Dan Coatsworth, head of markets at AJ Bell, said: “The Middle East crisis has already pushed up prices on the forecourt for petrol and diesel, and next comes the weekly shop.
“It is inevitable that the cost of food and drink will go up, meaning consumers will have to think harder about what they buy and whether they need to put less in their basket or opt for cheaper alternatives.
“The big unknown is for how long this situation might last and that creates uncertainty for Tesco’s future earnings.
“This backdrop has overshadowed a decent set of results from Tesco as the focus is on what might happen next, not what it has just achieved.
“Tesco continues to gain market share which is remarkable considering the ferocity of competition in the grocery sector.
“It is managing to appeal to both value seekers and people happy to pay a little more for fancy items.
“Sainsbury’s has similar momentum but isn’t firing on all cylinders, as its general merchandise interests remain a drag on the business.
“Tesco’s clothing sales look good, and even the wholesale arm Booker seems to be finding its feet after a wobbly patch.
“Tesco is clearly doing something right and it will want to keep customers on its side if there is another cost-of-living crisis.
“It will want to keep sales volumes high and might accept a slightly lower profit margin if it means beating competitors on price during a more challenging environment.
“Investors seem confident that Tesco will manage a tougher backdrop, hence the positive share price reaction to the results.”
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