Norway raises interest rates as Middle East war threatens economic outlook
Newsflash: Norway’s central bank has raised interest rates, to combat the inflationary dangers of the Iran war.
The Norges Bank’s Monetary Policy and Financial Stability Committee has just announced it is lifting its policy rate from 4% to 4.25%.
Norges Bank said inflation was already “unexpectedly high”, and pointed out that increase in oil and gas prices due to the war in the Middle East could lead to faster price rises.
Governor Ida Wolden Bache says:
“The Committee judged it appropriate to raise the policy rate at this meeting. Inflation is too high and has run above target for several years.
She added:
“The policy rate forecast presented in March implied the potential need for further tightening of monetary policy later this year. The monetary policy outlook does not appear to have changed materially since March, but the war in the Middle East is still causing substantial uncertainty about the economic outlook.”
Sweden's Riksbank leaves interest rates on hold
Sweden’s central bank has left its key interest rate on hold today, while it assesses the economic damage from the Iran war.
The Riksbank held its benchmark rate at 1.75% today, as expected.
It says:
The risk that the war in the Middle East will lead to higher inflation has increased somewhat. However, inflation is currently below the target and the recent outcomes have been clearly lower than the Riksbank’s forecast in March.
In addition, economic activity is weak. This means that there is scope to wait until there is a clearer picture of the effects of the war and the supply shocks it entails.
European markets higher, but UK lags
European markets are higher in early trading, although London is lagging behind.
Germany’s DAX share index has gained 0.4% in early trading, while France’s CAC 40 is 0.7% higher, lifting the pan-European Stoxx 600 index by 0.2%.
However, the UK’s FTSE 100 index is down 58 points, or 0.55%, with energy companies among the fallers.
Jim Reid of Deutsche Bank told clients this morning:
The main driver of the moves over the last 24 hours was that Axios report that the US and Iran were close to agreeing a one-page memo that would end the war and set a framework for more detailed nuclear negotiations.
Its provision would reportedly include a moratorium on nuclear enrichment for Iran, whilst the US would lift its sanctions and release billions in frozen Iranian funds in return, as well as both sides lifting restrictions around the Strait of Hormuz. And whilst the report left plenty of questions, a more positive tone continued during the day with Trump saying he thought the war “had a very good chance of ending” by next week and telling Fox News that he was “cautiously optimistic” about the proposal. He didn’t look to dispute the Axios report which was notable.
Meanwhile, Iran’s ISNA said that Iran was looking at the US proposal, with Bloomberg reporting that Iran is expected to send a response via Pakistan in the next two days.
The Danish shipping giant Maersk has maintained its profit guidance for the year, even as it reported a spike in fuel costs and warned that traffic through the strait of Hormuz “remains at a near standstill”.
The company, which transports goods around the world via sea, road, rail and air, said demand for shipping containers remained strong, but that war in the Middle East was ramping up costs.
Chief executive Vincent Clerc told BBC News that the reopening of the strait - a key shipping channel through which a fifth of the world’s oil and gas normally passes - would have a limited impact on cargo flows given the cost pressures the industry was facing.
Clerc said:
“The reopening of the strait of Hormuz, whether it happens in the days to come or the months to come, will have limited impact on cargo flows.
What really are the most important factors to consider: first is our ability to mitigate the cost increases we have been suddenly faced with. And I would say so far we have been successful with both our cost measures and the revenue, the commercial measures that we have put in place to mitigate the impact of these increases to our financials.”
Fuel costs have nearly doubled since the start of the conflict, he said, implying an extra $500m in costs per month, though he added that the company has been able to mitigate this through price rises.
He added:
“The secondary effect from this is actually whether these increased costs are eventually going to lead to inflation and demand destruction as a result, which could create a softened market environment in the second half of the year.”
Shares in Maersk, which are listed in Copenhagen, are down 4% this morning.
Oil drops back below $100 a barrel again
The Brent crude oil price is dropping this morning, towards the two-week lows hit yesterday.
Brent is down around 3% at $98.30 a barrel, back below the $100 a dollar mark, following Donald Trump’s claim that it’s “very possible” the US and Iran will agree a peace deal.
