- FTSE set to take another step down
- Gulf disruption presents risk and opportunity for BP and Shell
- US futures down after week starts strong for big tech
- Gold slips as rate cut hopes fade
- Brent crude at one-year high of $80 per barrel
Derren Nathan, head of equity research, Hargreaves Lansdown:
“The FTSE’s set for a fall this morning after losing 1.2% on Monday. Most constituents were in the red with defence and energy stocks being the notable exceptions. Sentiment towards BP and Shell has strengthened significantly off the back of oil price spikes. But it’s a complex picture. Neither company has production in Iran. But BP’s significant production in Iraq and Abu Dhabi risks being bottlenecked through disruption to the Strait of Hormuz. For Shell the same applies to its LNG facilities in Qatar and the Emirates. If a moderate sustainable regime is established in Iran, there is the potential for substantial derisking, and for prices to be rebased downwards. If sanctions are removed, it also opens the door for investment into Iranian oil fields.
But uncertainty remains high. This could prove to be highly profitable for both Shell and BP’s trading arms with Shell’s optimisation capabilities in LNG transit likely to be in particularly strong demand. Shell’s balance sheet strength also leaves it better placed to deal with any prolonged volatility and while BP’s buybacks remain on pause, we’re expecting Shell’s generous payouts are likely to continue this year.
US stocks are set to open down later on, after recouping Monday’s initial losses to end the day flat. US energy stocks, many of whom are less directly exposed to the Middle East had a strong day, but consumer stocks took a dip on concerns that soaring commodity prices could reignite inflation. Technology stocks aren’t typically associated with safe haven trading, but the Nasdaq Composite saw the best performance of the main US indices with NVIDIA, Palantir and Microsoft all enjoying gains on the day. These are companies rolling in cash and benefitting from structural growth drivers meaning demand may be less sensitive to geopolitical unrest. Palantir’s data services to intelligence agencies could be a direct beneficiary of the heightened-threat environment.
The more traditional safe haven that is gold has slipped a little this morning after closing up over 1% yesterday. At around $5,300 per ounce, all-time highs are well within reach. However fresh inflationary concerns are moving expectations for the next interest rate cut by the Fed further down the track which could take some shine off gold’s stellar performance over the last 12 months.
Brent crude oil has consolidated recent gains breaking through the $80 barrier not seen since January 2025. The Strait of Hormuz is effectively stalled, and Saudi Arabia’s largest refinery has been temporarily suspended after a drone strike. Until clarity emerges around the likely duration of this conflict, tension in the middle-east is likely to overshadow forecasts of a supply-glut in the market.”
