June 2026 Market Review: UK Shares Rise as Oil Slides and Inflation Holds

June was a month of rotation rather than a single direction for all assets. After leading for most of the year, US equities paused as investors questioned how far the artificial intelligence rally had run. The UK stepped into the gap, with the FTSE 100 closing higher. We also saw a continued slide in the oil price, as shipping through the Strait of Hormuz began to recover and OPEC+ raised supply, taking pressure off potential future inflation and off central banks. Gilt yields eased, and the Bank of England held rates while keeping its options open.

Equities: UK Catches Up as US Pauses

The pattern of recent months reversed in June. The S&P 500 slipped around 1.3% to close the month near snapping a two-month winning streak that had lifted the index by more than 10% over April and May. The pullback was modest  but it reflected growing caution over stretched valuations in AI-linked technology names, some of which had done almost all of the earlier heavy lifting.

The UK held up better. The FTSE 100 traded around 10,500 in late June, having recovered much of the ground lost in the March selloff, though it remained a few per cent below its record high. Some of that strength came from the Index’s international earnings base which benefited from a softer pound and firmer global sentiment. Gains weren’t uniform however, with heavyweight miners such as Fresnillo, Antofagasta, Glencore and Rio Tinto weighed on the index as metal prices eased over the month.

Gold Comes Off Its Highs

After one of the most dramatic starts to a year on record, gold cooled through June. Having crossed above $5,500 an ounce intraday in January, the price eased below $4,100 by late June, leaving it down for the year to date, but still performing strongly over the past twelve months. The pullback reflected expectations that interest rates could stay higher for longer, and some rotation back into equities as geopolitical fears receded from their spring peak.

The long term case for gold has not gone away, particularly as Central banks have continued to add to reserves and its typically not correlated with stocks or bonds. For diversified portfolios, gold's role is a long-run diversifier although June was a reminder that it can correct sharply after a strong run. Within the Smart Portfolios, gold's move lower made it a detractor over the month.

Fixed Income: Gilt Yields Ease Further

Having spiked above 5% in the spring on inflation fears and domestic political pressure, the 10-year gilt yield eased throughout June, falling toward the 4.7% area by month-end from around 4.85% at the end of May. The move followed lower oil prices and a scaling back of expectations for further rate rises. As bond prices move inversely to yields, the decline this month meant firmer prices on existing holdings and turned fixed income into a modest support for balanced portfolios. Additionally, whilst we saw Keir Starmer announce his resignation as Prime Minister, the clear path for Andy Burnham to succeed Starmer as Prime Minister post his Makerfield by-election win meant that the political noise this month had little effect on UK markets, with much of the major moves coming in the spring.

Oil Falls Sharply Again

The oil price remained the key macro driver. Brent crude, which had spiked above $110 a barrel at the height of the conflict, fell steadily through June to trade near $72 by month-end, its lowest since late February. Two forces drove the decline: shipping traffic through the Strait of Hormuz continued to recover as the US-Iran ceasefire held, and OPEC+ agreed further increases to production quotas, with major Gulf producers rapidly restoring exports toward pre-conflict levels.

Caution still applied. The ceasefire remains fragile, with periodic reports of incidents near the strait, and analysts warned that the recovery in flows was not yet complete. However, the broad trajectory through June was firmly downward for oil, a marked contrast to the spring spike and a meaningful relief for the inflation outlook.

UK Inflation Holds Steady

Inflation held steady for the month. CPI was 2.8% in the year to May, unchanged from April and its lowest since early 2025, but the calm headline figure masked a reshuffling underneath. Food inflation eased to 2.2%, its lowest since December 2024, and housing costs kept slowing. Pulling the other way, transport inflation jumped to 6.8%, its highest since 2022, on pricier motor fuel, air fares and vehicle excise duty, while core inflation edged up to 2.6% and services to 3.7%, a firm a reminder that domestic price pressures have not fully cleared.

The headline figure is welcome, but it rests on shifting ground. Much of the earlier fall came from lower energy bills, and that tailwind is now reversing. Ofgem has confirmed a rise in the price cap from 1 July, tied to higher wholesale gas prices. With services inflation sticky and the Middle East conflict not fully resolved despite a ceasefire, inflation could continue to feature going forward.

Meanwhile The Bank of England continued its current course, holding rates at 3.75% with a 7-2 vote. Governor Andrew Bailey signalled he was content to live with above-target inflation for now, but would move promptly if those pressures began to spread. Markets, at present, are still estimating one more rise before year-end.

The Portfolios

June was a marginally underperforming month for the Smart Portfolios. The main drag came from gold, which fell sharply over the month. The portfolios hold a notable position in the metal and it was the single largest detractor over the month. GBP hedged US equity which we have a chunky position in was the other notable headwind, with US shares slipping modestly in dollar terms, our GBP hedged positions locked in those losses. Yet the unhedged US equity positions gained slightly due to sterling’s fall against the dollar over the month.

The Smart Portfolios provide professionally managed, risk-profiled discretionary managed portfolios using BlackRock's iShares ETFs across five options from Conservative to Aggressive, matching different time horizons and risk tolerances. Automatic rebalancing maintains target allocations, whilst costs significantly below traditional active funds compound meaningfully over time. The portfolios are available in ISA and SIPP structures for tax efficiency.

Sources: Bloomberg, ONS, Bank of England, CNBC, EIA, World Gold Council, FTSE Russell, LSEG, Reuters (all data as at 30 June 2026)

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