Saxo’s Strategy Team say:
Oil fell sharply on Wednesday as markets priced a lower risk of prolonged disruption in the Strait of Hormuz, after the US reportedly sent a one-page proposal through Pakistan aimed at ending the conflict and gradually reopening the waterway. Iran is expected to respond in the coming days, with nuclear talks likely to follow later.
However, it’s not yet clear that Trump has found a way to end the conflict, with his latest proposal dubbed an “American wishlist, not a reality” by the spokesperson for the Iranian parliament’s national security and foreign policy commission…
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Greenpeace have calculated that Shell made $53,241 per minute of profit in the last quarter.
New closing high on the Nikkei
Japan’s Nikkei 225 stock index has ended today’s session at a new closing high.
The Nikkei jumped by over 5.5% to end the day at 62,833 points – now up 24% so far this year!
With markets up across the Asia-Pacific region, Matt Britzman, senior equity analyst at Hargreaves Lansdown, says:
“Global markets are still pricing the glass as half full, with yesterday delivering another strong rally despite little tangible progress towards a lasting resolution in the Middle Eas
Shell’s shareholders will profit from its jump in earnings.
The company is lifting its quarterly dividend to $0.3906 a share, up from $0.3580 in the first three months of 2025.
It is also announcing a new share buyback programme of $3bn, which is another way to funnel cash to investors.
This follows another lucrative quarter for Shell shareholders – the company handed them $5.3bn in the first three months of 2026 – $3.2bn of share buybacks and $2.1bn of dividends.
However, this still leaves Shell’s Q1 dividend below the $0.47 per share dished out in the first quarter of 2019.
Mark van Baal, CEO of the Follow This campaign, says:
“These windfall profits are the result of war, not strategy. The underlying business model remains untenable as fossil fuel demand will enter structural decline soon.
“If Shell can’t restore its dividend to pre-Covid level with the oil price above $100, how will the company create shareholder value when demand declines and the oil price drops?”
Centrica buys Severn gas power plant
Elsewhere in the energy world, the owner of British Gas has agreed to buy the Severn gas power plant in South Wales for approximately £370m almost six years after its previous owner went bust.
Centrica described its new acquisition as one of the most efficient gas plants in the UK, and said that it would play “a critical role” in stabilising the UK’s electricity system.
It agreed to buy the plant from Calon Energy, which entered administration in 2020. The company’s directors were able to regain control of the Severn and Sutton Bridge gas plants in 2021 to allow the plants to continue to run while a sale was agreed.
Severn is one of few gas plants in the UK which can ramp up power output at short notice to fill the gap left by fluctuating renewable electricity or an unplanned outage.
Centrica boss Chris O’Shea said:
“The importance of reliable, flexible generation to balance the system continues to increase, keeping energy supplies secure and affordable as the energy transition progresses. Severn will play an important role in supporting that journey.
With the delivery of replacement capacity being impacted by grid access, rising costs and supply chain constraints, alongside the closure of aging gas assets towards the end of the decade, the need for assets like Severn will increase.”
Shell: repairing Qatar LNG plant will take a year
Shell’s profits jumped despite the production shutdowns and export constraints caused by conflict in the Middle East and the closure of the strait of Hormuz.
In March, Production at Shell’s Pearl gas-to-liquids facility in Qatar was stopped after an attack on the Ras Laffan Industrial City.
Today, Shell indicates it could take a year to repair the damage to the Pearl ‘train’ (a compressor used to convert natural gas into liquefied natural gas (LNG)).
The company says:
On March 18, 2026, an attack on Ras Laffan Industrial City (Qatar) damaged one of the two trains at the Pearl GTL facility, resulting in a limited write‑off recognised within depreciation in the first quarter 2026.
It is currently anticipated that the full repair of the damaged train will take around one year.
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Anger over Shell's 'monstrous' profits
Danny Gross, climate campaigner at Friends of the Earth, says Shell’s profits are ‘indefensible’, after the company doubled its quarterly earnings to $6.9bn this morning.
