The resilience of the FTSE 100 was on show again on Tuesday, as London’s leading index carved out minor gains despite persistent concerns over the conflict in the Middle East.
Oil prices remained above $100 on Tuesday, but traders seem to believe the war in Iran won’t last long enough to have a major impact on the global economy. Or that any potential impact has already been priced into stocks.
The FTSE 100 was 0.3% higher at the time of writing.
“The FTSE 100 ticked higher and outperformed some of its counterparts as oil continued to climb,” says Dan Coatsworth, head of markets at AJ Bell.
“The longer the oil price stays above $100 per barrel, the louder the alarm bells for the market over inflation risks. Iran’s continued attacks on regional energy infrastructure are helping to keep crude at elevated levels.
“The FTSE 100 has a large weighting towards oil and gas producers, although it also has plenty of constituents that have big energy or fuel requirements or which might lose out from interest rates staying higher for longer.”
There was an element of risk aversion in Tuesday’s rally, with defensive sectors such as utilities, consumer goods, and pharma among the top risers.
Centrica, United Utilities, and Severn Trent were higher between 2% and 2.5% at the time of writing.
Hikma Pharmaceuticals was the top riser, adding 3%.
As expected, BP and Shell played their role in lifting the index with oil prices remaining above $100. BP added 1.5% while Shell gained 1%.
The attraction of the FTSE 100’s oil majors is likely to persist with the conflict showing little sign of letting up.
“Tehran has launched intense attacks on the American embassy in Iraq and is continuing to strike key infrastructure sites of US allies across the Middle East,” said Susannah Streeter, Chief Investment Strategist, Wealth Club.
“Iran is intent on causing as much disruption and damage to facilities as possible to stop the flow of oil, with energy its key weapon in this conflict.”