- FTSE 100 up 56 at 10,317
- US stock futures point firmly higher
- Brent $102 a barrel
- National Grid downgraded
5.15pm: Stocks recover
London stocks recovered on Monday amid fresh weakness in oil prices, with the FTSE up 56 points at 10,317.
“Earlier today it looked like we were poised for a fresh outbreak of risk aversion as Brent pushed through the magic $100 level,” IG chief market analyst Chris Beauchamp said.
“Stock markets stand or fall by the oil price at present, and in the topsy-turvy world created by the war against Iran, the absence of bad news, and hopes that the war will last weeks rather than months, is enough to prompt a recovery in equities.”
4.10pm: Blue-chips set to end in the green
As we head into the final 30 minutes of trading, some of the froth has come off the blue-chip index. From 90-odd points up, the Footsie is settled at 10,320.12, up 59 points.
Markets remain highly sensitive to developments in the Middle East, with traders still watching for any escalation that could threaten shipping through the Strait of Hormuz, one of the world’s most important oil chokepoints.
All three of the main US benchmarks were higher on Monday morning, suggesting investors are willing to step back into risk assets after last week’s more defensive mood.
3.01pm: Blue-chips accelerate
The Footsie bounced back strongly on Monday, rising almost 100 points to 10,359.83 after spending part of the session in the doldrums, as a slight pullback in oil prices gave equity markets some breathing room.
That recovery in London came as Wall Street also pushed higher at the open. The Dow Jones Industrial Average, the S&P 500 and the Nasdaq Composite were all in positive territory, supported by softer moves in crude after last week’s jump.
Markets remain highly sensitive to developments in the Middle East, with traders still watching for any escalation that could threaten shipping through the Strait of Hormuz, one of the world’s most important oil chokepoints.
Oil eases, but geopolitical risk remains front and centre
The immediate pressure on stocks has eased slightly as Brent crude and West Texas Intermediate pulled back from recent highs. That has helped calm some of the inflation worries that re-emerged when oil surged on fears of a broader regional conflict.
Even so, the tone across markets remains cautious rather than relaxed. Investors know any disruption around the Strait of Hormuz could quickly send energy prices sharply higher again, reviving concerns about consumer prices, growth and central bank policy all at once.
That tension explains why equity gains, while welcome, are being treated carefully.
Wall Street looks past the latest oil spike
US markets appear to be taking the view that, for now, cooler oil is enough to support a relief rally.
All three of the main US benchmarks were higher on Monday morning, suggesting investors are willing to step back into risk assets after last week’s more defensive mood. Lower energy prices tend to be especially supportive for rate-sensitive and growth-heavy parts of the market, which helps explain the firmer tone in the S&P 500 and Nasdaq.
Still, traders are not just watching headlines from the Middle East. The next major test is now much closer to home.
1.09pm: Footsie accelerates
London's blue-chip index pushed higher in afternoon trading, taking its cue from improving sentiment on Wall Street, where futures are pointing to a firmer open. S&P 500 contracts are up 0.9%, Nasdaq futures gain 1.1%, and Dow futures add 0.2%. Not a rally. A steadying of nerves.
The Iran war is three weeks old and shows no sign of ending. The Strait of Hormuz, through which roughly a fifth of the world's traded oil passes, remains effectively shut. Brent crude is holding above $103 a barrel. WTI is just below $98. Both benchmarks cracked $100 for the first time since the Russia-Ukraine energy shock of 2022.
Some tankers got through the strait over the weekend. Markets noticed. Whether that optimism lasts is another question. President Trump is leaning hard on NATO allies to join a naval coalition to force the waterway open, warning of a "very bad future" for the alliance if they refuse.
Into this steps the Federal Reserve. Officials begin their two-day meeting today, with a rate decision due Wednesday. Nobody expects a move. Everyone expects Jerome Powell to be asked, repeatedly, what surging energy costs mean for inflation and whether the rate path has changed.
He will choose his words carefully.
Then there is Jensen Huang. Nvidia's GTC conference opens today. The AI trade needs a signal. Huang usually delivers one.
