Susannah Streeter, chief investment strategist at Wealth Club, said: “The reignition of hostilities in the Middle East has fired up oil prices again, keeping investors on edge about the duration of the conflict.
“London’s FTSE 100 is in a downbeat mood, as wariness rises about how difficult the complex situation will be to resolve.
“Banks have led the charge lower in early trade, with HSBC the biggest faller after its first quarter profits missed expectations as provisions for bad debts mount.
“It is facing a toxic combination of exposure to a fraud case in the UK and fears of the repercussions of the energy crunch, denting customers’ ability to pay back loans.
“Its set aside $300 million because of the heightened uncertainty and worsening economic outlook due to the war with Iran.
“HSBC’s results have triggered falls for other lenders too and with the Middle East situation dominating there are fresh worries about the financial fallout as companies and consumers face sharply higher energy costs.
“The ceasefire looks increasingly fragile after an Iranian drone strike on the UAE’s Fujairah oil facility and reports that two US ships entering the Strait of Hormuz were also attacked.
“Brent crude shot up to trade around $114 a barrel before easing slightly, as hopes for a significant resumption of oil shipments from the region are being dashed again.
“The fresh fracture in the region comes following President Trump’s ‘freedom’ plan aimed at restoring shipping through the Strait of Hormuz.
“Shipowners and their insurers are set to stay super-cautious about vessels using the key waterway, given the risks of mines, small boat strikes, and potential drone attacks.
“However, the longer prices at the pumps stay elevated, hitting the wallets of millions of Americans amid looming mid-term elections, the more pressure will build on President Trump to find a resolution.
“But it’s clear Iran is preparing to play hardball in negotiations, given its clear leverage over the Strait of Hormuz.”
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