- Middle East conflict intensifies as Yemen's Houthis attacked two Saudi oil tankers, causing oil prices to surge.
- The FTSE 100 index closed down 77.80 points, or 0.7%, at 10,639.17.
- Rising oil prices have caused concerns for Bank of England hawks regarding potential interest rate hikes.
- Centrica shares plunged 10% after the company reported lower first-half profits and a cautious outlook.
- Brent oil hit $98 a barrel, raising inflation concerns and impacting investor sentiment.
- Oil prices topped $100 a barrel for the first time since May, following the Houthi attacks.
- Concerns about a prolonged stagflationary shock have emerged as investors price in more inflation due to rising energy costs.
- If oil prices remain near $100 per barrel, a September rate hike by the Bank of England could be likely.
The FTSE 100 index fell 77.80 points, or 0.7%, closing at 10,639.17 on Thursday, as rising oil prices and geopolitical tensions weighed heavily on investor sentiment.23
Oil prices surged past $100 a barrel for the first time since May, following attacks by Yemen’s Houthi rebels on Saudi tankers, which have raised concerns about supply disruptions.6
Centrica led the index lower, plunging 10% after reporting a significant drop in first-half profits and a cautious outlook. The company posted a headline profit before tax of £85 million for the three months to June, down from £286 million a year earlier. Despite the downturn, Centrica hiked its interim dividend by 9%, indicating some resilience amid market volatility.
The renewed spike in energy prices has reignited inflation fears, with analysts warning that if oil prices remain elevated, the Bank of England may reconsider its stance on interest rate cuts.
Pugh noted that a sustained price near $100 could lead to a September rate hike being “firmly on the table.”
The fluctuating oil prices are complicating the economic outlook, as Allen highlighted concerns about a prolonged stagflationary shock, with investors increasingly pricing in inflation risks.7
As the Middle East conflict continues, the impact on global markets remains uncertain, with rising fuel costs affecting various sectors, including budget airlines.1
“Brent oil surpassed $100 a barrel for the first time since May after Houthi attacks, reigniting inflation fears that traders are pricing in delayed rate cuts. Centrica shares plunged 10% following lower first-half profits, though the company raised its interim dividend by 9%.”
The Independent
