14 points of the MOU (a sequencing of steps) being fully met and achieved. One major point, of course, includes the highly complicated talks between the two parties on Iran’s controversial nuclear programme – the epicentre of the conflict. US officials have stated that either party can still walk away. Having got this far in proceedings, investment markets are unlikely to react well to peace talks failing, at this stage.

In late June, it did look like that might be a reality, though. The US military carried out new air strikes on Iranian targets (including missile and drone storage facilities in Iran). This was, however, in direct response to Iran carrying out a drone attack on a cargo ship in the Strait. Iranian officials claimed the ship was using unauthorised routes to move through the waterway. President Trump, at the time, described it as a “foolish violation” of the treaty, particularly as the MOU explicitly states that all action should cease. Both sides, at the time, blamed each other for the faux pas. Despite this, at the end of June, the MOU was still, tentatively, in place. The situation is certainly rare: It seems ‘diplomacy’ has become an unlikely bedfellow of ‘military operations’ as the two co-exist alongside one another – it appears anything is possible in the quest for long-term peace.

Hawkish central bank dynamics and changes at the top!

Something else that investment markets were growing increasingly cautious of during June was happening in the US. New Federal Reserve Chair Kevin Warsh cited a “big problem” he saw with financial markets and his view was an interesting one: Mr Warsh feels that markets have become over reliant on what the Fed ‘say and do’, rather than paying attention to how economies are performing i.e. he has a view that stock, and bond prices, don’t accurately reflect real-time data - potentially impacting the effectiveness of the Fed’s interest rate decisions. His solution is to have ‘less communication’ coming out of the US central bank, so markets become ‘less reliant’ on the views of the Fed.

In the UK, it was all change at the top of government. In June, Sir Keir Starmer announced his resignation as Labour leader and UK Prime Minister (PM). This brings an end to what has been a rather short term at 10 Downing Street for the beleaguered leader - with more than three years of his five-year premiership still left. Following months of declining popularity, and controversy over some of his decisions, he stood at the now ‘all-too-familiar’ lectern (outside number 10), to deliver his resignation speech. He now joins a growing number of British PMs who, in the last decade, have left the job early. Investment markets were largely unmoved by the announcement, having already partially factored it in some months ago: On the day itself, UK equities remained steady, and the pound dipped, only slightly, on the news.

UK devolution and a No.10 of the North!

What might move investment markets, however, is clarity on who will be the next Labour leader, and perhaps, equally importantly, the next Chancellor. It’s highly likely the PM will be former Manchester Mayor, front runner, and now MP, Andy Burnham. Hailed by some as Labour’s ‘King of the North’, earlier in the month, Mr Burnham won the Makerfield byelection.

Back in parliament after nearly a decade away, there’s a heavy expectation by Labour MPs that Mr Burnham will ride into Westminster and deliver the elusive economic growth where others have failed. If his end of June campaign speech is anything to go by, he’s more likely to be riding back out again to set up a ‘No.10 North’ office (likely to be based in Manchester) in a bid to shift power (and decision making) away from Westminster. This includes giving more control to local governments, which aligns with the UK’s existing agenda of addressing regional inequalities (formerly known as ‘levelling up’). 

If enough Labour MPs give Mr Burnham their backing, he could be sworn in as PM as early as mid-July – making him the seventh UK Prime Minister in a decade.

Bond markets will be watching with an air of caution. Any fiscal policy changes that the new government proposes, will be judged by them. We know that Mr Burnham is seen as more of an ‘interventionist’ (more so than Mr Starmer ever was) which could be good for economic growth. However, Britain, as a whole, has limited fiscal headroom for any type of additional spending right now. This will be a worry for bond investors who have yet to be convinced of the Prime-Minister-in waiting’s fiscal credibility. He does have form: In September 2025, he ruffled bond investors’ feathers’ when he publicly said that Britain should not be “in hock” to bond markets” when talking about measures he felt a Labour government should follow. Mr Burnham may ignore bond markets at his peril: Liz Truss’ 2022 mini budget announcement, and the knock-on effect it had on bond markets, at the time, is not yet a distant enough memory. 

We are certainly living in extraordinary times. As we leave the heat of June behind us (in more ways than one), there could be more to come in July: World leaders will be hopeful for President Trump’s MOU staying the course to lasting peace; domestically, the nation’s focus will be on who will next walk through the door at No.10…South!