London stocks are expected to open slightly lower on Wednesday as renewed military exchanges between the United States and Iran dampen investor sentiment ahead of closely watched US inflation figures.
Futures indicate the FTSE 100 will fall around 8 points at the open after the index suffered a sharp 1.4% decline on Tuesday, closing at 10,227.33.
Market nerves were rattled after Iran launched missile strikes against US military facilities in Jordan and Bahrain following American retaliatory attacks on Iranian military infrastructure. The escalation marks the most serious confrontation between Washington and Tehran since the ceasefire agreed in April and has raised fresh concerns over stability in the Middle East.
The latest flare-up followed the reported downing of a US Apache attack helicopter near the Strait of Hormuz, prompting US air strikes against Iranian air defence systems, radar installations and command facilities.
Oil prices moved higher in response, with Brent crude climbing to US$91.44 a barrel from US$90.90, reflecting renewed fears over potential disruption to energy supplies in one of the world’s most strategically important regions.
Investors are now turning their attention to US inflation data due later today, which could prove pivotal for expectations surrounding Federal Reserve interest rate policy.
Market participants remain wary that stronger-than-expected inflation could trigger another bout of selling across equities, particularly after last week’s robust US employment figures reignited concerns that interest rates may remain higher for longer.
On Wall Street, markets delivered a mixed performance overnight. The Dow Jones Industrial Average gained 0.2%, while the S&P 500 slipped 0.3% and the technology-focused Nasdaq Composite fell 1.0%.
Asian markets were broadly weaker, with Japan’s Nikkei 225 declining 2.3%, Hong Kong’s Hang Seng falling 1.2%, and China’s Shanghai Composite losing 0.8%. Australia’s ASX 200 bucked the trend, rising 0.3%.
Meanwhile, gold prices eased to US$4,203 an ounce despite the geopolitical tensions, suggesting investors are positioning cautiously ahead of the inflation release rather than moving aggressively into traditional safe-haven assets.
In UK corporate news, investors will be watching updates from travel retailer WH Smith and half-year results from water utility Pennon.
With geopolitical risks rising and inflation data looming, markets are likely to remain volatile as investors assess the outlook for global growth, energy prices and interest rates.
