The FTSE 100 was on the back foot again on Thursday after oil prices breached the $100 mark in Asian trading overnight.
Despite the IEA ordering the release of 400 million barrels of oil to help bring prices down, traders couldn’t ignore the risk that the Strait of Hormuz would remain closed for an extended period, and oil prices rose on Thursday.
Some analysts are predicting oil could rise above $160 if the Strait of Hormuz remains closed for the next few months.
Brent Crude oil briefly rose past $100 in Asian trading, but the rally faded as the European session got underway, trading at $98.10 at the time of writing.
London’s leading index was down 0.2% at the time of writing, off the worst levels of the session.
“Once again the FTSE 100 was protected from the worst of the falls on Thursday as its higher exposure to the energy sector helped support the UK stock index,” said AJ Bell investment director Russ Mould.
“Nonetheless, UK stocks were still in the red as investors reacted to ongoing disruption to energy markets from the Middle East conflict. Oil prices surged through the $100 per barrel mark for the second time this week.
“Defence and defensive stocks were in demand as investors looked for places to hunker down and ride out the current turbulence.”
BAE Systems was the top riser, gaining 3%, as investors rotated into the defence sector as tensions persisted.
The FTSE 100’s cohort of interest rate-sensitive and oil-exposed shares was among the fallers again on Thursday.
Housebuilders continue to be collateral damage during the Middle East conflict as the risk of an interest rate hike to curb inflation weighs on the sector. After surging higher on Tuesday on the back of upbeat results, Persimmon shares were back near their lowest levels since the beginning of the conflict, down another 3% on Thursday.
Banks were under pressure in risk-off trade. Barclays and Standard Chartered fell around 2%.
Easyjet and IAG, facing rising fuel costs and falling booking rates due to the conflict, were down 3% and 1.4%, respectively.
HSBC was the FTSE 100’s top faller after shares in the banking giant lost the right to its upcoming dividend payment.