FTSE 100 falls as Burnham becomes PM and oil prices surge
The FTSE 100 opened lower on Monday as Andy Burnham prepared to become Prime Minister and escalating US-Iran tensions pushed Brent crude above $90. London's blue-chip index was called down roughly 16 points pre-market and slipped about 0.4% in early trade, while oil majors gained and airlines fell.
Key Takeaways
- The FTSE 100 fell at the open as investors weighed Burnham's incoming cabinet and Middle East risks.
- Brent crude rose about 3% toward $90.75 as US-Iran hostilities entered a ninth consecutive day.
- Reports suggest Shabana Mahmood may become Chancellor under Burnham's new government.
- Shell, BP and TotalEnergies outpaced the broader market; Ryanair profits slumped 34% on fuel costs.
- European shares also edged lower ahead of Thursday's ECB meeting and major US tech earnings.
Why is the FTSE 100 falling today?
London stocks were set for a weaker start on Monday, with the FTSE 100 called to open around 16 points lower, according to London South East. In early trade, the index mirrored broader European weakness, slipping 0.4% as the pan-European STOXX 600 declined 0.2%.
Two forces dominated the session. First, Sir Keir Starmer was due to tender his resignation to King Charles, paving the way for Burnham to form a new government and announce cabinet picks. Second, geopolitical anxiety kept energy prices elevated, complicating the outlook for inflation-sensitive sectors across the Net Worth & Wealth landscape.
How could Andy Burnham's premiership affect UK markets?
City investors have spent weeks trying to gauge what a Burnham premiership means for financial policy. On Monday, the market was expected to get clearer answers as the new Prime Minister appoints his top team, City AM reported.
Briefings suggest Home Secretary Shabana Mahmood is likely to become Chancellor, while Chief Whip Jonathan Reynolds may take the business secretary role in a department expected to include tech and science briefs. City leaders see Mahmood as a respectable pick and notably different from an Ed Miliband chancellorship that had alarmed the Square Mile.
Burnham had said as recently as the weekend that he had not finalised his cabinet choices. Until names are confirmed, uncertainty over fiscal direction and regulation may keep UK equities cautious.
What is driving oil prices higher?
US-Iran tensions overshadowed the political transition. At 0715 BST, Brent crude was up 3% at $90.75 a barrel and West Texas Intermediate was 2.7% higher at $84.70, after US forces attacked Iran for a ninth night and Iran pledged that not a single drop of oil or gas would transit through the Strait of Hormuz if US aggression continues.
Investing.com noted the conflict pushed Brent up 2.2% in early trade, reviving fears that a prolonged energy spike could trigger secondary inflation across the Eurozone. Washington had already threatened to swiftly punish Iran after the death of an American service member, the third killed in action in recent days.
The energy flare-up also complicates Thursday's European Central Bank meeting, where policymakers are widely expected to hold rates at 2.25%. Analysts say surging oil may force ECB President Christine Lagarde to strike a hawkish tone.
Which FTSE 100 stocks are moving on Monday?
The oil rally split the index. European energy majors Shell, BP and TotalEnergies gained more than 1% each, helping FTSE 100 oil giants even as the wider index fell. Conversely, airlines suffered: Ryanair posted a 34% drop in first-quarter profit after tax to €538m, missing expectations, as fuel prices jumped and fares fell. Lufthansa also traded lower.
Property giant Segro rejected a sweetened £13.5bn bid from US rival Prologis and fell about 1.5%. Elsewhere, Craneware shares tumbled after the healthcare firm reported a cyberattack, while GSK said the European Medicines Agency accepted its submission to update the Bexsero vaccine label.
Investors also looked ahead to US megacap earnings from Alphabet, Tesla and Intel later this week, after a volatile period that put artificial intelligence valuations under global scrutiny.