The FTSE 100 ticked higher on Monday against a backdrop of heightened geopolitical risks, as metal prices rose, helping London’s diversified miners advance.
It was a different story for US futures, which were pointing to a slightly lower open, reflecting broader concerns about developments in the Middle East and the risk to inflation.
The US appears to have realised that military action against Iran won’t yield the results they had hoped for and is shifting to economic measures to bring them to the table. But their approach risks causing wider damage to the global economy by targeting Iran’s trading partners.
“Using the invective the administration has become infamous for, Treasury Secretary Scott Bessent stated in an interview that “economic D-Day is coming for Iran.” The emphasis is expected to be on isolating Iran economically and targeting its trading partners, with oil exports and the financial channels supporting Tehran likely to be central to the measures,” said Susannah Streeter, Chief Investment Strategist, Wealth Club.
“But quite how effective this will be, given China is Iran’s biggest customer for oil, is far from clear. The reaction on oil markets has been muted, with Brent crude dropping slightly but still trading around $93 a barrel. There may be some relief that the threats have moved from military strikes to some form of super sanctions, but there is little confidence that a route to a peace deal will open up any time soon.”
Brent oil had slipped 1.6% to $92.97 in mid-morning trade while the FTSE 100 added 0.1%.
BP shares slipped in line with oil prices, down 1.2%. Precious metals miner Fresnillo was the FTSE 100’s top faller, losing 2%, despite the gold price building on last week’s rally on Monday.
Antofagasta was among the best performers as copper prices flirted with all-time highs. Higher copper prices may help the miner offset lower production it guided for in recent results. Anglo American added 1.6% while Rio Tinto gained 0.5%.
Airtel Africa was the FTSE 100’s top riser, adding 3%.
The relatively benign trading conditions on Monday may be short-lived, with Nvidia set to release results later this week as investors prepare for Fed Chair Warsh’s instalment at Jackson Hole.
“Attention will zero in on Federal Reserve chair Kevin Warsh at the Jackson Hole Symposium later this week as the ongoing crisis in the Middle East continues to stoke concerns about inflation,” said AJ Bell investment director Russ Mould.