28 April 2026: The UK urges the reopening of the Strait of Hormuz

British retailers reported the largest year-on-year decline in sales in more than 40 years as the war in Iran heightened households' inflation fears, a survey from the Confederation of British Industry showed on Monday.

The CBI's monthly retail sales volume measure fell to -68 in April from -52 in March, its lowest reading since the series began in 1983. 77% of firms reported sales were down compared with a year ago, while only 9% reported an increase.

"Some retailers reported that weak consumer confidence was weighing on spending in April," the employer organisation said.

Expectations for May also darkened, falling to -60 from -49, the gloomiest outlook since March 2021 during the COVID-19 pandemic.

"With the economic impact of the Iran conflict becoming clearer, firms will be looking to the Government to recognise that easing cost of living pressures depends on tackling the cost of doing business," CBI economist Martin Sartorius said.

The CBI called on the Government to stop new employee rights legislation from boosting employers' costs too much, to reduce their property taxes, and to cut electricity bills.

The decline in the CBI figure was steeper than in other data since the U.S and Israel launched attacks on Iran on February 28, leading to the closure of the Strait of Hormuz.

Britain's longest-running consumer confidence survey from GfK sank to its lowest level since October 2023 this month, while a CBI survey of manufacturers showed the lowest optimism since the start of the COVID pandemic.

Monday's retail survey showed a smaller decline in a related question, which asked retailers whether sales were good, bad or normal for the time of year. That measure fell to -32 in April from -23 in March, its lowest since June 2025.

Yesterday, a Minister in Sir Keir Starmer’s Cabinet called for the immediate reopening of the Strait of Hormuz, warning that disruptions are driving up global costs and threatening supply chains.

Speaking at a UN Security Council debate on maritime security, the UK’s Minister of State for Europe, North America and Overseas Territories, Stephen Doughty, said the crisis is “not just affecting international shipping” but is sending “shockwaves throughout energy markets and supply chains.”

“We must get the Strait reopened fully and unconditionally. Freedom of navigation must be restored in line with international law,” he said.

Doughty added that Iran “must not be able to hold the global economy hostage,” urging coordinated international action to protect shipping and ensure safe passage for vessels.

He said the UK would continue working with partners to safeguard maritime routes, adding that “global stability and security depend on us stepping up together.”

As the war in Iran continues, fuelling a return to rising inflation, attention this week turns to the Bank of England and other G7 central banks.

Andrew Bailey and his rate-setters are widely expected to avoid knee-jerk reactions on Thursday and leave interest rates at 3.75%. They’re also expected to stress-test scenarios for responding to a prolonged energy price shock. Ultimately, there isn’t enough clarity on the length and impact of the war in Iran.

Officials believe that futures indicating an easing of energy price pressures could be overly optimistic. Any prolonged shock would likely hit jobs and growth. It’s a quandary facing central banks globally.

The Bank of Japan held rates steady earlier this morning and continued its wait-and-see approach as it gauges the economic effects of the war in the Middle East.

Its policy board voted to sit tight at a scheduled two-day meeting that was cut to a single day, maintaining the policy rate and the uncollateralised overnight call rate at 0.75%.

Yesterday, Sterling initially rallied to a high of 1.3576 but quickly ran out of steam and fell back to close at 1.3534.

The Federal Reserve is expected to hold interest rates steady this week as policymakers weigh rising oil prices and fresh economic uncertainty, in what could be Jerome Powell’s last meeting as Chairman before his term expires next month.

There is little doubt that the Fed will keep its benchmark interest rate unchanged at the end of its meeting tomorrow. Rates have been in the 3.5% to 3.75% range since December, as most officials have wanted to see more signs of progress on inflation, which has been running above the 2% target for years.

Higher oil prices due to the war in Iran have compounded the Central Bank's challenges in lowering inflation and introduced new uncertainty about the economic outlook. Brent crude, the global oil benchmark, has climbed by around 50% since the war started, increasing costs for petrol and other energy-dependent goods.

Elevated oil prices are already evident in inflation data, pushing the March consumer price index to its biggest increase in nearly four years. The question facing policymakers is whether the oil shock will be temporary or create sustained upward pressure on inflation.

