WeekWatch

Russia’s diesel release and why oil remains above $100 a barrel 

President Trump last week announced that his administration had reached an agreement on the release of about 13.5 million barrels of Russian diesel. However, October’s shipment of 2.3 million barrels against daily global demand of about 30 million barrels means that in the short term, this is unlikely to make a significant dent in bringing the diesel price down. While the price of US diesel futures closed $0.20 lower at $4.68/gallon on Friday, the retail price of $6.28 a gallon is almost double the $3.68 price a year ago.   

Oil shipments through the Strait of Hormuz in September were not far off their pre-war level. Yet hopes that the oil price would drop as a result have not materialised. Brent crude, the international benchmark, rose last week and so far this year is up 66%. 

There are a range of factors combining to minimise the chances of a swift and sharp decline for the oil price. Perhaps most significant is that hostilities show no sign of ending. The escalating Iran-backed Houthi attacks on Saudi Arabia, including the weekend’s missile strike on the international airport in the capital, highlight the vulnerability of energy assets across the Gulf. This could increase the risks of a broader regional confrontation. 

According to the United Nations’ International Maritime Organization (IMO), so far in October nine tankers have been damaged in the Strait of Hormuz or off the adjacent coast of Oman. In September, 15 tankers were damaged, with a number of fatalities. The danger and uncertainty have fed through to higher shipping rates and insurance premiums. Longer journeys to avoid hotspots are also less efficient and add to costs. While the cost of shipping crude oil from the Middle East to Europe would have added about $2 per barrel in 2025, in September 2026, the cost was an additional $35 per barrel. Damaged infrastructure also means that the supply of refined products, such as diesel, has been disrupted and will take months to recover. 

US mid-term countdown 

With less than three weeks until the US mid-term elections, Republicans are worried that the difficult backdrop of higher prices and an unpopular war will cost them at the polls. President Trump’s approval ratings are the lowest in decades for a president just before mid-terms. On the key issues, such as inflation, the economy and trade, he scores particularly badly on. How could this affect the outcome of the mid-term elections and what is the follow-through for markets? 

Within Congress, all 435 seats in the House of Representatives (the House) are up for re-election, while in the Senate, 35 seats will be contested. The Republicans currently enjoy narrow control of both the Senate and the House, but this is expected to change following the election. 

Analysts predict that the Democrats are likely win control of the House because they only need a net gain of three seats to win a 218-seat majority. Historic voting patterns and Trump’s low approval ratings suggest they could exceed this target. 

In contrast, the Senate outcome is proving more difficult to call. With the Republicans in control by 53-47, the Democrats will need a net gain of five seats to win. Trump’s unpopularity at the national level won’t necessarily translate into Democrat gains. In Senate races, state-level and local factors are important. A number of closely contested races are also occurring in states that Trump won in 2024, including Texas, Ohio and Iowa.  

Euro area fiscal contagion

Government bond yields in Italy and Spain, as well as France, have widened against comparable German ones. This gap, also known as the ‘spread’, is the additional compensation that investors are demanding to hold the debt of these euro area members. This pick-up in investor angst has revived fears of a repeat of the euro area crisis of 2010 – 2012, which saw a number of euro area states unable to repay or refinance their government debt. Because these countries no longer control their own currencies, they cannot print money to finance deficits or cause a currency devaluation. 

Yet there are key differences between the last crisis, set off by events in Greece, and the current nervousness. More safeguards are now in place, including European Central Bank (ECB) support for specific euro area countries, as well as a strengthened banking system and higher capital requirements. Greg Venizelos, SJP’s Fixed Income Strategist, comments that “while France is a serious case, with a high debt burden and political deadlock ahead of next year’s elections, it has a much larger and more diversified economy.” 

Conservatives pledge to abolish IHT on family homes

Leader of the Conservative Party Kemi Badenoch has promised to abolish inheritance tax (IHT) on family homes if her party returns to government.

Badenoch said that the proposal would allow couples to pass on an additional £1 million to their families free of tax.

According to Conservative Party calculations, the changes would see all estates paying less IHT and halve the number of families paying the tax. She argued that IHT is no longer a tax on the wealthy but is increasingly affecting middle-class families.

Under current rules, IHT is generally charged at 40% on the value of an estate above the available nil rate band allowances. The first £325,000 of an estate is usually covered by the nil rate band. Some people may also qualify for a residence nil rate band of up to £175,000 when leaving a qualifying home to direct descendants, such as children or grandchildren.

As a result, a single person may be able to pass on up to £500,000, and a married couple or civil partnership could pass on up to £1 million, without an IHT charge, if they qualify for the full allowance.

Rising mortgage rates weigh on property demand

Rising mortgage rates are continuing to put downward pressure on housing demand, slowing market activity and price growth.

Several lenders have reported softer levels of activity in recent months, blaming higher borrowing costs and ongoing economic uncertainty.

Expectations of further interest rate rises have also dampened confidence for house buyers and movers. Recent Bank of England data shows net mortgage approvals for house purchases fell to 54,900 in August, the lowest level since December 2023.¹

Mortgage brokers are reminding borrowers that they can often secure a new mortgage deal up to six months before their fixed rate period ends. Locking in a rate early may provide protection if borrowing costs rise further, while many lenders still allow borrowers to switch to a cheaper deal if rates fall before completion.

Source

¹Bank of England, Money and Credit, August 2026 – September 2026