S&P 500 Dips as Hormuz Tensions Lift Oil Prices

The S&P 500 edged lower in thin trading after record highs as investors weighed renewed US-Iran tensions and disruption risks in the Strait of Hormuz, which pushed oil prices higher. European futures pointed to declines, while Asian markets were firmer amid signs shipping activity may be stabilising. Diplomatic strains deepened, with Canada criticising US ties. Political pressure also mounted in the UK ahead of Keir Starmer’s parliamentary address.

Equities

The FTSE 100 closed 0.7% higher on Friday, marking a fourth consecutive weekly gain as oil prices fell sharply after Iran confirmed the Strait of Hormuz was open during the ceasefire period. The FTSE 250 rose 1.9%, extending its winning streak, with travel and leisure stocks leading gains as lower fuel costs improved sentiment.

BP shares closed 7.4% lower on Friday, while Shell fell 5.6%, tracking the sharp drop in crude prices below $90 a barrel. In contrast, airline and travel-related stocks rallied strongly, with Wizz Air and Carnival both gaining more than 7%, and easyJet rising 6% by the close. British Airways owner IAG added 6.2%, while Rolls-Royce climbed 4.8% and BAE Systems rose 1.8%. Fresnillo gained 6.4% as precious metal miners followed stronger bullion prices. Banking stocks also moved higher, with Barclays up 3.5%, Standard Chartered gaining 2.9% and HSBC rising 2%. Utilities came under pressure after comments from Finance Minister Rachel Reeves on energy pricing reform, with Centrica dropping 5% and SSE falling 6.6%, while National Grid slipped 1%. Workspace Group declined 6.2% after signalling a significant drop in annual profit.

In the United States, the S&P 500 and Nasdaq both closed at record highs on Friday, each marking a third consecutive record close as easing geopolitical tensions supported risk appetite. The Dow Jones Industrial Average rose 1.79%, while the Nasdaq extended its longest winning streak since 1992. Oil prices fell sharply, which weighed on energy stocks and supported gains in other sectors.

Exxon Mobil closed 3.6% lower and Chevron fell 2.2% as the energy sector led declines. Airline and cruise stocks surged, with United Airlines rising 7%, while Royal Caribbean gained 7.3% and Carnival climbed 7%. Netflix dropped 9.7% after forecasting weaker earnings and confirming the departure of co-founder Reed Hastings. Alcoa fell 6.8% after reporting results below expectations, citing higher costs and softer demand.

Forex & Commodities

The US dollar moved higher early on Monday, reaching a one-week high as tensions between the United States and Iran escalated following the seizure of an Iranian cargo ship. The euro slipped to $1.1760 after earlier touching $1.1730, while sterling edged down to $1.3500. The dollar index strengthened to 98.30, holding close to recent highs before easing slightly later in the session.

The Japanese yen weakened to 158.9 per dollar, remaining below the 160 level that traders continue to monitor for potential intervention. The Australian dollar declined to $0.7148, while the New Zealand dollar eased to $0.5872. Currency moves remained measured as uncertainty around a potential US-Iran agreement persisted.

Gold prices moved lower early on Monday, with spot gold falling to $4,794 after touching its weakest level in a week. The decline came as the stronger dollar made bullion more expensive for international buyers, while rising bond yields also weighed on demand. Gold has fallen from recent highs as higher energy prices have raised concerns about inflation and interest rates remaining elevated.

Oil prices rose sharply early on Monday, with Brent crude trading at $95.20 and US West Texas Intermediate at $88.80 as fears grew that the ceasefire could collapse. The gains followed renewed disruption risks in the Strait of Hormuz after Iran signalled it would not return to negotiations and reimposed restrictions on shipping.