With the war in the Middle East showing no sign of resolution, the FTSE 100 gave up early gains on Friday as surging oil prices stoked inflation fears.
As we saw yesterday, early FTSE 100 gains can very quickly turn to losses, and the index fell from highs of 10,476 to 10,358 at the time of writing on Friday.
The path forward is becoming increasingly difficult to plot for traders, with so many moving parts in the Middle East that could prolong the conflict for many weeks and filter through into inflation and central bank thinking.
We entered 2026 expecting a series of interest rate cuts throughout the year, starting in Q1. But with Brent Crude trading above $88 on Friday, rate cuts are firmly off the table.
Indeed, the war in the Middle East now means there are talks of potential rate hikes as the oil crisis takes hold, and this has been reflected in equity markets this week.
As of the time of writing, the FTSE 100 is down around 5% from last week’s record high at 10,910. This isn’t a huge move in the grand scheme of things, and many may see it as a healthy reset after surging gains.
Whether this turns into a 10% correction hinges on the perceived length of the Iran conflict and how freely oil will flow out of the region. While these remain unknown, we can expect equity markets to remain choppy, trading on a headline-to-headline basis.
Most FTSE 100 stocks were down again on Friday, driven by the familiar pattern of cyclical sectors leading the way lower. Retailers, banks, and miners all dragged on the index.
Kingfisher was the top faller, down 3%, as inflationary pressures prompted investors to sell. Housebuilders Persimmon and Berkeley Homes were down between 2% – 3%.
Paradoxically, Rightmove was the top riser on the back of Halifax house price data showing the average UK house price was 1.3% higher than a year ago.
IMI
IMI was the top pick of the corporate updates on Friday. Full-year results were strong, with steady growth and rising profits. Investors will also be pleased with a fresh £500m buyback. Shares were 2% higher at the time of writing.
“If there’s one area where the UK market has a surfeit of high-class operators it is complex engineering and one of these names, IMI, topped the list of FTSE 100 gainers thanks to its latest results,” said AJ Bell investment director Russ Mould.
“The company makes valves, actuators, and control systems for the control of steam and fluids and serves a variety of sectors including healthcare, energy and climate control.
“A 5% increase in organic revenue translating into an 8% increase in operating profit tells a story of improved profitability and there was an impressive uplift in cash generation.
“Management demonstrated their confidence in what looks to be a solid outlook, with a generous buyback announced alongside a meaningful increase in the dividend.”