Key facts
- The US has conducted strikes against Iran following an alleged drone attack.
- Iran's Islamic Revolutionary Guard Corps responded with strikes on US bases.
- Brent crude oil prices surpassed $92 per barrel amid the escalation.
- The FTSE 100 is predicted to open lower due to increased geopolitical risk.
- Global markets, including Wall Street and Asian indices, experienced significant sell-offs.
Markets braced for a lower open on Wednesday as escalating tensions in the Middle East sent oil prices higher. The US confirmed a series of strikes against Iran in retaliation for an alleged drone attack on a helicopter monitoring the Strait of Hormuz, a critical global oil chokepoint. Iran's Islamic Revolutionary Guard Corps (IRGC) responded by targeting 21 US bases in the region.
The exchange of fire pushed Brent crude, the international oil benchmark, above $92 per barrel. This surge in oil prices comes after a bruising session on Tuesday, which saw the FTSE 100 close down over one percent, with oil majors BP and Shell among the decliners. Health stocks also weighed on the index following GSK's significant takeover.
Global markets mirrored the downturn, with Wall Street experiencing losses as the rebound in chip stocks lost momentum, leading the tech-heavy Nasdaq down by one percent. Asian markets extended their slump on Wednesday, with South Korea's Kospi index plummeting 6.6 percent and Taiwan's TAIEX dropping 3.3 percent. Tokyo's Nikkei 225 fell 2.1 percent, while even markets with less exposure to tech, such as India's Nifty 50 and China's Shanghai Composite, saw declines.
Futures data from IG forecasts the FTSE 100 to slip 0.1 percent on open, indicating investor caution amid the renewed geopolitical instability. Banks were notable decliners on Tuesday, with Barclays, HSBC, and Lloyds all losing ground as investors rotated out of financials.