It’s Groundhog Day for the markets as the Iran-US ceasefire is tested, while conflicting noises are made about the prospects for a peace deal.
Understandably, markets are in a non-committal mood as they wait to see if this is the week when we finally see some form of resolution to the crisis. The FTSE 100 slipped 0.3%, while oil prices ticked higher but remain some way off the $100 per barrel alarm-bell territory.
Government bond yields edged higher. They are another key barometer of the temperature of the conflict given the impact of the energy price shock on inflation and interest rate expectations. On the flipside, after the record highs posted last week, US futures are pointing to a higher open when trading resumes on Wall Street today.
New Berkshire Hathaway boss Greg Abel splashed a modest portion of the company’s sizeable cash pile on housebuilder Taylor Morrison in his first major deal since taking over from Warren Buffett. Having struck a deal early in Abel’s tenure, there may now be speculation about Berkshire putting its hefty financial firepower to work in an increasingly concerted way.
In London, supermarkets were in demand, with energy and resources names also making gains. Housebuilders, gold miners and banks were under pressure, while there was profit taking in the defence sector after a strong run heading into 2026.
EasyJet
EasyJet’s biggest shareholders are unlikely to accept a takeover bid unless there is a knockout price. Castlelake is preying on the weak, pouncing when EasyJet faces its biggest headwind since the global pandemic. Investors won’t want to sell in the darkest of hours unless they are getting generous compensation.
A bid is the last thing EasyJet’s management want to happen, given they’ve already got their hands full trying to navigate a weak market backdrop and concerns around post-summer fuel shortages.
Airline shares can be volatile at the best of times, prone to wild swings as the industry has form in being dealt with a multitude of challenges. In recent years that’s included air traffic control strikes, baggage handler strikes, virus outbreaks, and volcanic dust clouds. Investors owning airline shares know they must be patient, and they won’t want to cash out in a depressed market.
Airline shares are often the first to decline where there are economic setbacks, but they can also be among the first to rebound at the first sign of recovery. EasyJet’s shares were beaten up as soon as the Middle East crisis unfolded in March, yet they’ve rallied hard over the past week or so amid hopes of a resolution to the conflict. Admittedly, some of that share price appreciation might have been word getting out that Castlelake was sniffing around EasyJet.
The fact the shares have ‘only’ jumped 12% on Castlelake disclosing takeover interest implies the market doesn’t believe a bid will succeed.
There is logic to Castlelake being interested in the business, given it has a history of investments linked to the aviation sector. The big unknown is whether it would want to run EasyJet in its current form or simply flip it when market conditions improve. There are also question marks around how Castlelake as a US business would overcome EU rules that prevent a non-EU owner from holding a majority share of an EU airline.
EasyJet founder Stelios Haji-Ioannou and his family still own 15.3% of the airline, with asset managers UBS, BlackRock, Invesco and Wellington among the other main shareholders.”
ME Group
ME Group is proof that defensive-type companies aren’t immune from a consumer spending downturn.
The company operates photo booths and laundry machines, two income streams that are typically resilient. While it’s possible to take a passport photo on your phone, government systems often reject pictures if they don’t have perfect lighting. That means anyone needing to renew their passport often finds they have no choice but to use a photo booth.
ME Group has blamed the Iran war on lower demand for official photo ID amid travel uncertainty. Many people might not want to take the risk of booking a holiday only for it to be cancelled if there are fuel shortages. In that situation, they might opt to delay renewing a passport until another day.
There isn’t much that ME Group can do in this situation apart from sit tight until the conflict is resolved or there is more certainty around fuel supplies.”
Drax
The commitment Drax is showing to diversifying its business is striking. Having lost out in a bid battle for storage play Harmony Energy to Foresight in 2025, Drax has now put in an all-cash bid for renewable energy investment vehicle Bluefield Solar. With the unanimous approval of Bluefield’s board it feels nailed on that the takeover will be successful.
The deal could boost Drax’s earnings and cash flow visibility while expanding the breadth of its footprint in renewable energy. Drax’s existing interests include pumped hydro, gas and biomass assets – with the latter facing scrutiny over their sustainability credentials.
An FCA probe is continuing to progress in the background, centred around the sourcing of pellets for its biomass facilities, but this acquisition suggests this matter is not stopping Drax from pursuing its strategic goals.
That Bluefield is still being snapped at a discount to the value of its assets, despite being pitched at a significant premium to the current share price, is, in itself, an indication of why Bluefield put itself up for sale last year.
A higher interest rate environment has been bad for renewable energy trusts because it increases borrowing costs while boosting the returns from perceived lower risk assets like cash and government bonds. In the circumstances, Bluefield shareholders might be happy to take the money on the table and move on.
Dan Coatsworth: Head of Markets
Dan Coatsworth is AJ Bell's Head of Markets. Dan has been with the company since December 2012 and has more than 18 years' experience in the industry, following the markets and all things investing. He...
