The FTSE 100 edged lower on Wednesday as investors balanced a larger-than-expected slowdown in UK inflation against renewed gains in oil prices driven by escalating tensions in the Middle East. Although the latest inflation data strengthened expectations that the Bank of England could begin cutting interest rates sooner, higher energy prices and geopolitical uncertainty limited risk appetite across European markets.
Inflation cools while geopolitical tensions intensify
The FTSE 100 slipped 0.08% in early trading. Elsewhere in Europe, Germany’s DAX added 0.04%, while France’s CAC 40 eased 0.06%. Sterling strengthened 0.09% against the US dollar to $1.3383.
Market sentiment remained cautious as the conflict between the United States and Iran intensified. US Central Command said it had carried out an eleventh consecutive night of strikes targeting Iranian military infrastructure, while Iran reported attacks across several provinces. The ongoing conflict has fuelled concerns over shipping through the Strait of Hormuz, a key global energy route, pushing crude oil prices sharply higher.
Speaking at an ASEAN meeting in Manila, US Secretary of State Marco Rubio warned that any attempt by Iran to control the Strait of Hormuz would “create a very dangerous precedent which will repeat itself in other parts of the world.”
UK inflation beats forecasts
Fresh data from the Office for National Statistics showed UK consumer price inflation eased to 2.6% in June, down from 2.8% in May and below economists’ expectations of 2.7%.
Lower motor fuel prices were the biggest contributor to the decline, with diesel prices falling by 10.7 pence per litre. Producer price inflation also moderated, with input prices rising 7.3% year on year compared with 9.3% in May, while output prices increased 3.5%.
The figures reinforced expectations that the Bank of England could begin easing monetary policy in the coming months if inflation continues to move towards its target.
Oil and gold extend gains
Energy markets remained volatile as geopolitical risks persisted. Brent crude rose 2.54% to $93.32 a barrel, while US West Texas Intermediate crude gained 2.50% to $86.44.
Safe-haven demand also supported precious metals, with gold futures climbing 1.10% to $4,121.45 an ounce and spot gold advancing 0.97% to $4,117.22.
UK corporate highlights
Among individual stocks, J D Wetherspoon (LSE:JDW) warned that full-year profit would fall below market expectations after weaker fourth-quarter trading and continued cost inflation.
Henry Boot (LSE:BOOT) also issued a profit warning, citing weaker land sales and slower demand from housebuilders amid political uncertainty and geopolitical tensions.
Mulberry (LSE:MUL) reported a strong start to the new financial year, with first-quarter revenue rising 23% as its turnaround strategy continued to gain momentum.
Fresnillo (LSE:FRES) maintained its full-year production guidance despite lower silver output in the second quarter, supported by stronger gold production compared with the previous quarter.
Greencore (LSE:GNC) upgraded its full-year earnings guidance after reporting strong third-quarter trading and continued progress integrating Bakkavor.
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