Oil tops $105 as dollar strengthens on Iran fears

Oil prices climbed above $105 per barrel on Tuesday as hopes for a US-Iran ceasefire faded, lifting the US dollar and weighing on sterling and the euro. The S&P 500 and Nasdaq closed at fresh record highs on Monday, supported by continued strength in semiconductor stocks, with Qualcomm hitting a record high and Intel extending gains. The FTSE 100 also edged higher as Airtel Africa surged to a record level and mining shares rallied alongside stronger commodity prices. Gold slipped back from a three-week high as markets reassessed interest rate expectations.

Equities

The FTSE 100 closed 0.36% higher on Monday as mining stocks and Airtel Africa lifted the index despite rising tensions in the Middle East. The FTSE 250 slipped 0.18%, while investors weighed higher oil prices, concerns about inflation and political pressure on Prime Minister Keir Starmer following Labour’s poor local election results.

Airtel Africa closed 14.5% higher at a record level after news that the board of parent company Bharti Airtel will consider options for its African operations later this week, including a potential consolidation or stake acquisition. Mining shares also pushed the London market higher late on Monday, with Anglo American rising 3.9% and Rio Tinto gaining 3.3% as commodity prices strengthened alongside higher crude prices.

Compass Group ended Monday up 2.4% after the catering group raised its 2026 profit outlook. Management pointed to continued demand for workplace dining and fresh contract wins as drivers of stronger earnings expectations. Oil prices also remained in focus after Brent crude climbed 2.8% following the collapse of hopes for progress in US-Iran peace discussions.

In the US, the S&P 500 closed 0.19% higher on Monday at another record high, while the Dow Jones Industrial Average gained 0.19% and the Nasdaq Composite added 0.10%. Semiconductor stocks continued to outperform as investors remained focused on artificial intelligence infrastructure spending ahead of more technology earnings later this month.

Qualcomm jumped 8.4% to a record high by the close on Monday, while Intel rose 3.6% after surging on Friday following reports of a preliminary chip manufacturing agreement with Apple. The Philadelphia Semiconductor index climbed 2.6% as chipmakers extended recent gains.

Fox Corp closed 7.6% higher after beating third-quarter revenue forecasts. Investors also looked ahead to results from Cisco and Applied Materials later this week, with Nvidia and Walmart scheduled to report later in May.

Airline stocks weakened sharply as higher fuel prices raised concerns over costs. Delta Air Lines, Southwest Airlines, Alaska Air and United Airlines closed between 2.9% and 4.4% lower on Monday.

Forex & Commodities

The US dollar strengthened early on Tuesday as investors reacted to fading hopes of a ceasefire agreement between the US and Iran. The dollar index rose to 98.17, while the euro fell to $1.1754 and sterling weakened to $1.3575 as markets focused on higher energy prices and the prospect of US interest rates remaining elevated for longer.

The Japanese yen traded at 157.1 against the dollar after US Treasury Secretary Scott Bessent and Japan’s finance minister Satsuki Katayama reiterated support for coordinated action against excessive currency volatility. Traders also continued to assess the impact of Japan’s recent yen-buying intervention as rising import costs put pressure on the domestic economy.

Commodity-linked currencies also weakened early on Tuesday. The Australian dollar slipped to $0.7230 ahead of the federal budget announcement, while the New Zealand dollar eased to $0.5953. Emerging market currencies remained under pressure, with both the Indian rupee and Indonesian rupiah falling to record lows against the US dollar.

Gold prices slipped on Tuesday morning as investors balanced safe-haven demand against expectations of tighter monetary policy. Spot gold fell to $4706 per ounce after earlier reaching a three-week high. Bank of America and Goldman Sachs both reduced expectations for US rate cuts this year, citing persistent inflation and resilient labour market conditions.

Oil prices continued to climb as concerns over disruption to supplies through the Strait of Hormuz remained unresolved. Brent crude rose to $105.1 per barrel, while US West Texas Intermediate climbed to $99.06. Saudi Aramco chief executive Amin Nasser warned late on Monday that disruption to exports through the strait could delay a return to stable energy markets until 2027.