The FTSE 100 was higher on Wednesday despite major escalations in the Middle East overnight as commodities provided a safe haven for investors.
Iran launched a barrage of missiles at Israel while Israel moved more troops into Lebanon overnight sparking concerns of all-out war in the region.
However, the dynamics of the FTSE 100 index and its leaning towards safe havens meant London’s leading found support as investors flocked to commodities companies.
“As Iran’s cruise missile attack on Israel and fresh strikes on Hezbollah in Lebanon have unnerved investors,” said Susannah Streeter, head of money and markets, Hargreaves Lansdown.
“The uncertainty has made safe-haven assets like gold more popular, with demand for the precious metal ticking up close to record levels, as violence spills further across the Middle East, briefly climbing above $2,670 an ounce. Already sought after, amid concerns that inflationary pressures would persist, fresh geopolitical fracture has increased demand for gold. The dollar has steadied after gaining ground and US Treasuries proved more popular, indicated by falling yields, as investors have sought out trusted shelters amid the widening conflict.
Oil prices are climbing, with Brent Crude approaching $75 a barrel, as supply concerns swirl again, sparked by heightened aggression. These worries are being mitigated by expectations that Saudi Arabia will turn on the taps more fully, and lower demand from China, but upwards pressure is likely to continue while uncertainty reigns about just how far conflict will spread.”
Rising oil prices helped lift oil majors BP and Shell on Wednesday with gains of 2.1% and 2.5% respectively.
Prudential was the top riser as optimism around China was untouched by developments in the Middle East. China has ramped up its efforts to stimulate the economy, paying particular attention to the financial sector. Prudential shares were 3% higher at the time of writing.
JD Sports was the top faller amid ongoing worries about Nike. Despite JD reaffirming guidance for the year, investors were more concerned with Nike’s ongoing uncertainty given the fact around half of JD’s sales around from Nike products.
“JD Sports has a multi-brand strategy and is continuing to roll out new stores and make acquisitions globally, yet Nike’s warning that the festive period may be littered with discounts could well have had some contagion effect,” said Adam Vettese, market analyst at investment platform eToro.
“Investors who have been in JD Sports for a while will be haunted by last year’s disappointing Christmas figures which saw shares plummet in January and will be looking to avoid a repeat performance this year.”