FTSE 100 shrugs off Israel-Iran strikes
The FTSE 100 was unmoved by simmering tensions in Israel and Iran, despite reports that the UK was scrambling to send fighter jets, and conflict in the Middle East was on the brink of a significant escalation with US involvement.
The UK’s leading index was up 0.2 per cent after the first hour of trading, having finished on a record high of 8,871.31 on Thursday.
Betting platform owner Entain was up 7.8 per cent, followed by big players including Shell, Rolls-Royce, BP and defence firm BAE Systems.
Fallers included pharmaceutical giants GlaxoSmithKline, which dropped by 23 points, as well as AstraZeneca and Hikma, with the industry at large continuing to face pressure from Trump administration officials over tariffs and vaccine production.
The mid-cap FTSE 250 was also trading at higher levels on Monday morning following a spike in the price of oil, which rose by 1.3 per cent before falling again.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said increased consumer confidence in China helped to allay fears surrounding the conflict in the Middle East.
“There are worries that the attacks from Iran and Israel could ignite a wider conflict, destabilising the Middle East and affecting oil supplies,” warned Streeter.
“Although gas prices have also edged up slightly, the biggest moves have been seen with crude prices which are up around 12 per cent since hostilities erupted.
The worsening situation is set to be the focus of the G7 meeting of leaders of wealthy nations in Alberta, Canada.
“While hopes that Trump will sign more deals seem to be keeping trade optimism a bit higher, many countries remain in a queue and the cost to the global economy is mounting,” Streeter added.
FTSE 100 affected by oil price jump
Gold prices have stayed around record highs of $3,411 an ounce, with bullion now the world’s second largest global reserve asset after the US dollar, according a recent report by the European Central Bank.
The Bank of England and Federal Reserve will be closely monitoring developments in the Middle East and impacts on oil prices and safe havens, with both central banks widely expected to hold interest rates later this week.
Monetary Policy Committee (MPC) members have pointed to concerns around high wage growth, which slowed to 5.2 per cent in the three months to April.
Bank officials may also look to a rise in unemployment with some trepidation, indicating that more members will vote for an interest rate cut due to subdued demand.
“There is a mere 3 per cent chance of a rate cut from the Fed this week, as the central bank is set to push back against pressure from Donald Trump to cut rates,” said Kathleen Brooks, research director at XTB.
“However, there was some expectation that after a softer inflation print for May, and a clear slowing in the US labour market, the Fed may signal that interest rate cuts would be coming down the line.
The Bank of England is likely to express the fact that upside inflation pressures are out of its control, and it will remain data-dependent when it comes to adjusting policy.
“This means that if the oil price is elevated in the long term and this feeds into inflation, the BOE will need to keep a tight lid on rate cuts.
Brooks also pointed out that London equities markets had upended global trends.
“Global stocks slumped sharply on Friday; however, the FTSE 100 was protected from the worst of the sell off.”