Fears of a new inflation spike have intensified after oil and gas prices today extended their upward momentum.
The FTSE 100 index also fell deeper into the red as the war between Iran and the US and its allies entered its fourth day.
The soaring prices are a new headache for Rachel Reeves as she prepares to deliver her Spring Statement.
FTSE 100 Live Tuesday
- Inflation fears mount
- Chancellor statement due
- Greggs profit falls
Market update: FTSE 100 down 2.5%, Brent Crude above $80
10:07 , Graeme EvansThe FTSE 100 index today slid by more than 2% as investors dumped stocks including Rolls-Royce, Prudential and British Airways owner IAG.
Fears of a new inflation spike that will derail global growth were fuelled by today’s latest surge for energy prices on the back of the Middle East conflict.
The disruption to flows through the Strait of Hormuz lifted European natural gas futures by another 20% and Brent Crude by 5% to $81.68 a barrel.
The FTSE 100 index followed yesterday’s 1.2% reverse with a sharp fall of 2.5% of 271.95 points to 10,508.16, while the Dax in Frankfurt slid 3%.
Traders are braced for a poor session on Wall Street, with leading benchmarks seen more than 1.5% lower after yesterday’s relaxed reaction to the Iran conflict.
Dan Coatsworth, head of markets at AJ Bell, said: “US futures suggest investors across the Atlantic are also starting to become more alarmed about the situation in the Middle East.
“The suspension of LNG production in Qatar is a particularly sensitive pressure point and has seen gas prices surge globally.
“The longer oil and natural gas prices remain elevated, the greater the risk of a meaningful impact on inflation which could mean higher interest rates, an event that’s typically negative for equity markets.”
In London, Rolls-Royce fell 5% or 64p following last week’s record high to trade at 1290p while airline group IAG lost 21.8p to 378.7p.
The uncertain economic outlook caused Asia-focused insurer Prudential to fall 4% or 48.5p to 1068p, Barclays by 17.55p to 419.8p and HSBC by 54p to 1278p.
Disruption to LNG cargoes offset the latest oil price rise as Shell edged 17p higher to 3149p and BP added 4.15p to 492p.
The FTSE 250 index fell 2.6% or 602 points to 22,821.64, with hotel linen supplier Johnson Service Group and car distribution firm Inchcape down 8% on the back of results.
Greggs slipped 5.3p to 1565.7p after releasing annual figures.
Greggs annual profit falls, cost inflation eases
09:28 , Graeme EvansBakery chain Greggs has said it is “still tough out there” for customers after it revealed a slump in profits for the past year.
The Newcastle-based firm’s rate of cost inflation slowed from almost 6% to around 3% this year but is still witnessing cautious sentiment among shoppers.
Greggs reported that statutory pre-tax profits fell by 17.9% to £167.4 million for the year to December 27.
Total sales grew by 6.8% to £2.15 billion over the year, boosted by 121 net store openings as the company ended the year with 2739 locations.
FTSE 100 down more than 2%, Prudential off 5%
09:14 , Graeme EvansThe FTSE 100 index today stood 2.2% lower as the escalating Middle East conflict caused a fresh flight from financial and travel stocks.
Asia-focused insurer Prudential fell 5% or 56p to 1060.5p and British Airways owner IAG shed 4.5% or 18.5p to 382p.
The uncertain economic outlook caused Barclays to fall 4% or 19.65p to 417.7p and HSBC by 67.5p to 1667.5p.
The FTSE 100 index slid 237.47 points to 10,542.64 and the FTSE 250 index by 2.1% or 501.22 points to 22,922.42.
Susannah Streeter, chief investment strategist at Wealth Club, said: “Downbeat sentiment is pervading equity markets as the conflict in the Middle East escalates, with global repercussions.
“London’s FTSE 100 has fallen deeper into the red as the war widens and companies assess the impact of severe disruption across the region on their operations.”
UK gilt yields rebound as inflation fears mount
09:03 , Graeme EvansThe UK 10-year gilt yield today rose 2% to 4.47%, up from Friday’s one-year low of 4.23% as investors priced in the potential inflation impact of the Middle East conflict.
At last night’s level of oil and gas prices, Berenberg said UK CPI inflation would likely be 0.7 of a percentage point higher than its 2.1% fourth quarter forecast.
The City bank said: “Prolonged disruption would see energy prices and inflation climb further. The upside risk to inflation will likely convince the Bank of England to hold off from another interest rate cut at its 19 March meeting.”
About 20% of global LNG and oil supply is exported from the Persian Gulf through the Strait of Hormuz.