11.06am: Back in the green
London shares scrambled back into the green after a brief dip, adding nearly 40 points in the final hour of the morning session, buoyed by a positive read from Wall Street ahead of the bell.
On a quiet day for corporate news, the Square Mile's analysts turned their attention to the spreadsheets. The big call came from UBS, which cut its rating on National Grid, the FTSE 100 electricity and gas network operator, from 'neutral' to 'sell', warning that the stock's valuation has reached levels historically associated with sharp price falls.
The Swiss bank raised its 12-month price target to 1,160p from 1,100p but said the shares, currently trading at 1,368p, are priced for a level of asset growth and returns that it believes are unlikely to be delivered.
National Grid now trades at a 57% premium to its regulated asset base (RAB), the value of the physical infrastructure on which the company earns returns, a level the bank said sits at the top of its 30-year historical range.
On four previous occasions when the shares reached similar RAB premia, between 42% and 61%, the stock subsequently fell by an average of 37% over periods of five to 19 months, with an average recovery period of around three years.
UBS analysts said the current valuation implies a cost of equity of 7-8%, well below their own estimate of 8.1%, and RAB growth of 8% per year through to 2041, requiring capital expenditure of around £15 billion annually against their own forecast of £12 billion.
9.30am: Early enthusiasm fades
After a bright early start, UK blue-chips hit the buffers to trade at parity in the first hour and a half of trading.
Brent crude is changing at around $10t per barrel (up 1.7%), with no firm international response yet to Donald Trump's call for a naval coalition to secure the Strait of Hormuz.
Despite the geopolitical backdrop, positive industrial output and retail sales data from China failed to lift Asian markets, where economies remain acutely exposed to rising import costs.
Central bank decisions will dominate the agenda later in the week, with the US Federal Reserve, Bank of England, European Central Bank and Bank of Japan all expected to hold rates steady.
US stock futures are pointing to a positive open, with tech investors looking to NVIDIA's annual GPU Technology Conference (GTC) for signals on the next phase of artificial intelligence development.
8.15am: UK blue-chips make a bright start
London shares opened almost 50 points above their Friday close as traders shrugged off higher oil prices and a mixed open to the week in Asia.
Unsurprisingly, Shell and BP were early risers as Brent moved 2.7% higher to almost $106 a barrel amid an escalation of hostilities in Iran.
The closure of the Strait of Hormuz, a narrow waterway through which roughly a fifth of the world's oil normally passes, has forced producers to cut output after tanker traffic effectively halted. More than 12 million barrels of oil equivalent per day have been taken offline since the closure, according to energy research firm Rystad Energy.
International Energy Agency members have released a record 400 million barrels from emergency reserves, but the move has done little to calm markets.
In the UK, the government looks set to unveil emergency measures to support consumers faced with spiralling energy bills.
Ed Miliband, the energy secretary, left the door open on Sunday to government intervention on fuel duty and household energy bills if the impact of the Gulf crisis worsens, speaking on BBC One's Sunday with Laura Kuenssberg programme.
"We're going to stand by people in this crisis," he said.
Ahead of the open: Positive start predicted
The FTSE 100 is set to open around 40 points higher on Monday, defying a broadly negative session across Asia-Pacific markets rattled by soaring oil prices and the escalating US-Iran conflict.
Spread betting firms pointed to the London index outperforming its regional peers as investors weighed the economic consequences of military strikes on Iranian oil infrastructure.
Brent crude, the international benchmark, rose 1.7% to $105 per barrel.
President Donald Trump ordered strikes on Iranian military assets on Kharg Island, Tehran's primary oil export terminal, which handles the vast majority of the country's crude shipments.
Mike Waltz, the US ambassador to the United Nations, repeated warnings of further strikes on crude facilities at the site on Sunday, adding to investor unease.
In Asia overnight, the Hang Seng flipped decisively into positive territory after spending most of the session in the red after China reported stronger-than-expected economic data for the first two months of the year.
The Nikkei and Topix, meanwhile, were off session lows, but still in negative territory.