London’s blue-chips are set to open lower on Wednesday after US forces struck more than 80 targets in Iran overnight, sending oil to a two-week high. FTSE 100 futures point roughly 30 points down, more than wiping out the previous day’s gain, as Iran vows a response and revived stagflation fears weigh on markets.
The FTSE 100 is heading for a weaker start on Wednesday, with futures down roughly 30 points after oil prices climbed to a two-week high on a major escalation in US-Iran tensions overnight. That decline more than wipes out the gain of just over 14 points the index made the day before, when it closed at 10,665.88.
Oil jumps after US strikes Iran
US forces launched strikes against more than 80 targets in Iran, hitting command-and-control networks, coastal radar sites, anti-ship missile capabilities and more than 60 Islamic Revolutionary Guard Corps small boats. The action was said to be in response to recent attacks on commercial shipping in the Strait of Hormuz, and it came alongside the US revoking a waiver that had allowed Iran to restart oil exports.
Iran condemned the American measures as breaching the ceasefire agreement and vowed a decisive response. Its Revolutionary Guards also claimed to have struck US military facilities in Bahrain and Kuwait in retaliation. Because of the escalation, Brent crude jumped 3.3% to $76.64 this morning.
Stagflation fears return
The developments have reignited concerns about energy supplies and geopolitical risk, according to Jim Reid at Deutsche Bank. He noted that even before the overnight strikes, rising oil had left markets struggling to gain traction as the jump revived familiar fears about stagflation, which caused clear pain for US Treasuries and other government bonds.
Wall Street had already closed lower before the strikes. The Nasdaq led the declines, falling 1.2%, while the S&P 500 slipped 0.5% and the Dow 0.3%. Asian markets were mixed, with South Korea’s Kospi falling 4.6% to a six-week low but Hong Kong’s Hang Seng up 3.1%, led by Chinese tech giants.
Sterling softened alongside the risk-off mood. The pound was quoted at $1.3355 early Wednesday, down from $1.3376 at the London equities close on Tuesday.
Sources: Yahoo Finance UK (Proactive), Share Talk
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