FTSE 100 falls 0.5% as US strikes hit Iranian targets near Hormuz
Key Facts
The FTSE 100 fell 0.5% to 10,705.31 points by 1043 GMT on Tuesday, according to a Reuters report, as tensions escalated after US strikes on Iranian targets. A US official told the Associated Press that the United States carried out the strikes in an operation that appeared limited. The official added that the targets included Iranians who had used surface-to-air missiles against the United States in the strait. Iranian state media reported hearing explosions on the islands of Qeshm and Hengam and in nearby Bandar Abbas. The moves came in a market affected by supply risks through the Strait of Hormuz, which carried about one-fifth of global oil supplies in peacetime, according to the Associated Press.
Losses spread to other UK shares: the FTSE 250 fell 0.5% to 24,674.91 points, and the AIM All-Share declined 0.4% to 754.60 points, according to Share Talk. Mining shares came under pressure, with Endeavour Mining down 4.7% and Antofagasta down 3.5%. Glencore and Anglo American shares also fell 2.8% each. In currency markets, sterling was little changed at $1.3416, compared with $1.3417 on Monday, according to the same report. The breadth of the decline showed that the move extended across multiple indices and company shares during the session.
Oil moved as the market weighed supply disruption risks against the course of political talks. A Reuters report during the session said Brent crude fell $1.63, or 2%, to $103.14 a barrel at 1544 GMT. In another report, Reuters said crude prices rose more than 1.5% on Tuesday after falling 7% in the previous session, following an Iranian official's statement that an agreement to end the war remained distant. A senior Iranian official told Reuters that Tehran and Washington were still far from an agreement to end the war. At the same time, Qatar stepped up mediation efforts to narrow differences and avert a new escalation after the US midterm elections.
The US midterm elections took place on Tuesday, with all 435 seats in the House of Representatives and 35 Senate seats contested, according to Share Talk. Reuters said strong Democratic performance expectations were priced into markets and that the election result could set the direction of global markets during the week. The Bank of England's next event is the publication of the Monetary Policy Committee summary and minutes and the Monetary Policy Report on Thursday, November 5. The bank said the current interest rate is 3.75%. At its previous meeting in September, the bank held rates at 3.75% in a 6-to-3 vote, with three members preferring a 0.25-percentage-point increase to 4%.
The Bank of England said UK consumer price inflation rose to 3.1% in August and that the prolonged conflict in the Middle East had pushed up crude and refined energy prices. The bank said inflation was likely to continue rising over the following quarters, with monetary policy set to ensure it returned sustainably to the 2% target. In its September report, the bank said spot Brent and UK wholesale gas prices had risen 36% and 78%, respectively, since the period covered by the previous report in July. Brent stood at $106 a barrel at the close on September 14, according to the bank. These figures put energy prices and inflation at the center of investors' focus on the bank's decision and forthcoming report on November 5.