Markets are in store for another volatile day as another escalation in the Middle East conflict kept oil prices at triple digits.
Brent crude edged above $100 a barrel again to around $102 this morning, even as the US eased its sanctions to allow countries to buy Russian oil stranded at sea.
US Treasury Secretary Scott Bessent said the temporary measure was aimed at promoting ‘stability in global energy markets’. He said the ‘short-term’ waiver would ‘not provide significant financial benefit to the Russian government’.
Markets are set to close the week lower as signs that the conflict might be resolved quickly are quickly dwindling.
The FTSE fell as much as 0.8 per cent at the opening bell in line with European stocks, before settling down 0.4 per cent at 10,261 points.
Sanctions loosened: The US will allow countries to buy Russian oil stranded at sea
There is increasing concern about how the economy might manage another energy crisis, after official figures showed the economy flatlining in January, before the conflict.
‘It doesn’t bode well for the resilience of companies ahead, faced with escalating energy prices which are likely to see many businesses battening down the hatches, putting investment plans on hold while hoping the storm subsides,’ said Susannah Streeter, chief investment strategist at Wealth Club.
The International Energy Agency’s record release of 400million barrels of emergency reserves, and an easing on Russian sanctions, has not countered worries that there will be a severe disruption to oil and gas supply, which could have a long-term impact on inflation.
On Thursday, Iran’s new supreme leader pledged to continue to block the Strait of Hormuz, and the US’ pledge to escort tankers through the shipping route remain far-fetched at this point.
Financial stocks are coming under pressure as banks operating in the region are shutting shop amid fears of strikes.
‘Banks with significant exposure to the Middle East have suffered losses this week as shareholders fret about the length of the conflict and the effect on consumer and business sentiment across the region,’ said Streeter.
This morning, HSBC and Barclays both fell by around 1.9 per cent, on track to end the week around 5.2 and 2.3 per cent lower, respectively.
Travel stocks remain under pressure, with Easyjet down nearly 2 per cent today and 22 per cent over the past month, while a dip in the gold price weighed on miners Fresnillo and Endeavour Mining.
Oil majors BP and Shell are unsurprisingly among the few risers on the index, up 1.7 and 0.8 per cent, respectively.
Richard Hunter, head of markets at interactive investor, said: ‘Each day is a crude reminder that investors are fearing the impact of an extended conflict, with the US dollar being a rare example of any buying interest.’
The dollar is set for a second consecutive week of gains and is up 2 per cent since the start of the conflict.
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