The FTSE 100 fell on Thursday as higher oil prices again curtailed demand for risk assets amid rising concerns of interest rate hikes.
Inflation fears set in on Thursday, with Brent oil jumping 4% amid ongoing Middle East tensions and a new supply threat from the Gulf of Mexico, where a storm has taken production offline.
Both factors could prove transitory, but they were enough to knock sentiment on Thursday and the FTSE 100 dropped
“Markets have turned more defensive this morning as renewed Middle East tensions, rising oil prices and persistently elevated bond yields put pressure on risk appetite,” said Daniela Hathorn, Senior Market Analyst at Capital.com.
“Wall Street finished lower on Wednesday, while Asian and European equities have extended the weakness today. The broader equity rally remains supported by strong earnings expectations and AI investment, but the increasingly narrow leadership is leaving markets exposed to shifts in the rates outlook.”
The top spots on the FTSE 100 leaderboard were dominated by companies providing positive trading and earnings updates. Tesco led at the time of writing, gaining 4% after releasing interim results.
“There is a lot to like about Tesco’s results,” said Dan Coatsworth, head of markets at AJ Bell.
“It’s taken a lot of hard work to become the UK market leader, and a lot of effort now goes into defending its market share. Tesco’s half-year results suggest it isn’t short of an idea or three to stay on top. New product launches, more personalised offers, and meal planning assistants are just some of the initiatives helping to keep shoppers interested and money going into the till.
“A high oil price creates a challenging backdrop, particularly as consumers are facing a spike in energy costs from January when the energy price goes up by a potential 25% to 30%. There is a lot of talk around whether we’re facing another cost-of-living crisis, and the government is expected to announce measures to help households at the Budget later this month.”
Imperial Brands was another blue chip in favour after revealing that it was on track to meet expectations and would kick off a fresh £1.5bn buyback for FY 2027. Shares rose 2.9%.
BP was among the best FTSE 100 performers as oil extended gains above $100.
But selling across FTSE 100 miners and financials wiped out those gains and weighed on the index. Standard Life was the top faller after Aberdeen halved its stake in the firm, sending shares 4.8% lower.
Melrose, Metlen and IAG were other stocks in the red on Thursday.