Gross says:
“Once again, fossil fuel giants are pocketing monstrous profits while drivers are being squeezed at the petrol pump and households are set to pay higher energy bills.
“Our fossil fuel-reliant energy system siphons money away from ordinary people to the rich and powerful.
“The answer is clear: strengthen the windfall tax on these indefensible profits and break our dependence on fossil fuels by powering our economy with homegrown renewables. This would lower energy bills, strengthen the UK’s energy security and protect us all from future energy price spikes.”
Maja Darlington, climate campaigner for Greenpeace UK, says the “fossil fuelled economy” is rigged in favour of oil giants like Shell.
“In the twenty-first century we have cheaper, cleaner alternatives that we can use to power Britain without anybody being bombed. We don’t need to let the fossil fuel industry hold us to ransom and pass on the costs of endless wars and limitless pollution.
The cost of living crisis, the climate crisis, the middle-east crisis, these are all oil industry operating costs. We need to stop subsidising them, introduce new taxes to make them pay and start taxing their obscene profits properly.”
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Shell's profits more than double quarter-on-quarter
Shell has become the latest energy giant to report soaring profits since the Iran war began.
Shell has beaten City forecasts by reporting profits of $6.9bn for the first quarter of 2026 – a period when oil and gas prices jumped and there was dramatic volatility in the energy markets.
That’s up from $3.256bn in the last three months of 2025 – when activity in the energy sector is typically lower (meaning lower profits).
That’s also a sharp jump compared with the first quarter of 2025, when the company made earnings of $5.577bn.
Shell attributes this jump in earnings to its trading division, higher prices and beefier profit margins at its refining business.
It told shareholders:
Adjusted Earnings, compared with the fourth quarter 2025, reflected higher contributions from trading and optimisation mainly impacting our Downstream, Renewables and Energy Solutions businesses, higher realised prices, higher refining margins, lower operating expenses and higher Lubricants margins, partly offset by lower volumes.
This surge in earnings will renew calls for a new windfall tax on the sector.
Anne Jellema, the executive director of climate campaign group 350.org, said:
“While people around the world struggle with soaring energy costs, Shell is raking in billions in added profit. The same crisis that is driving these windfalls is pushing millions closer to hunger and hardship.
“Governments must act now to tax these excess profits and use the money to protect vulnerable households and expand affordable, homegrown renewable energy.
Here’s the full story:
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Iran deal optimism lifts markets
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Global stock markets are continuing to rally today as investors cling to hopes of a deal to end the Iran war.
Asia-Pacific markets have jumped, after strong gains in Europe and the US yesterday on signs of progress in US-Iran negotiations.
Shares pushed higher after US president Donald Trump said a deal with Iran to end the war was “very possible” after “very good talks” over the past 24 hours.
Japan’s Nikkei 225 index has surged by 5.7% today, as trading resumed after the extended Golden Week holidays, while South Korea’s KOSPI index is up 1.4% and Australia’s S&P/ASX is 1% higher.
Iran is currently reviewing a US peace proposal, after Trump told Tehran to accept a deal to end the war or face a new wave of US bombing.
Yesterday, the FTSE 100 surged by almost 220 points, or 2.15%, to 10,438 points, while on Wall Street the S&P 500 hit a record high.
Oil plunged, ending yesterday almost 8% lower.
Markets are “aggressively pricing a peace dividend across oil, bonds, and currencies”, reports Stephen Innes, managing partner at SPI Asset Management, even though major geopolitical fault lines remain unresolved.
Innes adds:
The market traded like a casino where the fire alarm suddenly stopped ringing just as the champagne carts rolled back onto the floor. The S&P 500 and the Nasdaq Composite surged to fresh all-time highs, but truth be told, this was not merely an American rally. It was a full-blown global melt-up as traders aggressively embraced the idea that the Iran war may finally be shifting from missile trajectories to negotiation tables.
The agenda
7am BST: German factory orders
8am BST: Riksbank interest rate decision
9am BST: Norges Bank interest rate decision
9.30am BST: UK construction PMI
12.30pm BST: US Challenger job cuts
1.30pm BST: US jobless claims
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