Despite a much-needed geopolitical de-escalation between Iran and Israel, London’s FTSE 100 barely moved on Tuesday, a mere 0.95-point gain that says more about the index’s limitations than global relief.
US markets, by contrast, had no such hesitation. At the time of London’s close, the Dow was up around 1%, the S&P 500 was not far behind, and the Nasdaq climbed 1.3%. Wall Street acted like the threat of wider conflict had genuinely diminished. The FTSE 100? It blinked and went back to sleep.
This isn’t new, but it is getting harder to ignore. While US indices continue to trend upward on optimism, tech-driven momentum, and economic resilience, the FTSE 100 continues to play the role of the reluctant guest at a party it barely wants to attend.
Tuesday’s ceasefire brought with it a plunge in oil prices. Brent crude tumbled from over $76 a barrel to just above $68, good news for airlines, bad news for the index’s heavyweight oil majors. Shell and BP were hammered, down 3.6% and 4.8% respectively. Given that these two alone make up a large chunk of the FTSE 100’s market cap, it’s not hard to see why any broader rally got quickly watered down.
Gold didn’t help either. A risk-on mood pushed safe-haven assets lower, and in turn, knocked gold miners like Endeavour and Fresnillo. Defensive stocks didn’t catch much of a bid either, with names like BAE Systems sliding. The FTSE has long been dependent on a few sectors, energy, mining, defence, and banks, and when two or three of those are under pressure, the whole index stumbles.
The FTSE 250 fared better, rising 1.0%, helped by lower oil prices, improved travel sentiment, and strength in consumer cyclicals. Airlines like easyJet and IAG climbed over 6%, while On The Beach rose nearly 6% after a broker upgrade.
If this were just a one-off, it might be forgivable. But we’re talking about a broader trend. The FTSE 100 has significantly underperformed its US counterparts over the past 12 months, held back by its reliance on slow-growth sectors and an outdated mix of companies. The index remains light on tech, heavily skewed to energy, mining and financials, and chronically undervalued, but perhaps for good reason.
Banks like Barclays may look cheap, and indeed it popped 4.5% today, but without the kind of sustained earnings growth seen in the US, cheap often stays cheap. Investors are wary of UK political risk, weak productivity growth, and a Bank of England that remains cautious on rate cuts.
Top Mover
Top mover of the day, was Carnival, which jumped over 10% after reporting record second-quarter earnings. The FTSE 250 cruise operator posted net income of $565 million, up sharply from $92 million a year earlier. Strong bookings and demand lifted revenue by nearly 10%, and management struck an upbeat tone about future quarters.