FTSE 100 Declines on Escalating Middle East Tensions
Stock markets in London faced significant pressure on Thursday, driven by growing apprehensions over a prolonged conflict in the Middle East. The catalyst for this downturn was a directive from Iran's new supreme leader, Ayatollah Mojtaba Khamenei, who called for the vital Strait of Hormuz shipping lane to remain closed. This move heightened fears of extended regional instability, impacting global financial markets.
Market Performance and Currency Movements
The FTSE 100 index closed down 48.62 points, representing a 0.5% decline, to settle at 10,305.15. Similarly, the FTSE 250 ended the day lower by 212.60 points, a drop of 1.0%, at 22,168.74, while the AIM all-share index fell 6.59 points, or 0.9%, to 767.02. In European equities, the CAC 40 in Paris closed down 0.7%, and the DAX 40 in Frankfurt ended 0.2% lower.
Currency markets also reacted to the geopolitical tensions. The pound weakened to 1.3353 dollars on Thursday afternoon, down from 1.3410 dollars at the close on Wednesday. The euro stood lower at 1.1522 dollars compared to 1.1571 dollars previously. Against the yen, the dollar traded higher at 159.21 yen, up from 158.81 yen.
Oil Prices and Geopolitical Statements
As stocks declined, oil prices climbed sharply. Brent crude oil rose to 98.65 dollars a barrel on Thursday afternoon, up from 91.93 dollars late Wednesday. Ayatollah Khamenei emphasized the strategic importance of blocking the Strait of Hormuz, stating, "The lever of blocking the Strait of Hormuz must definitely be used." He added that Iran's revenge for US and Israeli strikes had "taken concrete form, but until it is fully achieved, this case will remain among our priorities."
In response, US President Donald Trump dismissed concerns about oil prices, focusing instead on broader geopolitical goals. He wrote on social media that "of far greater interest and importance to me, as President, is stopping an evil Empire, Iran, from having Nuclear Weapons, and destroying the Middle East and, indeed, the World." However, later on Thursday, Iran's deputy foreign minister, Majid Takht-Ravanchi, indicated that some countries had been allowed passage through the strait, though he noted that nations involved in aggression should not benefit from safe transit.
Global Market Impact and Economic Indicators
The ripple effects of the Middle East tensions were felt across global markets. In New York, stocks closed lower, with the Dow Jones Industrial Average down 1.1%, the S&P 500 index falling 1.1%, and the Nasdaq Composite declining 1.3%. US Treasury yields also widened, with the 10-year yield rising to 4.25% from 4.21% and the 30-year yield stretching to 4.88% from 4.85%.
Despite these market movements, US economic data provided some stability. Initial unemployment benefit claims for the week ended March 7 amounted to 213,000, slightly down from a revised 214,000 the prior week, indicating a relatively stable labour market. Oxford Economics analyst Michael Pearce commented, "If AI were reshaping the workforce, we would expect a pick-up in both hiring and layoffs, but so far neither appears to be happening on a scale large enough to be noticeable in the headline figures."
Notable Stock Movements in London
Within the FTSE 100, Rentokil Initial emerged as the top performer, closing up 5.2% after UBS upgraded the stock to 'buy' with a price target of 540 pence, up from 430p. Conversely, several stocks traded ex-dividend, leading to declines. HSBC closed down 6.1%, Entain fell 2.6%, and Schroders finished 2.7% lower.
M&G closed down 3.6% despite reporting better-than-expected results, with adjusted operating pre-tax profit edging up to £838 million in 2025 from £837 million the year prior. JPMorgan analyst Farooq Hanif noted, "This is a strong set of results from M&G," highlighting ahead-of-consensus figures in assets under management and net flows.
On the FTSE 250, TP ICAP closed up 11% after reporting 2025 revenue of £2.35 billion, up 4.4%, and pre-tax profit of £230 million, up 7.5%. Shawbrook, however, closed down 12% despite increased underlying profit, as it reiterated medium-term guidance including a maiden ordinary dividend payable in 2027.
Among small caps, On the Beach finished down 13% after withdrawing full-year profit guidance due to a slowdown in bookings to Mediterranean destinations. Gold prices fell to 5,131.30 dollars an ounce from 5,172.30 dollars at Wednesday's close.
Top Gainers and Losers
The biggest risers on the FTSE 100 included Rentokil Initial, up 24.10p at 491.40p, Airtel Africa, up 11.00p at 348.60p, SSE, up 83.00p at 2,704.00p, BAE Systems, up 70.00p at 2,298.00p, and Centrica, up 6.20p at 206.80p. The biggest fallers were Persimmon, down 80.00p at 1,188.50p, HSBC, down 77.00p at 1,195.80p, Barclays, down 20.90p at 389.35p, Barratt Redrow, down 14.10p at 285.80p, and easyJet, down 16.80p at 380.80p.
Upcoming Economic Events
Looking ahead, Friday's economic calendar features UK gross domestic product data at 7am. On the corporate front, trading statements are expected from housebuilder Berkeley Group, with full-year results from Irish housebuilder Glenveagh Properties and radiator producer Stelrad.
