The FTSE 100 fell on Thursday after hope of an agreement between the US and Iran was dealt a major blow by US military actions against Iran overnight.
It’s unclear whether the US believes this will push Iran towards an agreement, but it certainly hasn’t worked so far, and markets have taken the latest developments as a signal that the Strait of Hormuz will remain closed in the near term.
Brent oil rose 2% on Thursday, and investors dumped FTSE 100 stocks, sending the index down by 1.1% at the time of writing.
“The optimism which has persisted for much of this week about the prospects for a deal between the US and Iran is being severely tested,” said AJ Bell investment director Russ Mould.
“A fresh exchange of strikes between the two countries is testing the fragile ceasefire and forcing a reassessment of the chances of a near-term agreement which can reopen the Strait of Hormuz and dial down the pressure the crisis is putting on the global economy.
“For now, oil prices remain out of the $100 per barrel danger zone but government bond yields are ticking higher and the FTSE 100 and other European markets followed Asian shares in chalking up material losses.”
Most FTSE 100 stocks were down on Thursday, with those that rallied yesterday on hopes of a deal reversing much of their gains.
Retailers and consumer-facing stocks were among those heaviest hit. JD Sports lost 4% while Kingfisher gave back 4.1%.
BT was the FTSE 100’s top faller, shedding 4.5%.
SSE was the standout corporate update on Thursday, announcing relatively strong preliminary results, but shares fell amid the wider market selloff.
Adam Vettese, market analyst for eToro, says: “SSE’s preliminary results this morning show a company successfully executing on its energy transition strategy despite some near-term earnings softness”
“Adjusted EPS of 153.5p beat the 147-152p guidance range, supported by record capital investment of £3.6 billion, up 23% year-on-year, as the group accelerates its £33 billion five year plan, with 80% directed at regulated networks and the balance in renewables and flexibility.”