Barclays and Natwest shares jump as conflict sparks inflation fears
Shares in the FTSE 100’s top banks were rising on Monday as the intensifying conflict in the Middle East triggered inflation fears.
Barclays and Natwest were up nearly two per cent and Lloyds over one per cent during early trading as oil prices crept up another one per cent to $74.90 a barrel. This follows an over nine per cent spike on Friday after Israel began striking Iran’s nuclear programme.
Meanwhile, Standard Chartered took second place on the index’s risers after jumping nearly three per cent. The bank had made gains on the back of easing US and China trade tensions, with rising inflation fears over oil prices proving an extra bump.
Richard Hunter, head of interactive investor, said: “The oil price, which initially spiked by more than seven per cent, could have an almost immediate impact on inflation at a time when rising prices are coming to the fore as a result of the tariff introductions.”
The higher inflationary pressure could spark a more hawkish stance from the Bank of England, which has slashed interest rates four times in the last year.
Fewer cuts would be welcome news to lenders, who pocketed record profits in 2024 on the back of post-financial crisis high interest rates.
Bank of England to hold or trim rates on Thursday
The Bank of England’s monetary policy committee (MPC) will next decide whether to trim or hold rates on June 19.
Economists expect the MPC to keep rates at 4.25 per cent as it maintains a ‘gradual and careful approach.’
Huw Pill, the bank’s chief economist, said last month that he thought rates had been cut too quickly partly due to the risk of “stubbornly strong” pay growth on overall inflation.
Fresh anxieties from the Middle Eastern conflict could be set to add further weight to the MPC’s decision, as oil’s surge pedals inflation fears.
But Hunter said: “For the Bank of England, there is likely to be some reference to the inflationary potential of the rising oil price, although this will play second fiddle to a labour market which is showing some signs of softening.
“In turn, this could lessen pressure on wage growth inflation, although the central bank’s currently measured and cautious approach is likely to leave their stance on monetary policy unaltered for the time being.”