Berenberg said the closure of the Strait for a prolonged period would lift Brent crude prices well above $100 a barrel.
However, the smaller spike in the oil price so far to near $80 indicates that investors calculate that this outcome will be avoided.
Berenberg said: “We share investors’ rationale that US President Donald Trump will want to avoid an unpopular rise in US inflation in the run-up to the 3 November midterm elections, which he can achieve by using US military superiority to ensure safe passage through the Strait again within a matter of weeks.”
FTSE 100 down more than 1%, Barclays 3% lower
08:10 , Graeme EvansThe FTSE 100 index today fell by 1.1% or 118.05 points to 10,662.06.
Barclays dropped 3% or 12.4p to 424.95p, Lloyds Banking Group dipped 2% or 1.9p to 98p and HSBC reversed 29.6p to 1302.4p.
British Gas owner Centrica fell 3% or 5.45p to 191.25p, while SSE and National Grid lost 2% in early dealings.
Shell rose 12p to 3144p and BP added 8.6p to 496.5p.
Brent Crude above $80 a barrel, coal price surges
07:57 , Graeme EvansBrent Crude oil prices are up another 4% to $81.16 a barrel, a level last seen in July 2024. European natural gas futures lifted by another 20%, having surged 35% yesterday.
Hargreaves Lansdown analyst Derren Nathan said: “The Strait of Hormuz is effectively stalled, and Saudi Arabia’s largest refinery has been temporarily suspended after a drone strike.
“Until clarity emerges around the likely duration of this conflict, tension in the Middle East is likely to overshadow forecasts of a supply-glut in the market.”
Coal prices have also surged by 8% after demand was boosted by QatarEnergy’s decision to cease LNG production because of attacks on its facilities.
Meanwhile, the FTSE 100 index is now forecast to open about 0.8% or 89 points lower.
Food price inflation eases to 3.5% - BRC
07:24 , Graeme EvansShop price inflation eased in February but consumers are still paying 3.5% more for food than a year ago, according to the British Retail Consortium (BRC) and NIQ.
Overall shop inflation fell slightly to 1.1% from January’s 1.5%, in line with the three-month average of 1.1%.
Food inflation fell slightly to 3.5% from 3.9% in January, while fresh food prices remained 4.3% higher than last February, a slight drop from January’s 4.4% and above the three-month average of 4.2%.
BRC chief executive Helen Dickinson said: “Households got some welcome relief in February as shop price inflation eased.
“While the direction of travel is promising, prices are still rising, and many consumers remain under pressure.”
Reeves urged to scrap fuel duty hike
07:21 , Graeme EvansThe Chancellor has been urged to scrap a proposed hike in fuel duty as concerns have been raised about the conflict in the Middle East.
Rachel Reeves announced last year that the long-held discount in fuel duty would be scrapped from September, with a 1p hike followed by two increases of 2p each in subsequent years.
But following the US and Israeli attacks on Iran at the weekend, concerns have been raised about the impact of oil price hikes which could hit consumers at the pumps.
SNP economy spokesman Dave Doogan said: “Oil prices are already spiking – the last thing motorists and businesses now need is another damaging tax hike from the Labour Party.”
A spokeswoman for the Treasury said: “We have extended the 5p fuel duty cut from this month to the end of August to support drivers across the country.”
Chancellor set to deliver spring statement
07:08 , Graeme EvansChancellor Rachel Reeves will today issue her response to the publication of updated economic projections by the Office for Budget Responsibility.
She is expected to say that the economy is “stronger and more secure” as a result of decisions taken by the Government when she addresses the Commons.
The Chancellor will point to falling inflation and interest rates cuts as successes which have resulted in an easing of living pressures.
But the statement comes just weeks after the Bank of England downgraded its growth forecast for the UK economy.
FTSE 100 seen lower, Asia markets fall sharply
07:01 , Graeme EvansThe FTSE 100 index is seen falling for another session after last night closing 1.2% or 130.44 points lower at 10,780.11.
IG futures point to a reverse of about 0.6%, even though US markets rallied yesterday evening to leave the S&P 500 index broadly unchanged.
The Nasdaq Composite rose 0.4% and the Dow Jones Industrial Average ended 0.2% lower.
The price of Brent Crude oil lifted another 3% to $80.29 a barrel this morning, having been $72.71 prior to the Middle East conflict.
European wholesale gas prices soared by 52% on Monday after QatarEnergy said it “ceased production” because of attacks on its facilities.
Asia markets are sharply lower, with the Nikkei 225 down by 3% and the Hang Seng index 1.1% lower.
