FTSE 100 sinks additional into the pink as oil and fuel costs proceed to surge on escalating Middle East battle

The FTSE 100 sank further into the red this morning as the conflict across the Middle East escalates and oil and gas prices surge.

Oil and gas prices have rocketed amid fears about disrupted supply and a fresh bout of inflation, as central banks had finally appeared to have prices under control.

Iran has reportedly blocked the Strait of Hormuz – a crucial shipping route for crude tankers – pushing brent crude above $80 a barrel again. 

It prompted a continued global equity selloff across Asia and Europe this morning as Israel launched fresh attacks on Tehran and Beirut.

After closing 1.2 per cent lower at 10,780 on Monday, the FTSE 100 slipped another 2 per cent at the open and now sits at 10,575.

Almost all stocks were in the red, despite the index’s substantial weighting to energy, commodities and defence stocks. 

At the pump: Higher oil prices are likely to feed through to higher petrol prices 

Meanwhile, miners Fresnillo, Anglo American and Antofagasta were down between 3 and 4 per cent.

It came as gold slipped 0.5 per cent to $5,300 per ounce but remains up nearly 3 per cent over the course of the week. Silver also lost its gains, trading down 4.6 per cent to $85.

Brent crude is up 4 per cent to nearly $81 a barrel, while European gas prices are up by more than 20 per cent, after Qatar shut down liquified natural gas (LNG) production on Monday after Iran targeted it with drone strikes.

Gas prices remain below levels seen during the 2022 energy crisis, but are higher than their level in January, when they rose due to colder weather.

A prolonged spike in prices could trigger a fresh bout of energy inflation, which could dent hopes of an interest rate cut. Investors have already trimmed bets on a rate cut this month, from 80 per cent to 50 per cent.

It comes as borrowing costs climbed higher amid the conflict and ahead of the Spring Statement, with the ten-year gilt yield nearing 4.5 per cent.

‘The FTSE100 has taken a further opportunity to let some air out of the tyres after a stirring run this year, despite the resilience within the oil and defence sectors in particular and is having some difficulty at present in establishing a floor,’ said Richard Hunter, head of markets at Interactive Investor.

‘The themes were similar to the previous session, with a broad and sharp markdown offsetting any resistance offered by those sectors and leading to another notable dip at the open.’

In Asia, the Nikkei and Shenzhen indices both closed down over 3 per cent, while Germany’s Dax opened 2 per cent lower, while France’s CAC fell 1.6 per cent.