Market report: Sentiment tense amid escalation of conflict
Susannah Streeter, head of money and markets, Hargreaves Lansdown: “There is a tense mood on financial markets as investors assess the potential repercussions of the US attack on Iran. Investors had breathed a sigh of relief on Friday as it appeared a two-week window had opened when a diplomatic solution could be pursued, so the weekend’s military action has knocked sentiment. The FTSE 100 has opened in the red and European stocks are set for a weak start as a risk-off attitude percolates, and in the US, the S&P 500 future indicate a subdued session ahead. The pound has slipped back against the dollar, helping limit downwards pressure on London-listed multinational stocks a little.
At a time when there were signs that inflation was becoming a little less troublesome, the geopolitical situation has added a slick of fresh uncertainty into the mix, pushing up energy prices. Brent Crude had risen around 2% earlier but retraced some gains trading above $77 dollars a barrel. While crude supplies are still flowing through the Strait of Hormuz off Iran, there’s concern that they could be severely disrupted if the conflict is prolonged. The US has warned that closing the narrow channel, through which around a quarter of global supplies flow, would be ‘’economic suicide’’ for the country. Iranian lawmakers have endorsed plans to close off the route, but the vote wasn’t binding as the decision will rest with the country’s leaders. Crude prices are up around 25% since the end of May. Part of this is the recovery from the worst of the tariff threat fears hanging over the global economy, but the sharp escalation of the Middle East conflict has piled on pressure. If the Strait is closed there are fears it will lead to an oil price shock, and another big inflation problem. Memories of the surge in prices after Russia’s attack on Ukraine are still front of mind, Brent crude oil prices surged to a peak of almost £120 a barrel. For now crude gains are limited, with traders speculating that Iran won’t fully close the strait, but the increases still mark a significant shift up in energy prices. UK gas prices are also hanging around highs not seen since the start of April, amid concerns about the disruption of LNG supplies from the Middle East. With wholesale energy prices rising, it’ll add to worries about the household price cap heading higher just as demand increases over the colder winter months.
Tesla has showcased its ‘self-drive’ prowess with the launch of the robo-taxi service. There are high hopes riding on this technology given Tesla’s challenges elsewhere. But it comes as other players are entering the market, and there are still regulatory issues to overcome. With more here’s Matt Britzman, senior equity analyst, Hargreaves Lansdown:
“Tesla just entered a bold new chapter, launching its first paid Robotaxi rides in Texas over the weekend. While the debut was modest – limited to invited guests, a relatively small region, and with safety crew on board – it marks a critical real-world test of Tesla’s vision-only approach to autonomous driving. It’s not the fully unchained future Elon Musk has promised just yet, but make no mistake, this is a pivotal first step to realising that dream. When you’re one of the most heavily scrutinised companies on the planet, slow and steady wins the race, and by most counts, yesterday was a very successful soft launch.
Tesla isn’t the first to pass the post, with Waymo servicing over 250,000 paid trips a week across a selection of US cities. But the Tesla approach, if successful, has the potential to be significantly more profitable and, importantly, scalable. The next few months are pivotal for Tesla – while the core auto business is under pressure from brutal competition, the narrative is shifting gears. AI, autonomy, and delivering on years of bold promises have taken centre stage. Now, the spotlight is on execution.”