The FTSE 100 is expected to open about 26 points higher on Monday. London’s blue-chip index closed Friday at 10,650.44, up 42 points or 0.4%, having reached a session high of 10,714.67. Despite Friday’s gain, the index lost 1.7% over the week, its worst weekly performance since July.
Brent crude surged to $107.12 a barrel early on Monday from $104.73 late on Friday after Saudi Arabia temporarily closed its strategically important East-West oil pipeline following drone strikes.
The pipeline links Abqaiq, near the Gulf, with the Red Sea port of Yanbu and has become increasingly important as Saudi Arabia seeks alternative export routes following disruption to shipping through the Strait of Hormuz.
Saudi authorities said drones launched from Iraq targeted the pipeline in the Riyadh and Medina regions, causing injuries and damage.
Rabobank analysts said oil prices were also being supported by reports of Houthi forces seizing strategic locations along the Red Sea coast, with geopolitical tensions in the Middle East and Eastern Europe remaining a major concern for investors.
In the UK, attention will also turn to Downing Street, where Prime Minister Andy Burnham is expected to gather leading business figures and call for a “culture shift” in the government’s relationship with entrepreneurs and investors.
The government is expected to use a series of events at No 10 to position itself as a partner for growth and provide businesses with a stable platform for UK investment.
Executives from HSBC, Rolls-Royce, Morrisons, BAE Systems and Shell are among those expected to attend.
Sterling traded at $1.3505 early on Monday, down from $1.3523 at Friday’s London close. Against the euro, the pound strengthened to €1.1668 from €1.1648.
The euro slipped to $1.1569 from $1.1605, while the dollar strengthened against the yen to ¥153.99 from ¥153.58.
US government bond yields continued to rise, with the 10-year Treasury yield increasing to 4.96% from 4.93% on Friday. The 30-year yield climbed to 5.36% from 5.32%.
Asian equity markets were mixed overnight. Japan’s Nikkei 225 fell 1.1% and China’s Shanghai Composite slipped 0.1%, while Hong Kong’s Hang Seng gained 0.5% and Australia’s S&P/ASX 200 edged 0.1% higher.
Central banks will dominate the economic calendar this week, with interest-rate decisions due from the US Federal Reserve, Bank of Japan and Bank of England.
Analysts at Brown Brothers Harriman expect the Federal Reserve to raise rates by 25 basis points on Wednesday, taking the target range to 3.75%-4.00%. Such a move would represent the Fed’s first increase since July 2023 following five consecutive meetings where rates were left unchanged.
Persistently elevated US inflation and a relatively stable labour market have increased expectations that policymakers will tighten monetary policy again.
The Bank of Japan is also widely expected to increase its policy rate by 25 basis points to 1.25% on Friday, although analysts believe a larger 50-basis-point move cannot be completely ruled out.
The Bank of England, meanwhile, is expected to leave UK interest rates unchanged.
Gold fell to $4,332.73 an ounce early on Monday from $4,375.02 late on Friday.
On the UK corporate calendar, investment trust HgCapital Trust is scheduled to publish half-year results.
With Brent crude back above $107, US Treasury yields approaching 5% and three major central-bank decisions due this week, energy prices, inflation and the outlook for global interest rates are likely to remain the key drivers for markets.