Economic downturns are often seen as negative, but they can also help reset imbalances in the economy. A recession can slow inflation, reduce excess spending, and force adjustments in overvalued sectors. However, it also brings job losses and uncertainty.

This may well be a turning point for the U.S. economy, but views are mixed on whether the delayed “golden age” is set to begin, or whether the global economy is set to move on from its domination by the U.S.

While Donald Trump takes a few days off from telling the world how well the war in Iran is going, as he entertains the King and Queen, the world will have an opportunity to gauge what is really happening across the Gulf without his constant rhetoric.

In just eight weeks, much of the global economy has been knocked sideways. America has largely been spared the tumult.

Inflation has risen, but that will likely prove transitory, provided the Strait of Hormuz reopens fully within a reasonable timeframe.

One blockade set to end is that imposed by Senator Thom Tillis of the Federal Reserve nominee Kevin Warsh, following the U.S. Department of Justice's decision to drop its criminal investigation of Fed Chair Jerome Powell.

Warsh now has a clear path to replacing Powell as the next leader of the Fed when Powell’s term expires next month. The Senate Banking Committee is set to vote on his confirmation tomorrow, and the full Senate could take it up shortly after.

With Tillis’s support, the confirmation of President Donald Trump’s pick to lead the Fed is all but assured.

“I am prepared to move on with the confirmation of Mr Warsh. I think he’s going to be a great Fed chair,” Tillis said on NBC’s “Meet the Press.” “We were very clear that we had assurances from the DOJ that I needed to make sure they were not using the DOJ as a weapon to threaten the independence of the Fed. So this will allow Mr Warsh to move on with his confirmation on time.”

The dollar index saw traders mostly sitting on their hands yesterday as they waited for this week’s monetary policy decisions. The index fell marginally to a low of 98.22 but recovered to close at 98.49.

Eurozone companies expect substantially higher selling prices and input costs due to the war in Iran, adding to inflation concerns at the European Central Bank.

Firms anticipate a 3.5% increase in selling prices over the next 12 months, according to the ECB’s most recent survey on the access to finance of enterprises, or SAFE. That’s up from 2.9% in the previous round, an increase the ECB called significant.

Projected input costs rose to 5.8% from 3.6%. The ECB said daily responses collected before and after Feb 28, when the conflict began, showed “firms questioned later in the fieldwork period had reported higher cost and price expectations.” While that may be fairly obvious, it should be noted.

At the same time, inflation expectations also rose “markedly” for the one-year horizon — to 3% from 2.6%. For three to five years, they remained unchanged.

The poll, conducted between February 19 and April 1, comes days before the ECB next sets interest rates and has been highlighted by officials as a key input in assessing potential fallout from the conflict in the Middle East.

The accompanying surge in energy costs is already pushing up inflation and weighing on economic sentiment in Europe, though the medium-term implications are still murky.

The ECB has signalled it will stand pat on Thursday, with officials keeping their options open and investors and economists seeing June as the likelier time for a hike.

While companies’ selling prices and inflation expectations rose significantly, those for wages, a major focus for policymakers, moderated slightly, to 2.8% from 3.1% in the final quarter of 2025.

According to the ECB, companies reported higher rates on bank loans and other financing costs, stable credit needs, and a small perceived decline in availability.

It is a brave call, but the ECB’s Chief Economist, Philip Lane, has again told reporters that he believes a bout of Euro strength will aid the ECB in its fight to reduce inflation.

Given the current turmoil in the global economy, it is perhaps a step too far to expect the Euro to continue to gain if and when the conflict in Iran ends, particularly since no one has a clear picture of what any solution will look like.

Before the conflict began, economists were pointing to an undershoot in inflation in the region, which could have led to a cut in interest rates this year. While the Fed, under its new Chairman, is also likely to cut rates, growth will become more evident, and the dollar is more likely to react positively than the Euro.

Yesterday, the common currency spiked to 1.1755 in early trading. Still, as traders considered events due this week, including Central Bank meetings where comments will be more important than final interest-rate decisions, it fell back to close at 1.1720.

Have a great day!