London stocks closed sharply lower on Wednesday as Brent crude surged above 100 dollars a barrel for the first time since July, stoking fresh inflation fears across global markets.
The FTSE 100 (^FTSE) fell 141.60 points, or 1.3%, closing at 10,670.06, while the FTSE 250 dropped 240.19 points, or 1.0%, to finish at 24,108.66.
Brent oil was quoted at 101.07 dollars a barrel at the London equities close on Wednesday, up sharply from 98.00 dollars late Tuesday afternoon.
The surge in oil prices came after the US military reported striking five Iranian oil tankers, triggering a sharp rally in global crude and natural gas prices.
Iran-aligned Houthi militants launched a wave of missile and drone attacks on several Saudi Aramco energy facilities, compounding fears about global energy supply disruption.
The US-Iran conflict is now in its seventh month and shows little sign of easing, despite White House claims that a deal is imminent, leaving investors increasingly unsettled.
Iran continues to maintain a stranglehold on the Strait of Hormuz, a crucial shipping route for the world’s oil and gas, while the US pursues a campaign aimed at choking the Islamic Republic’s ports and economy.
Investors are growing increasingly worried that soaring energy costs could force the Federal Reserve to raise interest rates in order to contain renewed inflationary pressures.
The European Central Bank is widely expected to hike interest rates on Thursday, with attention then turning to Friday’s US consumer price index report, seen as crucial to next week’s Federal Reserve decision.
Back in London, oil majors were among the few beneficiaries of the crude rally, with BP (BP.L) topping the FTSE 100 risers, climbing 1.3%, while Shell (SHEL.L) edged up 0.1%.
Autotrader Group (AUTO.L) was among the worst performers on the blue-chip index, falling 4.7%, and Burberry (BRBY.L) dropped 4.0% after HSBC cut the luxury retailer to ‘hold’ with a 1,200p price target.
On the FTSE 250, NCC Group (NCC.L) fell 6.7%, while Funding Circle Holdings (FCH.L) closed down 6.1%, extending Tuesday’s losses following news that chief executive Lisa Jacobs will leave the company in 2027.
Goodwin (GDWN.L) shares also extended Tuesday’s losses, down 3.5%, after the mechanical and refractory engineering company confirmed the sale of a substantial part of its Mechanical Engineering division to an affiliate of New York-based Cerberus Capital for up to £1.10 billion.
Mortgage Advice Bureau (MAB1.L) shares lost 20% after the mortgage advice provider lowered its full-year guidance, citing a weaker housing market and fewer potential customers entering its Fluent division.
Among smaller caps, Sutton Harbour (SUH.L) jumped 38%, while Caledonian Holdings (CALD.L) surged 20% after its wholly owned subsidiary Aspire Commerce sealed the commercial launch of its enhanced multi-currency business current account offering, described as a “key commercial milestone”.
In currency markets, the pound was quoted at 1.3554 dollars at the London equities close, up marginally from 1.3548 dollars on Tuesday, while the euro stood at 1.1639 dollars.
US private employers added an average of 12,000 jobs per week in the four weeks to August 22, according to preliminary figures from payroll processor ADP, accelerating from an average of 10,000 jobs per week in the prior four-week period.
However, the pace of hiring remained well below levels recorded earlier in the summer, when the four-week average stood at 30,750 jobs per week in the period to June 6.
European markets also fell sharply, with the CAC 40 in Paris closing down 1.9% and the DAX 40 in Frankfurt ending down 1.7%, as energy concerns weighed on the continent.
The European Union on Wednesday proposed new rules to encourage member states to favour domestic companies over Chinese bidders for government contracts, as part of efforts to bolster European industry against competition from both China and the US, with public procurement worth 2.60 trillion euros annually across the bloc.