US-Iran peace deal: which sectors have recovered and which are stuck in a rut?

A US-Iran peace agreement and prospects for a reopening of the Strait of Hormuz saw Brent Crude oil prices fall to around $80 per barrel on 16 June, well below the near $120 peak and back within 10% of pre-war levels.

The agreement has implications for central bank interest rate policy due to the inflationary impact of higher energy prices putting pressure on inflation.

The European Central Bank raised interest rates by a quarter of a percentage point on 10 June in response to higher inflation forecasts for 2026, the bank’s first interest rate hike since 2023.

Central banks have been expected to raise interest rates before the end of 2026 because of rising inflation, driven mainly by rising oil prices. It remains an open question if the retreat in oil prices will reverse that trend.

UK two-year government bond yields, a proxy for official interest rates were recently trading around 4% compared with more than 4.5% at their recent peak, and 3.5% before the start of the war.

As the table shows, interest rate expectations compiled by the Bank of England from market prices for December 2026 have come down by around 0.19 percentage points since news of a peace deal surfaced on 12 June.

The prices in the table are not round numbers because they reflect weighted probabilities calculated by the bank. They should be seen as a guide to the direction of travel rather than specific market forecasts.

While there are many factors which can impact share prices, the war in Iran has been a key driver for certain sectors directly affected by the conflict. We look at the most impacted sectors.

Oil companies drift lower

Diversified oil companies BP and Shell saw their shares drift lower over recent weeks even before news of the peace deal hit the headlines, with BP shares down around 9% and BP around 7% lower since the middle of May.

This means that despite full year earnings estimates, for BP and Shell increasing significantly since late February, their shares are only marginally above where they were before the war started.

While the move in BP and Shell is consistent with a belief that oil prices are heading sustainably lower, any interruption to the flow of oil through the Strait of Hormuz could change the picture dramatically.

Airlines fly back to pre-war levels

Perhaps unsurprisingly, airline stocks rallied this week, but counterintuitively they are now trading back at pre-war levels with British Airways owner IAG shares up around a third since the lows in mid-March.

Budget airline Easyjet got an extra boost in early June after receiving a potential takeover bid from US investment firm Castlelake, which the company brushed off as ‘highly opportunistic.’ The shares are around 5% higher than their pre-war levels.

Housebuilders still down in the dumps

Ahead of the weekend UK housebuilders rose on hopes of a more supportive interest rate outlook with Vistry leading the pack, up 6% and FTSE 100 homebuilders Persimmon and Barratt Redrow gaining around 4% apiece on 12 June.

The sector remains down by around a third since the US-Iranian conflict began, reflecting rising mortgage costs and dampening consumer sentiment.

In May 2026 shares in affordable housebuilder Vistry plumbed a new 15-year low after the company paused share buybacks and lowered its annual profit forecast.

The company said events in the Middle East have started to create some upward pressure on material and labour costs which are expected to increase in the second half of the year.

Defence sector on its heels

After initially gaining in early March in response to the war in Iran interest in defence companies was not sustained, with share prices lower today than where they were before the conflict.

This reflects the sector running hot before the war which drove valuations to a rich premium to the market, leading to profit taking. There were also concerns that the large defence contractors may not reap the full benefit of increased defence budgets as low-cost drones became a focal point.

Shares in BAE Systems are around 10% below their February 27 level despite the company reiterating full year guidance on 7 May. BAE expects 2026 sales growth in a range of 7% to 9% and underlying operating profit to grow between 9% and 11% for the year December.

Gold, silver and copper shine

After dropping since the start of the war, gold and silver prices rallied this week in response to the US-Iran peace deal and a weaker US dollar, which makes the precious metals cheaper for buyers in other currencies.

Precious metal stocks remain heavily underwater since February with gold and silver miners Fresnillo and Hochschild Mining down by around a fifth.

The price of copper has increased due to improving risk appetite and structural demand from the AI data centre infrastructure boom.