Good morning. A lot happening overnight, and a couple of things that should move how you’re thinking about the week.

The Hormuz situation has escalated materially. US forces struck Iranian fast boats in the strait after Tehran targeted UAE assets, and Iran’s parliamentary speaker has warned that “we have not even begun.” Oil is holding its gains. HSBC has separately disclosed $400mn in exposure to collapsed mortgage lender MFS and set aside a further $300mn for impairments tied to the Iran conflict — a useful early signal of how quickly this is feeding into bank balance sheets. Worth watching whether other lenders with Gulf exposure follow with similar disclosures.

On UK politics, the cabinet is in damage-limitation mode ahead of Thursday’s local elections. Ministers are privately telling backbenchers that any move to oust Starmer after what could be a difficult night would be destabilising, but the Guardian’s reporting suggests the mood on the backbenches is genuinely febrile. If the results are as bad as some Labour MPs fear, the leadership question won’t stay contained for long. Starmer is also hosting a Downing Street antisemitism summit today, which is unlikely to quieten internal critics.

Germany’s Merz has apparently undone a year of careful relationship-building with Washington in a single public swipe at Trump, according to the FT. The timing is awkward given Berlin is trying to hold together European positioning on trade and defence spending simultaneously.

LVMH is exploring the sale of Marc Jacobs and Fenty, among other brands — one of the biggest portfolio pullbacks in the group’s history. Arnault moving from buyer to seller is a meaningful signal about where luxury demand is heading, and about his own read on how long this downturn lasts.

On tech, CISA has flagged a critical Linux vulnerability — named CopyFail — that is being actively exploited in hacking campaigns and poses significant risk to servers and data centres. If your firm runs Linux infrastructure, your IT security team should already be across this, but worth confirming.

The Bank of England’s rate decision is Thursday. Given the local election results will land the same day, Bailey’s press conference is going to be an unusually watched one.

Sources

The Economist, BBC News, Guardian, Al Jazeera, FT, TechCrunch, Ars Technica, Politico — 2026-05-05