Key facts
- The FTSE 100 index closed down 1.3% at 10,670.06 points on Wednesday.
- Brent crude oil surged above $100 a barrel for the first time since July.
- US forces struck five Iranian oil tankers, escalating Middle East tensions.
- Heightened inflation fears and concerns over global energy supplies weighed on equities.
- BP and Shell saw gains as oil majors benefited from higher crude prices.
- Autotrader Group and Burberry were among the worst performers on the FTSE 100.
London stocks closed sharply lower on Wednesday, with the FTSE 100 index falling 1.3% to 10,670.06 points. The decline was driven by Brent crude oil prices surging above $100 a barrel for the first time since July, fueled by escalating tensions in the Middle East and concerns over global energy supplies. Heightened inflation fears also weighed on global equities.
The US military reported striking five Iranian oil tankers, adding to a sharp rise in global crude oil and natural gas prices. This escalation followed retaliatory threats from Iran and a wave of missile and drone attacks by Iran-aligned Houthi militants on several Saudi Aramco energy facilities, fueling fresh concerns about global energy supplies. The US-Iran conflict is now in its seventh month and shows little sign of easing.
Investors are becoming increasingly concerned that soaring energy costs could force the Federal Reserve to raise interest rates to contain renewed inflationary pressures. The European Central Bank is widely expected to hike interest rates on Thursday, with attention then turning to Friday’s US consumer price index report.
Oil majors benefited from the rally in crude prices, with BP topping the FTSE 100, up 1.3%, while Shell climbed 0.1%. Technology services provider Computacenter rose 0.5%. Autotrader Group was among the worst performers on the blue-chip index, down 4.7%, while Burberry fell 4.0% after HSBC cut the luxury retailer to ‘hold’ with a 1,200p price target.
On the FTSE 250, NCC Group fell 6.7%, while Funding Circle Holdings closed down 6.1%. Goodwin shares also extended Tuesday’s losses, down 3.5%. Among smaller caps, Sutton Harbour jumped 38%, while Caledonian Holdings surged 20%. Mortgage Advice Bureau shares lost 20% after lowering its full-year guidance.
In European equities, the CAC 40 in Paris closed down 1.9%, while the DAX 40 in Frankfurt ended down 1.7%. The European Union proposed new rules to encourage member states to favour domestic companies over Chinese bidders for government contracts.