Brent Oil Slides as Nasdaq Eyes Tech Earnings

Summary

Brent oil fell sharply after the US and Iran agreed to pause hostilities, easing concerns over Middle East supply disruptions and lifting Nasdaq futures. The US dollar weakened as investors moved away from safe-haven assets, while Wall Street prepared for a busy week of major technology earnings. European markets were set for a steadier open after Friday’s mixed US session, with the FTSE expected to benefit from lower energy prices and improved risk sentiment.

Equities

The FTSE 100 closed 0.9% higher on Friday at 10,736.23, while the FTSE 250 gained 0.3%. Both indices recorded a second consecutive week of gains as investors balanced encouraging UK economic data against continuing tensions in the Middle East. UK retail sales unexpectedly increased in June, supported by warm weather and spending linked to the FIFA World Cup, while business activity also returned to growth in July.

HSBC closed 1.7% higher on Friday after agreeing to sell its Singapore life insurance business to Allianz for S$2.7 billion (£2.1 billion). The transaction forms part of the bank's strategy to simplify its operations and focus on its core Asian banking business. Investment group 3i rose 3.1% after UBS increased its price target for the shares from 2,900p to 3,200p, reflecting greater confidence in the company's outlook.

Energy stocks weakened despite continuing military action between the US and Iran. BP closed 1.6% lower and Shell lost 0.9% as oil prices fell around 3%, with traders taking profits after five consecutive sessions of gains. Electronics manufacturer discoverIE climbed 12.5% after saying annual earnings are now expected to exceed market expectations.

In the United States, the Dow Jones Industrial Average rose 0.46% on Friday, while the S&P 500 edged 0.05% higher. The Nasdaq fell 0.64% as investors reduced exposure to semiconductor shares ahead of earnings from Microsoft, Amazon, Meta and Apple next week. For the week, the Dow lost 0.4%, the S&P 500 fell 0.6% and the Nasdaq dropped 2%.

Intel closed 7.9% lower on Friday despite forecasting quarterly revenue and profit above Wall Street expectations and outlining plans to increase investment over the next two years. Investors remained cautious about the scale of AI-related spending following Alphabet's recent increase in capital expenditure, while the Philadelphia Semiconductor Index fell 4.5%.

Digital Realty Trust surged 11% after raising its full-year funds from operations forecast, making real estate the strongest-performing sector in the S&P 500. International Paper also gained 11.2% after strong investor demand for paper and packaging companies, while oilfield services group SLB advanced 11% after reporting second-quarter profits that exceeded analysts' forecasts.

Forex & Commodities

The US dollar weakened in early trading on Monday after the United States and Iran paused military action over the weekend, reducing demand for safe-haven assets as investors became more optimistic that the conflict may not escalate further. Against the Japanese yen, the dollar fell to ¥163.6, while the euro strengthened to $1.140 and sterling rose to $1.335. The US dollar index remained broadly steady at 101.2 as attention shifted away from geopolitical developments towards this week's Federal Reserve policy meeting, with investors reassessing the outlook for US interest rates following the sharp fall in oil prices.

Gold prices moved higher early on Monday, with spot gold rising to $4,088 per ounce as the weaker US dollar made the precious metal more affordable for buyers using other currencies. The decline in oil prices also eased some of the inflation concerns that had built up during recent weeks of conflict in the Middle East, helping to support demand for gold. While lower energy prices have reduced expectations of near-term inflationary pressure, investors remain focused on the Federal Reserve's upcoming policy announcement, which is expected to provide further guidance on the outlook for US interest rates. Elsewhere in the precious metals market, silver rose to $59.16 per ounce, platinum climbed to $1,612 and palladium advanced to $1,264.

Oil prices fell sharply early on Monday after the United States and Iran paused military strikes following two weeks of conflict, raising hopes that diplomatic negotiations could reduce tensions and allow energy exports to recover. Brent crude dropped to $90.58 per barrel after briefly slipping below the $90 level, while US West Texas Intermediate crude fell to $83.51. Despite the improvement in sentiment, shipping through the Strait of Hormuz remains significantly below normal levels as many operators continue to wait for greater security before resuming regular traffic. Disruption in the Red Sea also persists following Houthi attacks on Saudi oil infrastructure, while Ukraine's latest strikes on Russian energy facilities continue to pose potential risks to global oil supplies.