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The UK’s blue-chip index fell on Wednesday morning, as oil prices reared up yet again, reaching six-week highs.
Speaking late on Tuesday, Andrew Bailey caused fresh speculation that the Bank of England could hike interest rates when he said that risks to inflation remain “on the upside”. The central bank boss told MPs that energy prices “could be higher still” in coming months, as the Strait of Hormuz remains largely blocked.
Oil prices marched on during early trading on Wednesday. Brent crude – the international benchmark for oil prices – rose by nearly two per cent to teeter below $100 per barrel. This latest hike came after Saudi Arabia’s state-run press agency said attacks by the Iran-backed Houthi militants on several energy facilities wounded several people.
Dan Coatsworth, AJ Bell’s head of markets, said that this latest jump in oil prices could spook global markets by raising fears that interest rates will stay higher for longer, as central banks seek to guard against inflationary pressures.
He said: “History suggests investors should be alert rather than alarmed when oil trades above $90 per barrel. The impact on markets depends not only on the oil price itself, but also on why it is rising and how long it remains elevated.”
Ahead of the latest economic growth figures later this week, food industry leaders have issued the latest warning that the impacts of the Iran war could be yet to fully take hold.
The Food and Drink Federation (FDF) has said that food inflation will soar to four per cent later this year and above six per cent by next summer, as the higher supply chain and energy costs caused by the closure of the Strait of Hormuz begin to feed through.
We’ll be bringing you the latest market updates and analysis.