Markets are set for volatility in the UK and globally as investors watch closely for signs of escalation in the Middle East and clues on Labour’s plans.
The suspected attack attempt on the US military base in Fairford and continued entrenchment of positions on the US and Iranian side suggest peace remains a way off.
Oil has responded accordingly, with Brent crude jumping back to $107 per barrel, having fallen under $100 last week. WTI crude is back up to about $95.
There are also reports emerging that fuel rationing may be implemented soon in the UK, France and some other European countries.
The FTSE 100 is higher as trading gets underway for the week, up 0.17% to 10,712 points. Futures prices indicate slight falls in the main US indices when the market opens across the Atlantic later on.
The Middle East situation and its impact on inflation offer an unhelpful background to the Labour party conference which begins today (28 September).
Speculation over the fast-approaching Budget is set to ramp up as Andy Burnham and his colleagues set out their plans, with gilt yields hovering near global financial crisis levels.
Susannah Streeter, chief investment strategist at Wealth Club, said: “Inflationary worries are back front and centre at the start of the week as energy costs surge higher again after President Trump dashed hopes for immediate progress in talks aimed at breaking the deadlock in the Iran crisis.
“Brent Crude has surged above $107 a barrel, and government borrowing costs have been on the rise again. Investors are bracing for interest rate hikes, with central bankers expected to move to stop the price spiral from becoming embedded.
“The worry is that the longer oil and gas prices stay elevated, the greater the chance that they will be passed on to consumers via higher costs of goods and services.
“Nevertheless, the FTSE 100 looks set to be lightly on the front foot in early trade, with the increase in crude prices set to support energy giants listed on the blue chip index.”
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AJ Bell investment director Russ Mould, added: “The FTSE 100 started off on the front foot on Monday, supported by its limited tech exposure and heavyweight oil and gas names.
“This put it on the right side of two major developments over the weekend. First, the pausing of training of OpenAI’s latest models on safety concerns led to selling in Asia, particularly for those pockets of the market exposed to artificial intelligence.
“Second, there was renewed strength in oil prices after comments from President Trump that he had rejected Iran’s latest proposal to reopen the Strait of Hormuz. Although there are some hopes that negotiations will continue through the course of this week.”
