The FTSE 100 started the day in the red, down about a third of a percent, but it has since pushed back into positive territory. On the surface, it looks like a market that is cautious but managing to hold its nerve. Given the news of US strikes on Iranian nuclear facilities, you might have expected a more dramatic sell-off. Instead, investors seem to be balancing geopolitical risk against the fact that, for now, nothing has spun completely out of control.
Airline shares were the obvious casualties this morning, with easyJet falling 2.5 per cent and IAG down nearly 2 per cent. It’s no surprise that these stocks come under pressure when tensions flare in the Middle East. Fuel prices rise, flight disruptions happen, and consumer confidence in travel dips.
Energy stocks were the clear winners this morning, BP and Shell gained as oil prices initially climbed above $79 a barrel on fears about the Strait of Hormuz, a crucial artery for global oil supply. Prices later eased back closer to $77, suggesting traders remain uncertain whether Iran will follow through on threats to disrupt this vital shipping route. If that happens, the economic consequences would be severe, especially for Europe, which remains vulnerable to spikes in energy costs.
Outside the energy sector, corporate headlines grabbed attention today. Spectris shares surged 15 per cent after private equity firm Advent tabled a £3.8 billion bid. With rival KKR reportedly preparing a counteroffer, the likelihood is that this FTSE 250 company will soon leave the public markets. This latest takeover is another blow to the London Stock Exchange, coming shortly after Scottish Widows revealed it’s dumping UK shares in favour of US stocks. With more top firms being snapped up by private equity, the pool of publicly listed companies is shrinking, and that does not bode well for the long-term health of the UK market.
Meanwhile, the bidding war for NHS landlord Assura continues. Primary Health Properties raised its offer to £1.79 billion after being outbid by KKR. This fight is a reminder that private equity has its sights set not only on tech firms but also on stable, income-generating assets in healthcare and property. The shift of such assets from public to private ownership has broader implications for transparency and control.
Oil prices remain the wild card in all of this. If Iran tries to close the Strait of Hormuz, it could trigger a supply shock pushing inflation higher, particularly in Europe. Deutsche Bank’s warning that every $10 rise in oil could add 0.4 percentage points to inflation over a year should make policymakers sit up and take notice. Higher inflation in a fragile economic environment means interest rates could stay elevated for longer, squeezing consumers and businesses alike.
So while today’s FTSE 100 recovery may seem like a sigh of relief, it is more of a pause than a sign of calm. The risks are real and remain unresolved.