Oil Tops $100 as Tesla Slides and Nasdaq Extends Losses

Summary

Oil surged above $100 a barrel after attacks on Saudi oil tankers in the Red Sea intensified supply concerns, weighing on global markets. The Nasdaq extended its losses as investors reacted to heavy AI spending, with Tesla tumbling after reporting its first cash burn in two years and Alphabet also falling sharply. The S&P 500 and Dow Jones declined while Treasury yields climbed on renewed inflation fears, supporting the US dollar. Sterling remained under pressure ahead of UK economic data.

Equities

The FTSE 100 closed 0.7% lower on Thursday at 10,639.2, giving back most of Wednesday's 1% gain as higher oil prices and rising bond yields weighed on sentiment. The FTSE 250 also finished 1.3% lower, marking its largest one-day decline so far this month. Energy shares stood out as one of the few stronger areas after Brent crude climbed above $100 a barrel for the first time since May.

BP and Shell both benefited from the jump in crude prices, helping the FTSE energy sector close 2.1% higher on Thursday. EasyJet rose 2.7% after reporting third-quarter earnings that beat analysts' expectations despite a 70% drop in profit, with the airline saying conditions were becoming clearer ahead of the peak summer season. Mitchells & Butlers fell 5.1% after reporting flat third-quarter like-for-like sales, with management pointing to the impact of the recent heatwave on food sales. Wizz Air also came under pressure as higher fuel costs weighed on airline shares, while banks, utilities and beverage companies all finished lower.

US markets also closed lower on Thursday as investors reacted to quarterly earnings from major technology companies and rising oil prices. The Dow Jones Industrial Average fell 0.97%, the S&P 500 declined 1.21% and the Nasdaq Composite dropped 2.15%, with technology shares accounting for much of the weakness.

Tesla shares tumbled 14.5% after reporting negative free cash flow for the second quarter, the first time this has happened in more than two years. Alphabet fell 7% after increasing its full-year capital spending plans and reporting higher cash outflows, raising fresh questions over the cost of artificial intelligence investment. Texas Instruments slipped 3% despite issuing quarterly revenue guidance above analysts' expectations.

Defence companies moved sharply higher after updating their outlooks. Lockheed Martin surged 10.5% after raising its 2026 sales and profit forecasts, while RTX gained 7.3% after also increasing its full-year guidance on stronger demand for commercial aircraft maintenance and military systems. Thermo Fisher Scientific climbed 8.7% after beating second-quarter earnings expectations and lifting its annual profit forecast.

Forex & Commodities

The US dollar held firm early on Friday, supported by higher US Treasury yields as rising oil prices and renewed trade tensions reinforced concerns that inflationary pressures could remain elevated. The dollar index traded around 101.4, while sterling remained near a three-week low at $1.331 and the euro eased to $1.138. Against the Japanese yen, the dollar stayed close to a 40-year high at 163.8 after the US Treasury called for further Bank of Japan interest rate increases. Investors are now looking ahead to next week's Federal Reserve meeting, with markets expecting policymakers to keep rates unchanged while retaining a cautious stance as higher energy prices add to inflation risks.

Spot gold weakened early on Friday, falling to $4,028 per ounce after dropping sharply in the previous session. The decline followed Brent crude's move back above $100 a barrel, which strengthened expectations that interest rates could remain higher for longer. Despite the latest pullback, gold remained on course for a modest weekly gain as investors continued to balance geopolitical uncertainty against the prospect of tighter monetary policy. Silver traded at $57.48 per ounce, while platinum fell to $1,586 and palladium slipped to $1,239.

Oil prices closed sharply higher on Thursday, with Brent settling at $100.7 a barrel for the first time since May and US West Texas Intermediate ending at $92.19. Prices surged after Yemen's Houthis said they had attacked two Saudi oil tankers in the Red Sea, adding to supply concerns following severe disruption to shipping through the Strait of Hormuz. Analysts warned that simultaneous disruption to both the Strait of Hormuz and the Bab el-Mandeb shipping route could tighten global supplies further, while Goldman Sachs said Brent could exceed $120 later this year if the disruption persists into the fourth quarter.