Market update: Footsie falls as pessimism over Iran war duration returns
Susannah Streeter, chief investment strategist, Wealth Club: “Trepidation about an incoming energy shock is back, rattling financial markets as the standoff continues in the Iran conflict. Officials in Tehran have rejected the 15-point ceasefire plan put forward by the US. They have pushed back with their own demands, which include sovereign control of the key Strait of Hormuz, the chokehold of crude oil supply. While negotiations may be continuing via intermediaries, for now the conflict appears intractable, and that’s sparking fresh frissons of worry. London’s FTSE 100 has begun to erase yesterday’s gains of optimism as pessimism spreads again. Brent crude has risen and is back, nudging $105 a barrel.
This conflict and its repercussions will be particularly onerous for energy-intensive industries. Take the cement industry, for example, where energy consumption usually accounts for more than 50% of manufacturing costs. While many companies have been pursuing lower-carbon technologies, for many it’s been relatively slow progress, with a lack of investment and buy-in from end customers. While there are hopes of a reassessment given the current crisis, it will still take time for attitudes to shift. Meanwhile, companies are facing a big ramp-up in prices for construction projects that were costed well before the conflict broke out.
It’s little surprise that in this current climate, confidence is taking a hit. Germany is more exposed than the UK, given that its industrial base is far larger and more energy-intensive, and the country relies more heavily on energy imports. German consumer sentiment has plunged to the lowest level in two years. Households are not only worried about energy bills going up but are also concerned about the economy being derailed. Across Europe, similar worries are playing out, as hopes for gradual progress in living standards are wiped out and consumers face another cost-of-living crisis.
Financial markets may still be wracked with volatility, but Elon Musk still has stratospheric ambitions for SpaceX. It’s rumoured that a filing for its IPO could be made as soon as this week, with a date for the listing being prepared for June. Mr Musk is known for his big ambitions, and he’s reaching for the stars with this launch. SpaceX is now believed to be targeting a $1.75 trillion valuation, a big lift from $1.25 trillion – the price tag that was attached following the merger of SpaceX with Musk’s artificial intelligence venture, xAI. Starlink, its satellite service, has seen explosive growth in subscribers, but it’s the combination of space exploration and AI capabilities that is also putting a rocket under interest. However, given that regulation in this huge new domain is still being worked out, and AI aspirations are so lofty, there are still considerable risks ahead for Mr Musk and his big space vision.”