FTSE 100 oil majors started the week on the back foot dragging the index lower as the oil price reacted to an escalation in Middle East tensions after the Islamic Republic of Iran regime launched an attack on Israel.

London’s leading index was down 0.4% at the time of writing, with BP and Shell down 2.8% and 10.9%, respectively.

“The week is starting on a fraught note, with unease still clouding sentiment. Investors are on alert for retaliatory action following Iran’s attack on Israel. Fears are brewing that a dangerous new episode of escalating conflict is about to roll. All eyes are on diplomatic efforts being made to diffuse the situation which have helped bring down a spike in oil prices,” said Susannah Streeter, head of money and markets, Hargreaves Lansdown.

“The FTSE 100 has been on the back foot in early trade, retreating away from record levels which the index flirted with on Friday. Although defence company BAE Systems has gained fresh ground amid expectations of higher military spending, energy stocks are on the back foot, as oil prices have retreated a little.”

Regime military leaders orchestrated a response to Israel’s bombing of a consulate in Syria, firing hundreds of unmanned drones and missiles towards Israel. Most were intercepted and the damage in Israel was minimal.

Oil traded negatively on Monday, dragging on the commodity-heavy FTSE 100, as markets removed geopolitical risk premiums from Brent and WTI. With Iran having made its move, uncertainty around possible escalation has diminished and the crisis has a sense of containment.

Helping calm the nerves in energy markets, analysts argue the Iranian regime wanted to be seen to respond to Israel but had little appetite for a wider conflict.

Nonetheless, the step up in Middle East tensions over the weekend was significant and BAE Systems shares reacted accordingly with a 1.7% as investors bet on increased defence spending.

With oil prices looking set to remain elevated for the foreseeable future, the main factor concerning investors on Monday is the possibility of higher inflation rates if oil surpasses $100. US CPI was hotter than expected in March and the last thing markets want to see is it creep higher due to higher energy prices.

“Concerns have also deepened about stubborn inflation in the United States, following a rebound in the headline CPI rate in March. There’s now a big rethink taking place about when the Fed will be confident enough to cut interest rates, with more hopes sliding away from a June date and September being increasingly pencilled in instead,” Streeter said.

Neo Energy Metals shares were unchanged on Monday after the company announced it had progressed the evaluation of its Henkries uranium project.

Neo has appointed Erudite to renew the project’s financial evaluation, which Anglo American last completed in 1979.

The news did little to inspire any trading in Neo Energy Metals shares, which were unchanged on the day at 0.58p at the time of writing. Neo Energy Metals shares are down heavily since listing on the London Stock Exchange at 1.25p at the end of 2023.

Commenting on today’s update, Neo Energy CEO Sean Heathcote said:

“While Anglo American moth-balled the Project in the late 1970s following a downturn in demand for uranium, the landscape for uranium has changed greatly with the market witnessing a significant resurgence fuelled by the growing recognition of nuclear’s role in carbon emission reduction.

“This positions Henkries as one of the few projects globally poised to commence production in the near term. Accordingly, we look forward to incorporating the updated estimates provided by Erudite into our financial models within an updated feasibility study ahead of paving the way for strategic development.”

Tekcapital portfolio company Guident could enjoy a substantial valuation uplift this summer as the company rolls out its autonomous vehicle safety SaaS solution.

The UK Investor Magazine Podcast was recently joined by Guident CEO Harald Braun for a deep dive into the company’s latest developments. The focus of this podcast was two recent announcements.

The first was the expansion of the strategic partnership with Auve Tech concerning Guident’s Remote Monitoring and Control Centre safety solution and its integration with the Mica autonomous shuttle. The second was a new partnership with Star Robotics representing Guident’s entry into the robotic surveillance and inspection industry.

The calibre of Guident’s two partners should not be underestimated. 

Estonia-based Auve Tech has partnered with SoftBank affiliate Boldy to make Mica shuttles available in 50 locations across Japan by 2025.

Auve Tech is an Estonian Deep Tech start-up selling autonomous vehicles to Japan, a country synonymous with technology and vehicle manufacturing, and Guident is helping Auve Tech launch in the US.

Star Robotics has secured venture funding and is revenue-generating in a real-world setting with material scalability.

The two partnerships demonstrate a huge addressable market for Guident. Most major players in the Level 4 autonomous vehicle market are already billion-dollar companies and Guident is carving out a potentially market-leading safety solution with a broad base of applications.

Unique Proposition for UK Investors

Guident and Tekcapital shares especially present UK public equity investors with a rare and arguably unique opportunity. 

Speaking with UK Investor Magazine, Harald Braun touched on a proposed funding round designed to accelerate growth across the company.

As one would expect, Braun did not disclose any specifics of the round. There is no detail on the funding level or valuation, yet. The details are confidential for the time being.

We do, however, know it will be a venture capital round in US private markets.

From a valuation uplift perspective, it is a very exciting time to be a Seed/Pre-Seed investor in growth companies in the Electric Mobility and Autonomous Mobility space. And that’s exactly what Tekcapital and its shareholders are.

Guident has one foot in the clean technology subsector, Electric Mobility – which attracted the most venture capital investment in 2023 – and the other foot in the Deep Tech Autonomous Mobility sector.

According to Dealroom, VC investors poured $22bn into Electric Mobility in 2023. This sector includes electric vehicles, electric vehicle charging and lithium battery technology. US VC investors allocated just under $4bn to the Deep Tech Autonomous Mobility. One could argue that Guident is a communications company, but its technology’s foundations are certainly rooted in the aforementioned industries.

Tekcapital currently owns 100% of Guident, which was valued at around $20m in terms of NAV on TEK’s balance sheet in the half-year report.

This is pocket change in the grand scheme of things. On the successful completion of the proposed funding round, one would expect a substantial uplift in the Guident valuation. 

There is serious capital around for mobility companies and Guident is at the forefront of making the next wave of autonomous mobility safer. To compound the attractiveness of Guident’s revenue-generation model, the company is adopting a SaaS offering that tends to command higher valuations.

Guident Valuation

The UK has a problem in pricing technology risk and attributing a long-term value to big tech. This hasn’t always been the case, but a combination of Brexit and higher interest rates has made the current environment particularly challenging. UK public markets struggle to look at the bigger picture and real-world benefits of technology. That’s why ARM chose to list in New York.

However, Tekcapital investors need not worry about the UK’s current deficiencies with pricing technology risk when considering Guident because the company is tapping up US private equity investors who readily support early stage innovation in the sector.

US investors tend to have a much longer time horizon and have a bigger appetite for risk. The ‘Magnificent 7’ is evidence of this.

London’s public markets may change their risk tolerance and approach to big technology in the future, but for now, Guident will enjoy a supportive environment in the US. This should feed directly into Tekcapital shares.