FTSE 100 Posts Worst Session Since Iran Conflict Outbreak (May 16, -1.9%); UK Utilities Battered; CIT Section 122 Tariff Ruling Still Under Federal Circuit Stay

The weekend of May 16-17, 2026 brought a confluence of developments reflecting the global economic stress picture heading into the week of May 18. **FTSE 100 Worst Session Since Iran Conflict Outbreak (May 16, 2026):** - The FTSE 100 fell **1.9%** on Friday May 16 — its worst single-session performance since the outbreak of the US-Israel-Iran conflict in February 2026 - UK domestic utilities were the hardest hit: Severn Trent -7.9%, United Utilities -7.6% - The FTSE 250 (more domestically focused) fell 1.3% - Drivers cited: Iran conflict energy price transmission to UK utility economics (gas-peaker generation costs), rising UK gilts yields tracking US 10Y at 4.59%, and post-summit disappointment - The UK market performance reflects the broader European economic stress: Bank of England holding at 3.75% against UK CPI of 3.3% (March 2026), with IMF downgrading UK 2026 growth to 0.8% **CIT Section 122 Tariff Ruling — Status Update (as of May 17):** - On **May 7, 2026**, the US Court of International Trade issued a **2-1 ruling** that Section 122 tariffs (Proclamation 11012) were unlawful — finding the administration failed to establish a genuine 'balance-of-payments deficit' as required by the statute - The majority held that 'trade and current account deficits do not constitute a balance-of-payments deficit within the meaning of Section 122' of the Trade Act of 1974 - **However:** On **May 12, 2026**, the US Court of Appeals for the Federal Circuit issued an **administrative stay**, freezing the ruling while the administration's appeal proceeds — Section 122 tariffs are therefore **still being collected** as of May 17 - The stay means the Section 122 'cliff' on July 23 (66 days from May 17) remains the primary legal/policy deadline - USTR Greer's May 17 Face the Nation comments (US can restore 'Busan Deal' tariff levels) suggest the administration is also preparing contingency measures — likely Section 301 authority — to maintain tariff pressure if Section 122 is ultimately struck down **Week of May 18 Outlook:** - April housing starts and building permits (scheduled May 21) — first housing sector read under Warsh era - Flash PMIs for May (scheduled May 22) — first read on business conditions after the Trump-Xi summit - No FOMC until June 16-17 — Warsh era 'listening tour' only; no policy signals expected before June - Section 122 cliff countdown: 66 days - Federal Circuit appeal timeline: 90–180 days typical, likely resolving in October–November 2026