FTSE 100 plunges as oil prices rocket on Iran counterattacks (Image: Getty)
London’s blue chip index opened in the red on Thursday amid intensified conflict in the Middle East. The fall came as Qatar said Iranian missile attacks had hit its liquefied natural gas field Ras Laffan, “causing sizeable fires and extensive further damage”.
This followed reports that Israel launched an attack against Iran’s South Pars gas field. The price of Brent crude oil has increased by around 7% to cross $114 (£85.89) per barrel, bringing it close to the highest level since the war began at the end of February. The FTSE 100 dropped almost 2% on Thursday to 10,119.62, extending the previous session’s 0.9% decline. Mining stocks led losses, according to an analysis by Trading Economics, with Fresnillo and Endeavour dropping over 5%, Antofagasta also down more than 5%, and Anglo American, Rio Tinto and Glencore falling between 2.5% and 4.6%.
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Markets are in the red as brent crude oil prices hit a staggering $114 a barrel this morning. (Image: Getty)
Susannah Streeter, chief investment strategist at Wealth Club, said: “Fears of a sustained energy shock have resurfaced after the escalation in the Iran war sent oil and gas prices soaring.
“The prospect of a longer, more drawn-out conflict is in sharp focus, as both sides ratchet up attacks on energy infrastructure. Downbeat sentiment is spreading fast, with London’s Footsie opening around 1% lower as investors assess the repercussions for the global economy.
“Brent crude remains highly volatile but has traded as high as $114 a barrel today, threatening to climb back towards recent scorching levels. Gas prices have surged by 25%, reaching a range not seen since early January 2023.
“The conflict is not only highly damaging for economies in the region, with tourism and business activity hit, but the knock-on effects of higher energy prices will have toxic repercussions worldwide.”
Kathleen Brooks, research director at securities brokerage, XTB, said the escalation in the conflict was “spooking the market”. She said: “This war looks far from over, and the energy crisis is shifting from a shipping crisis to a supply crisis.
“If Iran is targeting energy assets in the region, then the conflict gets more serious and the repercussions for a long-term energy price shock also start to play out in financial markets.”
Ms Brooks added that despite Mr Trump’s calls for Israel and Iran to stop targeting energy sites, “it will take a lot of positive sentiment and news flow to calm energy prices today”.
Besides the FTSE 100’s drop, France’s Cac 40 fell by 1.7% while Germany’s top stock market index, the Dax, faced steeper falls of about 2.4% in early trading.
Derren Nathan, Head of Equity Research at Hargreaves Lansdown, said US markets closed down on Wednesday evening and are now near six-month lows. He said futures point to a weak opening later today.
Richard Hunter, Head of Markets at Interactive Investor, said there have been few winners so far across asset classes outside oil and the US dollar, which he said appeared to have regained its haven status.
He added: “The main indices in the US continue to track downwards in the absence of an obvious end to the war and in the year to date the Dow Jones, S&P500 and Nasdaq have now fallen by 3.8%, 3.2% and 4.7% respectively.”
The expert said the moves were compounded by the additional downward pressure of a number of stocks being marked ex-dividend, including NatWest, M&G and Standard Chartered.
Mr Hunter said: “The weakness continues to chip away at the progress which the premier index had been making, although unlike many of its global counterparts the FTSE 100 is clinging on to a gain for the year to the tune of 2.5%.
He added the FTSE 250 has given up its previous rise and currently stands 2.8% down.