The FTSE 100 was broadly flat on Wednesday as investors continued to digest the latest developments in the escalating conflict between Iran and Israel.
London’s leading index was up 0.1% at the time of writing. The German DAX fell 0.1%, and US futures were creeping higher.
The FTSE 100’s weighting towards oil stocks BP and Shell has helped the index navigate the risk-off tone to trade this week, but investors are facing a wider predicament as oil prices rise.
Major economies face the risk of inflationary pressures from rising fuel prices, while businesses are still counting the costs of Donald Trump’s tariffs. Equity markets have been remarkably resilient, but some may question whether there is an element of complacency to current positioning given the increasing risks to growth.
“As tensions in the Middle East continue to escalate, oil prices remain in the ascendancy and stocks are enduring volatility,” explained AJ Bell investment director Russ Mould.
“Concern the US might join Israel’s military effort against Iran, after comments from President Donald Trump on his Truth Social platform, saw US shares fall overnight and briefly pushed Brent crude oil above $77 per barrel before it eased back a touch.
“Iran is a significant exporter of oil in its own right and there will be concern it might try and obstruct the Strait of Hormuz – through which a healthy chunk of the world’s oil and liquefied natural gas passes.”
Mould continued to outline the impact on central bank thinking at a time when markets are desperate for an easing of monetary policy.
“If higher oil prices stick it would act as a renewed inflationary pressure and this further complicates the decision making of the US Federal Reserve which is set to announce its latest decision on interest rates tonight.”
FTSE 100 movers
Howden Joinery was the FTSE 100’s top faller after peer Speedy Hire reported falling volumes that suggest a soft construction industry. Howden Joinery shares were down 3% at the time of writing.
Ashtead shares pulled back 2.4% after a positive update yesterday sent the stock higher.
AstraZeneca and GSK were among the top fallers after Donald Trump warned of tariffs on pharmaceuticals of 25% or more. Trump has warned of pharma tariffs before and is yet to follow through with any firm measures.
Melrose was the FTSE 100’s top riser as it continued its recovery from a sharp sell-off following Trump’s tariff announcements.