A volatile week saw the FTSE 100 end the final session with another three-figure fall as oil was sharply higher and UK bond yields rose amid renewed inflation fears.
Brent crude was trading at $92.83 a barrel on Friday evening, up from around $84 in the previous session.
Kuwait joined Qatar and said that it was halting energy production, as the crisis in the Middle East deepened.
Attacks on oilfields were reported in southern Iraq and in the northern autonomous Kurdistan region, which forced a US-run oil field to shut production.
Military action also stepped up with UK helicopters, which have anti-drone-capabilities, along with HMS Dragon, due to arrive Cyprus in the next few weeks. The UK is also sending four additional Typhoon fighter jets to Qatar.
US Energy Secretary Chris Wright said on Friday the US Navy was preparing to escort ships through the Strait of Hormuz “as soon as it’s reasonable to do it”.
Allan Monks, analyst at JPMorgan said a Bank of England interest rate cut in March is “off the table” and April “requires a clear calming of geopolitical tensions”. Barclays still expects a 25 basis points cut, although it accepts the decision is on a “knife-edge”.
Unexpectedly weak job figures in the US contributed to the sell-off in equities. The FTSE 100 index ended 129.19 points (1.2%) lower at 10,284.75. Over the week, the FTSE 100 was down 5.7%.
Total non-farm payroll employment in the US fell by 92,000 in February, while January’s increase was revised down to 126,000 from 130,000.
The US unemployment rate increased to 4.4% in February from 4.3% in January, where it had been expected to remain.
The yield on UK 10-year gilts leapt to 4.61% on Friday from 4.48% on Thursday, having traded at about 4.23% a week ago.
Fading interest rate hopes hit homebuilder and consumer goods stocks. Barratt Redrow was down 2.6% and Berkeley down 3%, while DIY retailer Kingfisher fell 5.2%.
Martin Brown, managing partner at Continuum Financial Services, said the worst thing investors can do is rush to sell. He said reactionary emotional decisions can take a heavy toll on a portfolio.
“There have been a series of events over the years – the pandemic, Black Monday, the dot com boom and bust,” he said.
“The key thing is to stay calm and to remember these episodes can be short-lived. History tells us that markets bounce back. There is no need to panic if the core of investments in your portfolio is fundamentally strong.”
source