Oil tops $100 as euro awaits ECB hike

Summary

Brent crude climbed above $100 a barrel for the first time since July as the Middle East conflict escalated and attacks on shipping intensified. The euro held steady at $1.1637 ahead of the ECB decision, while European stock futures pointed to a muted open. The yen strengthened to 153.39 per dollar and is up 4% this month as traders prepared for a faster pace of Bank of Japan rate increases.

Equities

The FTSE 100 fell 1.31% to close at 10,670.06 on Wednesday, its lowest level since late July, as oil prices climbed above $100 a barrel. The FTSE 250 dropped 0.99% to its lowest level since early August.

UK banks were among the biggest fallers at Wednesday’s close. HSBC fell 1.6%, Barclays dropped 2% and Lloyds Banking Group lost 2.2%.

AstraZeneca declined 1.9%, Rolls-Royce fell 2.4% and Unilever slipped 1.6%. BP rose 1.3% and Shell edged 0.1% higher on Wednesday as oil producers benefited from stronger crude prices.

Burberry fell 4% after HSBC downgraded the luxury group to “hold” from “buy”. Victrex jumped 16.2% on Wednesday after the polymer maker raised its annual underlying pre-tax profit forecast.

Energean climbed 9.3% after the gas producer reported a 45% increase in first-half profit.

In the US, the S&P 500 fell 0.48% to close at 7,636.46 on Wednesday. The Nasdaq dropped 0.64% to 26,253.34 and the Dow Jones Industrial Average declined 0.77% to 52,381.02, while the S&P 500 energy sector gained 1.1%.

Meta jumped more than 6% on Wednesday after launching an AI assistant that can autonomously perform tasks including sending emails, selling a car and making travel bookings. Alphabet fell 2.3% after Google’s parent company said it would invest at least $15.1 billion in AI infrastructure in Finland over the next two years.

Apple slipped 0.3% at Wednesday’s close after holding its first smartphone launch under new chief executive John Ternus. Advanced Micro Devices rose 3%, helping the Philadelphia Semiconductor Index gain 0.37%.

Dow Inc fell 0.6% following a report that the chemicals company was considering leaving its $20 billion partnership with Saudi Aramco.

Forex & Commodities

The US dollar was subdued early on Thursday, with the dollar index slipping to 98.73 after giving up earlier gains. Sterling edged higher to $1.356, while the euro rose to $1.164. The yen strengthened to 153.4 per dollar, remaining close to a seven-month high, while the New Zealand dollar rose to $0.5851 and the Australian dollar was unchanged at $0.7215.

Currency markets are awaiting fresh US inflation figures. Producer prices are due later on Thursday, followed by consumer inflation on Friday, ahead of the Federal Reserve’s September 15–16 meeting. Markets are pricing around a 60% chance of a US rate increase this month following stronger-than-expected nonfarm payrolls, although a Reuters poll found most economists expect rates to remain unchanged for the rest of 2026.

The European Central Bank is expected to raise interest rates on Thursday for the second time this year and signal that further tightening remains possible if the inflation outlook fails to improve. The Bank of Japan is expected to raise rates to 1.25% on September 18, with another increase to 1.75% anticipated in the second quarter of 2027.

Spot gold rose 0.3% early on Thursday to $4,414 per ounce, supported by the softer US dollar as investors waited for the latest US inflation figures.

Oil remained firmly above $100 a barrel early on Thursday after Brent breached that level on Wednesday for the first time in six weeks. Brent has risen by around a quarter since early August as Middle East supply disruptions intensified, although it remains below the 2026 high of $126 reached in April. About 10 million barrels per day of oil exports remain unavailable because of the Iran war, while reduced inventories and depleted emergency reserves have left the market more exposed to further supply disruptions.