FTSE 100 Outperforms Global Indices as Defense and Energy Stocks Rally
- Iran’s missile attack on Israel triggered a surge in oil prices and a decline in global stock markets, while London’s FTSE 100 index outperformed due to its weighting towards defense and energy stocks.
- The escalating conflict in the Middle East has heightened geopolitical risks, driving investors towards safe-haven assets like gold, which reached a near-record high.
- Market sentiment remains cautious as investors brace for further repercussions from the Middle East crisis and its impact on the global economy.
London markets made gains on Wednesday morning after an unprecedented missile attack on Israel by Iran that sent oil prices higher and shook global stocks.
The prospect of a regional conflict is looming large over the Middle East after Iran fired around 180 missiles at Israel on Tuesday, for which Israeli authorities promised there would be “consequences”.
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Brent crude surged as much as four percent to $74.91 a barrel after White House officials warned a strike was imminent. It is now trading at $74.63.
Early on Wednesday, Israel announced it was sending “additional forces” to its ground operation inside Lebanon, which began earlier this week.
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“The events drove a geopolitical risk-off tone, with clear ramifications across multiple asset classes,” said Jim Reid, a strategist at Deutsche Bank.
London’s blue-chip FTSE 100 has proven more resilient than most other global stock market indexes, given its weighting towards defence and energy giants.
The FTSE 100 gained 0.36 percent to 8,306.23 on Wednesday morning, while the mid-cap FTSE 250, which is more closely aligned with the health of the UK economy, remained broadly flat at 20,915.20.
BP, BAE Systems and Shell were among the FTSE 100’s biggest risers in early trading, up two percent, 1.5 percent and 1.2 percent respectively.
“A subdued tone has hit trading as markets brace for further repercussions from the Middle East crisis,” said Susannah Streeter, head of money and markets at Hargreaves Lansdown.
“The FTSE 100 has headed higher in early trade, partly because of its defensive nature, helped by strength in energy stocks as oil prices continue their march upwards.”
US stocks slipped at the close on Tuesday as investors digested events in the Middle East, on top of a closely-watched survey showing that manufacturing activity continued to decline in September.
The S&P 500 index closed 0.9 percent lower, while the blue-chip Dow Jones Industrial Average fell 0.4 percent.
The European Stoxx 600 benchmark fell 0.4 percent at Tuesday’s close, while Germany’s Dax, made up of 40 blue-chip firms, dropped 0.6 percent.
Elsewhere, the price of gold jumped as much as 1.3 percent on Tuesday to a near record of $2,673 per ounce as investors piled into the safe-haven asset. It was trading at $2,649 on Wednesday morning.
By City AM
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