FTSE 100 Closes at 10,410, Down 0.29% as Iran Ceasefire Strains; Brent Back to $96
The FTSE 100 closed at 10,410 on Wednesday, down 0.29% on the day, as oil prices climbed and Middle East peace hopes faded with the renewed Israeli strikes on Lebanon. Brent crude rose 2% to $96.20 a barrel. UK 10-year gilt yields ticked back up to 5.02%. Sterling weakened to $1.3410. Gold firmed to $4,480. The VIX rose 2.8% as the war-risk premium rebuilt. Defence stocks BAE Systems, Babcock and Melrose were mixed; oil majors BP and Shell led the FTSE gainers on the Brent rebound. UK services PMI data came in weaker, adding to the risk-off tone.
The Wednesday close pares Tuesday’s relief rally as the Israel-Hezbollah cessation continues to fray. If the Lebanon track formally breaks and Iran walks away from the framework re-engagement, Brent is likely to test $98-103 within 48-72 hours and the FTSE could fall toward the 10,330 Monday low. The 5.02% gilt yield is back above the 5% line that has been the binding macro-political resistance level for the Reeves Treasury through May. The Bank of England MPC’s rate-cut path is now uncertain again; if Brent stays above $95 through mid-June, the next rate cut may be delayed. UK services PMI weakness adds to the binding macro picture. The Ofgem October price-cap reset depends on Brent staying in the $88-95 range through mid-summer.