The FTSE 100 is expected to open about 40 points lower on Wednesday as escalating military action between the US and Iran pushed oil prices above $95 a barrel and triggered a broader sell-off across global equity markets.
FTSE 100 futures were quoted between 10,750.5 and 10,753.5 shortly before 7am BST, pointing to a decline of approximately 0.4% at Wednesday’s open.
London’s blue-chip index closed Tuesday at 10,789.28, down 34.98 points or 0.3%, after recovering from an intraday low of 10,689.55.
Selling was considerably heavier among domestically focused and smaller companies, with the FTSE 250 falling 1.7% to 24,521.29 and the AIM All-Share dropping 1.9% to 796.06.
Brent crude climbed to $95.35 a barrel early Wednesday from $92.48 at Tuesday’s London close as US forces launched fresh strikes against Iran’s Revolutionary Guards.
The renewed hostilities have intensified concerns about disruption to energy supplies through the Strait of Hormuz, one of the world’s most important oil shipping routes. Rising crude prices are also adding to inflation concerns after Tuesday’s sharp increase in global government bond yields.
Wall Street finished firmly lower overnight, with the Dow Jones falling 0.8%, S&P 500 losing 0.7% and Nasdaq Composite dropping 1.0%.
Asian markets followed the US lower. Japan’s Nikkei 225 fell 2.7%, while China’s Shanghai Composite declined 0.7%, Hong Kong’s Hang Seng lost 0.5% and Australia’s S&P/ASX 200 dropped 0.9%.
Australian equities declined despite stronger-than-expected economic growth. GDP increased 0.4% during the second quarter and 2.1% year-on-year, beating forecasts on both measures.
Gold also weakened despite the geopolitical uncertainty, trading at approximately $4,324 an ounce, compared with $4,364 at Tuesday’s London close.
G20 finance ministers have meanwhile called for “free, safe and predictable navigation through the Strait of Hormuz” following their latest meeting, although China did not support that section of the final statement.
Wednesday’s US economic calendar includes the ADP employment report for August and July factory orders, while the Bank of Canada is due to announce its latest interest-rate decision.
On the London corporate calendar, AEP Plantations, Cairn Homes, Ecora Royalties and TT Electronics are scheduled to report half-year results.
