FTSE Futures Down 1% on Iran Escalation; Brent +3.7% to $97.79
The FTSE 100 is set to open down 1% at around 10,400 on Thursday after the US-Iran exchange of fire overnight collapsed framework-deal hopes. Brent crude jumped 3.7% to $97.79 a barrel, recovering Wednesday’s losses and reigniting the geopolitical risk premium. The dollar strengthened as investors sought safe havens; sterling traded at $1.3415, down from Wednesday’s $1.3429. The US 10-year Treasury yield rose to 4.50%, reviving fears of persistent inflation. European futures pointed broadly 1% lower; German DAX futures -0.9%; pan-European futures -1.1%. Asia stocks tumbled overnight.
European Central Bank Chief Economist Philip Lane warned the global nature of the energy shock may amplify and prolong inflation impact across Europe, reinforcing central-bank caution on rate cuts. Gold rose 0.9% to $4,480 an ounce as a safe-haven hedge. The UK 10-year gilt yield is likely to give back some of the 34-basis-point rally off the 13 May peak as the imported-inflation backdrop tightens. The Reeves cost-of-living package — cancellation of the 5p fuel-duty rise, VAT cuts, food tariff removals and £120m ceramics support — lands into a re-tightened macro backdrop just three weeks before the 18 June Makerfield by-election. The UK energy price cap rise of 13% from July (£221/year/household) compounds the political-economy pressure.