The FTSE 100 Index has pulled back for three consecutive days, dropping by over 2% from its weekly high, as escalating geopolitical tensions and rising inflation weigh on investor sentiment. The blue-chip index fell 0.8% to 10,388.84 points on Thursday, while the mid-cap FTSE 250 declined 1.1%.
British inflation rose to 3.3% in March, driven by higher oil, gas, and transport costs, making it the highest among G7 nations. This has reduced expectations for a Bank of England rate cut, with traders now pricing in a 70% probability of a rate hike in June, up from 40% last week. The elevated inflation numbers also caused Gilt yields to jump.
Geopolitical tensions remain a key driver, as the US-Iran conflict escalates. Iran tightened control over the Strait of Hormuz and stated it would not reopen the waterway until the US lifts its naval blockade. This pushed Brent crude futures above $100 a barrel, impacting sectors sensitive to fuel costs.
Travel and leisure stocks were among the worst performers. Wizz Air fell 3%, Carnival declined 2.4%, and Rolls-Royce share price crashed by over 3.3%. IAG dropped by 3.4%. Retailer WH Smith plunged 10.6% after cutting its annual profit forecast and suspending its dividend. Banking stocks also came under pressure: Barclays fell 2.1%, while HSBC slipped 0.9%. Mining companies tracked declines in metal prices, with Fresnillo dropping 6.9% and Rio Tinto falling 2.1%.
On the positive side, oil and gas companies like BP and Shell hovered near their all-time highs. London Stock Exchange Group gained 1.9% after forecasting annual revenue growth at the upper end of its range. The index found support near the 50-day Exponential Moving Average (EMA), forming a potential inverted head-and-shoulders pattern, suggesting a possible resumption of the uptrend following the pullback.
The FTSE 100 has fallen 2.7% so far this week, erasing most gains driven by earlier optimism over a US-Iran ceasefire. Investors now look ahead to upcoming corporate earnings from BP, Barclays, Lloyds Bank, and others.
