FTSE closes down, but off the lows
And finally, the UK’s stock market has clawed back most of its earlier losses.
The FTSE 100 share index has closed for the night, down 35 points at 10,249 points, having been down around 200 points in early trading.
Energy companies and defence stocks led the risers, while property developers, housebuilders and retailers fell as hopes of UK interest rate cuts evaporated today.
“It’s been tough for investors to figure out how to price in the Trump effect over the past 12 months,” says AJ Bell head of financial analysis Danni Hewson, adding:
“For many it has made sense to plump for the ‘TACO’ trade, assuming the US president will pull back or change direction quickly. But after a relatively calm period for markets last week, the rhetoric from both sides in the US-Iran conflict over the weekend will have forced traders to think again.
“The US economy and markets will be insulated to a degree by the country’s huge oil and gas industry, but it can’t escape soaring prices entirely, or the growing spectre of stagflation which is stalking the global economy.
“For central banks, the only way may be up when it comes to interest rates – a huge pivot from where markets had expected them to go in 2026.
“Preventing inflation from reaching those scorching hot levels that would annihilate already fragile consumer confidence will trump a desire to curb unemployment or charge up economic growth.
Updated
Closing post
Time for a recap, after a dramatic day in the financial markets.
UK chancellor Rachel Reeves has warned petrol, diesel and heating oil retailers not to take advantage of the surge in oil prices.
Updating MPs about the situation, after an alarming surge in oil prices last night, Reeves said she would “continue to monitor prices” at the pumps as the situation develops.
She told the House of Commons:
I have also asked the Competition and Markets Authority to be vigilant across prices, including essentials like road fuel and heating oil.
Let me be absolutely clear. I will not tolerate any company exploiting the current crisis to make excess profits at consumers’ expense.
Reeves also reassured households that the UK energy price cap will fall in April, as planned before the Middle East crisis erupted.
She was speaking after taking part in a call with fellow G7 finance ministers, where they agreed to stand ready to take necessary measures” to support oil supplies
G7 finance ministers met after the Iran war drove the cost of a barrel of crude to its highest since 2022, over $100 a barrel in frenzied trading as Asia-Pacific markets opened last night.
They faced calls to release their emergency oil reserves, but the France’s finance minister has said the G7 are “not there yet”.
In a statement, the G7 finance ministers say:
“We, the G7 finance ministers, held a virtual meeting on March 9, together with the Heads of the International Monetary Fund (IMF), World Bank Group (WBG), Organisation for Economic Co-operation and Development (OECD), and International Energy Agency (IEA).
“We discussed the current conflict in the Middle East, its impact for regional stability, global economic conditions, and financial markets, and the importance of secure trading routes.
“We will continue to closely monitor the situation and developments in the energy markets and will meet as needed to exchange information and to co-ordinate within the G7 and with international partners.
“We stand ready to take necessary measures, including to support global supply of energy such as stockpile release.”
The G7 statement appeared to calm the financial markets, which had been highly volatile early in the day.
Brent crude rocketed to as high as $119.50 a barrel as the financial markets opened on Sunday night UK time, an astonishing jump of 29%, as the fallout from the US-Israel war with Iran continued to rattle global markets.
But crude prices then eased back during afternoon trading today. Brent crude is now changing hands around $99.75 a barrel, still up 7.33% on the day.
The TUC warned that “working people are now facing a Donald Trump-made cost of living crisis”.
According to the RAC, UK petrol has risen by 5p to 137.5p a litre since the Iran war began on Saturday 28 February, with diesel is up 9p to 151p a litre.
Fears of an inflationary surge hit the price of government bonds today, pushing up the yield (or interest rate) on UK debt, before a late recovery.
The yield on two-year UK gilts surged by 36 basis points (0.36 of a percentage point) at one stage, on track for its biggest daily jump since Liz Truss’s mini-budget alarmed investors in September 2022.
But yields eased back in late trading, and were only slightly higher on the day.
Hopes that the Bank of England would cut interest rates this year were dashed by the jump in the oil price. The City money markets now indicate the Bank is expected to keep rates on hold through 2026, with a small possibility of a rise in 2027.
Updated
