The FTSE 100 fell on Tuesday as tension in the Middle East ratcheted up and HSBC weighed on the index.
London’s leading index was down 0.9% at the time of writing as traders reacted to news that the US had resumed attacks on Iranian boats in the Strait of Hormuz.
Trump’s promise at the beginning of the conflict of a short, targeted war that would last 4-6 weeks is lying in tatters.
Nowhere is Trump’s miscalculation being felt more than in the energy markets, where Brent oil prices are firmly above $110 and show little sign of material retreat, although Brent was slightly weaker on Tuesday after a surging rally yesterday.
“The reignition of hostilities in the Middle East has fired up oil prices again, keeping investors on edge about the duration of the conflict,” said Susannah Streeter, chief investment strategist, Wealth Club.
“London’s FTSE 100 is in a downbeat mood, as wariness rises about how difficult the complex situation will be to resolve. Investors are also on edge as fears of interest rate hikes rise, and there’s fresh political uncertainty in the mix ahead of key local elections on Thursday.”
FTSE 100 movers
HSBC was the FTSE 100’s top faller, wiping off a significant number of points from the index in the process. Although there were improvements in key metrics, they missed expectations, and the market punished HSBC, sending shares down by 5%.
“HSBC’s exposure to faster growing developing economies brings extra growth potential but there are risks too, and the Iran conflict has prompted meaningful impairments alongside first-quarter results,” said AJ Bell head of markets Dan Coatsworth.
“These, plus provisions for fraud-related issues in the UK, cast a shadow over the quarterly numbers with earnings coming in below forecasts.
“The sizeable fraud-related charge is a reminder that risks don’t only exist in more far-flung parts of the world. It may also raise some questions about the robustness of controls within the business.
“Revenue was better than anticipated and the company is seeing good growth in insurance and wealth management, particularly in Hong Kong. These are income streams which are less tied to interest rates and therefore more consistent.”
A mix of sympathy for HSBC and broader concerns about global growth dragged the rest of the FTSE 100 banking sector down with it. Lloyds was down 2.8%, and Standard Chartered lost 2.7%.
Weir Group fell 3% after Goldman Sachs cut its price target on the stock. BT, on the other hand, benefited from a broker update and rose 4%.
Intertek was the FTSE 100’s riser after EQT boosted its offer for the company to 5,800p. EQT previously offered 5,150p and 5,400p, which were rejected.