The geopolitical backdrop in the Middle East remained tense after renewed threats to Iranian infrastructure from President Donald Trump, although reports of a potential deal could limit the demand for the dollar.
Major indices, including the Nasdaq Composite, S&P 500, and Dow Jones Industrial Average, all recorded gains, with the Nasdaq delivering its strongest weekly performance since November.
Sterling fell by 0.5% against the dollar, dropping below $1.33, as the US currency strengthened due to a flight to safety. The dollar index increased by 0.3%.
The manufacturing input prices index jumped to 70.2 in March from 56 the previous month, its highest level since late 2022 and the steepest increase since October 1992, the month following Black Wednesday, when the pound's collapse drove up the cost of imports.
The UK is set to be among the countries worst hit if US President Donald Trump's 15% global tariff goes ahead, analysis has suggested. The British Chamber of Commerce told the BBC the UK would "sit towards the bottom of league table" of trade partners if Trump's announcement came into effect on Tuesday. On Friday, the US Supreme Court outlawed most of the global tariffs that Trump had announced last year, saying the president had overstepped his powers.
Sanjay Raja, the chief UK economist at Deutsche Bank, stated, 'The UK's disinflation story is set for another twist. The good news is that the CPI is expected to fall in the coming months. The bad news? Higher energy prices appear likely to significantly raise the CPI during the summer, creating yet another spike in the inflation trajectory.'
Energy becoming more expensive globally and the weaker pound means Britain pays even more for those imports. Oil and most commodities are priced in dollars. A softer pound therefore magnifies the impact of rising global prices.
'That's just the tip of the iceberg when it comes to ongoing export costs and delays,' says Parcelhero's Head of Consumer Research, David Jinks M.I.L.T. 'It was not only to EU destinations that export costs rose. 'Costs for shipping to the USA and other international destinations also rose year-on-year. 40.5% of retailers and 36.1% of manufacturers reported their global exports cost them more in December than in the same month of 2024. Trump's tariffs, introduced last April, played a role in this overall increase.
Markets were closed on Monday for Martin Luther King Jr. Day, compressing the week's activity into four sessions. Early in the week, stocks fell sharply after renewed concerns about a potential global trade conflict. Investor sentiment weakened following comments from President Donald Trump about imposing tariffs on certain European nations in connection with negotiations over Greenland. However, midweek optimism returned when the president signalled a softer stance and postponed the planned tariffs.
Weak performance in several service sectors offset gains in retail and wholesale trade, reinforcing concerns about the pace of economic recovery. Japan relies heavily on oil imports from the Middle East, making it particularly sensitive to disruptions in the region.
