Pedro Sanchez has risked the ire of the unpredictable Donald Trump with his firm stances that Spain is \u201cnot going to be complicit in something that is bad for the world\u201d.<\/strong><\/p>\nTrump\u2019s threat to halt trade with Spain has prompted the EU to remind the US president that the deal they signed last year on tariffs still stands as a matter of good faith. If it is breach the bloc will react, it said on Wednesday hinting at retaliatory powers at its disposal.<\/p>\n
It would be impossible for Trump to halt trade with any single country such is the global nature of supply chains.<\/p>\n
But he does have, in his own words, a series of \u201cpowerful and obnoxious\u201d tariff options that are outside the scope of the supreme court ruling 10 days ago which struck out his reciprocal tariffs.<\/p>\n
He has constantly threatened, for example, sectoral tariffs on pharmaceuticals made in the EU and sold in the US, something that keeps Irish leaders awake at night.<\/p>\n
Although Spain\u2019s pharma sector is not as high profile politically as Ireland\u2019s, it is also vulnerable.<\/p>\n
In 2024 Spain exported $1.15bn pharmaceutical products in 2024 including medicines, sera and other blood products.<\/p>\n
Trump could also attack a country\u2019s legislative canon if he felt it was prejudicing American companies such as tech sector, something we know he feels strongly about.<\/p>\n
He is currently invoking section 122 of the 1974 Trade Act to impose a global 10% tariff on foreign imports but pharma tariffs would be available to him under a different law, section 232 of the 1962 Trade Expansion Act.<\/p>\n
He is currently threatening eight sectors under Section 232.<\/p>\n
But he has three other laws he can draw on – here\u2019s the explainer.<\/p>\n
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Gas prices are dropping<\/h2>\n
UK and continental European gas prices have fallen back today \u2013 a relief for households, politicians and central bankers alike<\/strong>.<\/p>\nThe UK\u2019s month-ahead gas contract is down 10.5% today at 126p per therm, down from 141p per therm last night.<\/p>\n
The benchmark Dutch contract is down almost 12% at \u20ac47.8 per Megawatt hour.<\/p>\n
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Updated at\u00a006.56 EST<\/p>\n
Some UK lenders have paused plans for mortgage rate cuts, according to a financial information website, amid wider economic and global uncertainties as the conflict in the Middle East unfolds.<\/strong><\/p>\nMoneyfacts<\/strong> said swap rates, which are used by lenders to price mortgages, have been rising in recent days, PA Media reports<\/em>.<\/p>\nThe website said it was aware that some lenders, which it did not name, had already reconsidered planned rate reductions.<\/p>\n
Despite some lenders pausing plans to reduce rates further, figures from Moneyfacts<\/strong> indicated some mortgage rates were still heading in a general downward direction on Wednesday.<\/p>\n\n- \n
The average two-year fixed-rate homeowner mortgage rate on the market on Wednesday morning was 4.82%, down from 4.83% on Tuesday.<\/p>\n<\/li>\n
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The average five-year fixed-rate homeowner mortgage rate on the market on Wednesday morning was 4.94%, falling slightly from 4.95% on Tuesday.<\/p>\n<\/li>\n<\/ul>\n
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US stock index futures are slightly higher, as investors assess the NYT\u2019s report that suggested Iranian operatives had reached out to the US with an offer to discuss terms for ending the conflict.<\/strong><\/p>\nThe S&P 500<\/strong> share index is on track to rise 0.4%, the futures market suggests.<\/p>\nShare<\/p>\n
NIESR: Middle East crisis could push UK interest rates up<\/h2>\n
Tom Knowles<\/span><\/p>\nInterest rates in the UK could rise back up above 4% if the war in the Middle East causes energy prices to stay higher for longer, a think tank has warned.<\/strong><\/p>\nThe National Institute of Economic and Social Research (NIESR)<\/strong> said that if the energy shock from the conflict persists for one year, then the Bank of England would be forced to push up borrowing costs from the current rate of 3.75%.<\/p>\nThe think tank analysed two \u201cWhat if?\u201d scenarios for the energy market. Both cases involve oil prices rising a further 30%, equivalent to $100 a barrel, and gas prices rising a further 50%, equivalent to $70 a barrel equivalent.<\/p>\n
In the first scenario, the analysis assumes the impact is transitory and energy prices begin to normalise after one quarter. In this case, NIESR<\/strong> said a temporary jump in energy prices would lead to a 0.3 percentage point (pp) increase in inflation alongside a \u201cnegligible impact\u201d on GDP for 2026. It said central banks around the world would most likely understand the shock to be temporary and \u201clook through\u201d the impact.<\/p>\n[This, incidentally, is how BoE policymaker Alan Taylor argued central banks should act, on Monday]<\/p>\n
However, in the second scenario, NIESR<\/strong> examined what would happen if the rise in oil and gas prices persisted for one year before normalising at a slower rate. It says this would lead to a 0.7pp increase in inflation in 2026 and 0.5pp increase in 2027 and dampen GDP growth by 0.2% in 2026. It says this rise in inflation would cause the Bank of England to increase rates by 0.8pp, which at the current rate of 3.75% would see it increase to 4.5%.<\/p>\n\u201cIf the shock persists, the Bank of England could be forced to raise interest rates back above 4%,\u201d NIESR<\/strong> said.<\/p>\nEd<\/strong> Cornforth<\/strong>, an economist at NIESR<\/strong>, said:<\/p>\ndouble quotation mark\u201cThe conflict in the Middle East will have material implications for the economic outlook. The Bank of England will have to contend with a shock to global energy prices, with the question of persistence hanging over their heads. This will cause problems for Rachel Reeves as financing costs increase, putting further pressure on an already precarious fiscal outlook\u201d.<\/p>\n
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Updated at\u00a006.21 EST<\/p>\n