FTSE 100 close: Markets muted as airlines are hit by Israel conflict
London’s FTSE markets were muted on Monday as investors grappled with the implications of the surprise attack launched on Israel by Hamas.
Airlines were immediate losers with British Airways owner International Consolidated Airlines Group down 5.8 per cent on fears that rising oil prices would increase fuel costs. EasyJet and Wizz Air were also both down over five per cent.
The blue-chip FTSE 100 index was down marginally at 7,492.21 while the midcap FTSE 250 index fell 0.90 per cent to 17,572.06.
“Markets will spend a fair amount of time in the early part of this week trying to understand the implications of the most serious cross-border attack on Israel in decades early on Saturday morning,” analysts at Deutsche Bank said.
Hamas fired thousands of rockets at Israel on Saturday and sent dozens of fighters across the country’s heavily fortified border, a massive show of force that caught Israel off-guard on a major holiday.
The analysts noted that “it was 50 years ago on Friday that the Yom Kippur War started after a surprise attack on Israel so there are some parallels. This war cast a shadow over the rest of the 1970s so although we’re a long way from that, it’s a reminder that geopolitical risk is elevated at the moment with the Ukraine conflict, the US/China tensions and now those resurfacing in the Middle East.
“Geopolitical risk doesn’t tend to linger long in markets but there are many second order impacts that could come through in the weeks, months and years ahead from this weekends’ developments,” they concluded.
One of the most immediate impacts was a spike in oil prices. Although Israel is not an oil-producing nation, the conflict is likely to have an impact on global supply. Brent crude climbed more than 3.6 per cent, leaving a barrel costing over $87.
On the FTSE 100, BP and Shell were among the top risers, boosted by higher oil prices, rising 3.2 per cent and 2.9 per cent respectively.
Chemicals company Croda International meanwhile fell by over seven per cent after slashing its full-year outlook.
“Customers have continued to reduce their ingredient inventories in consumer care, crop and industrial end markets, due to a combination of destocking and a weaker demand environment,” Croda said in a trading statement.
Elsewhere Metro Bank climbed over 10 per cent after announcing a major new refinancing deal with investors. The deal came at the end of a dramatic weekend in which regulators had teed up other lenders to look at buying parts of the bank.