The FTSE 100’s commodity sectors helped drive outperformance on Monday as Donald Trump threatened to seize Iran’s key oil hub on Kharg Island.
London’s leading index was 0.9% higher, at 10,062, at the time of writing, as oil traded above $115 and metal prices rose. The German DAX was just 0.3% higher.
“Market nervousness around the situation in the Middle East continues to ratchet up as the Iran conflict enters a fifth week,” says AJ Bell head of financial analysis Danni Hewson.
“Comments from President Trump about seizing Iranian oil and the country’s Kharg Island export hub, a build-up of US troops and the involvement of Tehran-backed Houthis in the war all create the impression of a conflict that is escalating rather than drawing to a close.”
The FTSE 100 managed to shake off souring sentiment on Monday due to its heavy weighting in commodity companies. But it was not oil majors driving the index higher, rather metals companies such as Rio Tinto, Melten Energy & Metals, and Glencore.
Mining shares rose on Monday after strikes at aluminium facilities in the UAE and Bahrain threatened already-constrained supply and drove prices higher.
Rio Tinto was the top riser, adding 3.6%.
Oil prices at $115 per barrel served as another buying signal for the FTSE 100 oil majors, which have been trading steadily higher amid the war in the Middle East. Shell added 1.4%, and BP rose 1.6%. The pairs gains were measured, but their weighting within the FTSE 100 went a long way to lifting the index.
A 1.6% rally in AstraZeneca, the FTSE 100’s largest constituent by market cap, played a part in index-level gains on Monday.
Financials St James’s Place, Prudential, and M&G were among the worst performers on the session.
Since falling sharply after the US and Israel launched attacks on Iran at the beginning of March, the FTSE 100 has formed a range between 9,850 and 10,100 as the index trades headline to headline.
Traders will be aware that it will likely take a major escalation or de-escalation in the conflict for the FTSE 100 to break out. A break could be fast and dramatic.