The FTSE fell again on Thursday as oil prices jumped back above $100 with little progress in talks between the US and Iran.
Oil prices reflected the generally cautious mood in markets currently, with Brent trading at $104.
The risk for equity bulls is, and has been for some time since the ceasefire was first announced, that an agreement between Iran and the US takes a long time to thrash out, and more barrels of oil are removed from global supply.
Some analysts estimate that around 1 billion barrels of supply have been lost due to the war.
As we saw with UK inflation data this week, higher oil prices are starting to filter through into economic data, risking tighter monetary policy for the rest of this year.
We’re seeing signs of this realisation this week with declines in the FTSE 100, which was down again on Thursday, losing around 0.9%.
“Even though equity markets have been remarkably resilient of late, oil prices above $100 a barrel are a reminder to investors that the Middle East conflict still presents an inflation risk,” said Dan Coatsworth, head of markets at AJ Bell.
“There continue to be mixed messages around peace talks, creating an air of uncertainty that periodically stops investors in their tracks. It’s one of those days where investors have dialled back risk appetite to consider what could go wrong, rather than shrugging off the backdrop of conflict to bid markets higher.”
FTSE 100 movers
Around 80 of the FTSE 100’s constituents were trading negatively at the time of writing.
Sainsbury’s was firmly among the worst performers of the session after warning of the impact of the war in Iran on its customers.
Adam Vettese, market analyst for eToro, said: “shares opened significantly lower after management issued a cautious outlook for the year ahead.”
“Retail underlying operating profit edged 1.1% lower to £1.025 billion amid cost inflation and heavy investment in value. Total underlying operating profit is guided at £975 million – £1.075 billion, reflecting uncertainty from the Middle East conflict, which CEO Simon Roberts noted is making customers even more cost conscious while disrupting supply chains.”
Ex-dividends played a role in the FTSE 100’s performance on Thursday after names such as Legal & General, Fresnillo and BAE Systems lost the right to their upcoming dividend payments.
Minor gains in defensive stocks such as BT, SSE and Unilever underscored a risk-off tone for stocks on Thursday.
London Stock Exchange Group
The London Stock Exchange Group shares were 1% higher after the company released a trading statement focused on the rollout of AI services, which should help cement the view that LSEG is going to be a beneficiary rather than a casualty of the AI revolution.
“LSEG spent their FY25 results highlighting how AI is an enabler for their business, vs a threat to positive market reaction over the time period following,” said Max Harper, Senior Analyst at Third Bridge.
“Our experts agree with management broadly, highlighting that LSEG everywhere allows them to cover multiple leading horses in the race, in the form of LLMs such as Claude, where LSEG wouldn’t have the budget to compete on their own platform.
“LSEG could see income compression as clients shift from per-seat licenses to usage-based AI revenues, with Phase 1 up to 2027, offering stable revenues, with early API revenues. 2027 onwards could see income pressure, with AI benefits being felt, and AI cutting seat-based revenue. Phase 3, as early as 2029, should unveil winners, with our experts predicting LSEG could be better positioned, based on their LSEG everywhere strategy, as LSEG and competitors such as Bloomberg, S&P, and Factset, adapt to a AI usage-driven world.”