Early Market Advances Evaporate as Oil Prices Climb Amid Middle East Crisis
Financial markets remained unsettled on Thursday as the conflict involving Iran entered its sixth day, with no immediate resolution in sight. The FTSE 100 relinquished its early gains to close lower, driven by a renewed surge in oil prices amidst the escalating Middle East tensions.
Geopolitical Turmoil Rattles Global Indices
Chris Beauchamp, chief market analyst at IG, noted, "While images of war continue to roll across screens around the globe, and Iranian missiles and drones attack other countries, markets have little upon which to base a sustained rally." The FTSE 100 index ended down 153.71 points, or 1.5%, at 10,413.94. Similarly, the FTSE 250 closed down 196.47 points, or 0.9%, at 22,700.20, and the Aim All-Share dropped 6.20 points, or 0.8%, at 788.36.
Inflation expectations have increased due to rising energy costs, diminishing hopes for interest rate cuts and pushing bond yields higher. The yield on the US 10-year Treasury rose to 4.15% from 4.07%, while the US 30-year Treasury yield widened to 4.76% from 4.71%. Central bank meetings in the US, UK, Europe, and Japan are scheduled in two weeks, with policymakers facing another dilemma following recent supply shocks from tariffs.
Military Escalations and Regional Responses
Iran's army announced a drone attack on a US site in Erbil, Iraq, after targeting Kurdish forces with three missiles. Meanwhile, residents in Abu Dhabi reported loud explosions as UAE air defences responded to a missile threat, with Iran continuing its retaliation campaign in the Gulf.
Britain is deploying additional fighter jets to Qatar to strengthen defensive operations, Prime Minister Keir Starmer announced, as Defence Secretary John Healey visited Cyprus following a drone strike on a UK air base there earlier this week.
Commodity and Currency Movements
Brent oil traded higher at $84.41 per barrel, up from $80.75. David Morrison at Trade Nation commented, "Oil prices remain elevated, and as things stand there's no sign that either WTI or Brent looks set to reverse direction. Oil has, perhaps more than any other market, been driven by headlines concerning the ongoing hostilities across the Middle East, particularly around the Strait of Hormuz."
In European equities, the Cac 40 in Paris closed down 1.5%, and the Dax 40 in Frankfurt declined 1.6%. On Wall Street, the Dow Jones Industrial Average fell 1.6%, the S&P 500 dropped 0.8%, and the Nasdaq Composite declined 0.6%. The pound weakened to $1.3309, the euro stood lower at $1.1574, and the dollar traded higher at 157.67 yen.
Corporate Earnings and Sector Performance
In London, investors navigated a mix of earnings reports. Rentokil Initial surged 11% on the FTSE 100 after reporting better-than-expected growth in its North American business, with organic revenue growth of 3.6% in the fourth quarter. Analysts at RBC Capital Markets noted, "These results should reassure that Rentokil is on the right track, although the key spring/summer period will be proof of the pudding."
Insurer Admiral rose 7.6% as it reported strong trading in 2025, hiking its dividend amid a profit rise. However, Reckitt Benckiser fell 5.8% due to a weak cold and flu season impacting the first quarter of 2026 and challenging trading in Europe.
A declining gold price affected Fresnillo, down 7.3%, and Endeavour Mining, down 5.8%. Rising bond yields and reduced expectations for interest rate cuts sent housebuilders like Persimmon and Berkeley Group into the red, with falls of 2.9% and 2.4%, respectively.
Travel firms suffered, with Wizz Air plummeting 11% after warning that Middle East disruption could reduce its 2026 net profit by around €50 million. British Airways owner IAG fell 3.6%, and easyJet dipped 5.0%.
On the FTSE 250, Coats rose 8.8% after raising mid-term targets, and Harbour Energy soared 9.5% with a new payout policy. Conversely, PageGroup plummeted 15% due to a 67% drop in full-year pre-tax profit and a halved dividend, weighing on peer Hays, down 3.8%.
Market Leaders and Laggards
The biggest risers on the FTSE 100 included Rentokil Initial, Admiral Group, Compass, Relx, and Experian. The biggest fallers were 3i, Fresnillo, Endeavour Mining, Reckitt Benckiser, and Rio Tinto.
Looking ahead, Friday's global economic calendar features US nonfarm payrolls, UK Halifax house price data, and eurozone GDP figures. The UK corporate calendar includes full-year results from IMI.
