Oil surges above $100 as S&P 500 futures tumble

Oil surged back above $100, dragging S&P 500 futures sharply lower as investors fled risk after renewed US threats toward Iran. European equities are set for a weak open, while safe-haven demand lifted the US dollar. Asian markets broadly declined under pressure from rising energy costs. The renewed oil shock is reviving stagflation concerns and reversing earlier gains in risk assets.

Equities

The FTSE 100 closed 1.8% higher on Wednesday, with the FTSE 250 rising 2.2%, as comments from Donald Trump suggesting a possible end to the Iran war lifted sentiment. Energy stocks fell sharply as oil prices dropped, while aerospace and defence stocks climbed 5.7% and banks rose strongly. Rate expectations also eased, with markets now pricing in just one Bank of England increase by the end of 2026.

NatWest Group, Lloyds Banking Group and TBC Bank Group all closed between 5.4% and 5.8% higher on Wednesday, reflecting the shift in interest rate expectations. Berkeley Group fell 9.6% after warning that profit growth will slow through 2030 and announcing a halt to land purchases due to weaker housing market prospects. Energy stocks dropped 4.2% as oil retreated from recent highs, reversing earlier gains linked to the conflict.

On Wall Street, the S&P 500 rose 0.72% on Wednesday, while the Nasdaq Composite gained 1.16% and the Dow Jones Industrial Average added 0.48%. Technology stocks led the advance, with Alphabet rising 3.4% and Amazon and Meta Platforms each closing more than 1% higher.

Intel surged 8.8% after announcing plans to buy back a stake in its Ireland factory for $14.2 billion. Nike dropped 15.5% to its lowest level in a decade after forecasting a surprise fall in fourth-quarter sales. Eli Lilly rose 3.8% following regulatory approval of its new weight-loss pill.

Space-related stocks jumped after reports that SpaceX filed confidentially for an initial public offering. Planet Labs climbed 10%, Intuitive Machines gained 9%, and Rocket Lab rose 2%, while the Destiny Tech100 fund advanced 9.1%.

Forex & Commodities

The US dollar moved higher early on Thursday, reversing recent losses after Donald Trump confirmed further military action against Iran. The dollar index pushed back above the 100 level, while sterling weakened to $1.323 and the euro fell to $1.154, both giving up ground from earlier in the week. The Japanese yen also slipped to 159.4 per dollar, remaining below the key 160 threshold watched by policymakers.

Risk-sensitive currencies came under pressure, with the Australian dollar trading down at $0.6878 and the New Zealand dollar at $0.5709, both hovering near recent lows. The renewed strength in the dollar coincided with a rise in US Treasury yields, reflecting expectations that elevated energy prices may limit the scope for interest rate cuts. Market pricing now points to a reduced likelihood of policy easing through most of 2026.

Oil prices surged sharply early on Thursday, with Brent crude rising to $108.0 per barrel and US crude reaching $106.5, after comments signalled continued attacks on Iran without a clear timeline for resolution. Concerns over supply disruptions intensified after an oil tanker linked to QatarEnergy was struck in regional waters, while the International Energy Agency warned that the impact on Europe’s economy could begin to show this month.

Gold prices fell back early on Thursday, with spot gold declining to $4,664 per ounce after a four-day rally. The retreat followed the rebound in the dollar and higher bond yields, which reduced demand for non-yielding assets. Silver also dropped to $71.67, while platinum and palladium moved lower alongside the broader pullback in precious metals.

Attention now turns to the upcoming US non-farm payrolls report, with expectations for modest job growth. Investors are watching closely after recent volatility, as any downside surprise could intensify concerns about stagflation and complicate the Federal Reserve’s policy outlook.