The FTSE 100 fell on Wednesday as investors took stock of the latest developments in the Middle East.
The ceasefire in place since April is looking increasingly fragile after Iran reportedly downed a US helicopter over the Strait of Hormuz, and Donald Trump responded with a promise of retaliation.
London’s leading index reacted by giving up 0.6% to trade at its lowest point for nearly a month.
“Yesterday’s sell-off on Wall Street didn’t turn out to be too disastrous, with the Nasdaq clawing back much of its losses by the end of the session. That has helped to avoid contagion in the markets, albeit investors are slightly nervous about the heightened volatility this week,” says Dan Coatsworth, head of markets at AJ Bell.
“There are many reasons why markets are wobbly. The prospect of interest rates staying higher for longer, inflation fears, frustration that the conflict involving Iran is still ongoing, and potential liquidation events as investors trim holdings to raise cash to back some mega IPOs on the horizon.”
After a poor session yesterday caused by tension in the Middle East and rising oil prices, the FTSE 100 was performing slightly better than US stocks, which were again seeing weakness in tech shares.
US chip stocks are proving to be a real rollercoaster ride for investors of late, with the Nasdaq swinging wildly intraday yesterday and futures pointing to a lower open today.
In London, there was pronounced weakness in stocks that were caught up in AI fears earlier this year. RELX, Experian, London Stock Exchange Group and Sage Group were all down around 3% at the time of writing.
Investors rotated into the less exciting sectors in the hope of finding shelter from any further volatility, with FTSE 100 supermarkets and consumer staples higher on the day.
Tesco rose 1.3%, while DCC was the FTSE 100’s top riser, with gains of 2.2%.