FTSE 100 Hits Record High Amid US-Iran Tensions and Global Trade Shifts

UK’s leading stock index surges past previous peak despite economic contraction, oil price spikes, and trade uncertainty

FTSE 100 Breaks New Ground

The FTSE 100 closed at a record high of 8,884 on Thursday, surpassing its previous peak of 8,771 from 3 March. The index has now risen over 8.6% year-to-date, reflecting investor resilience despite mounting global pressures.

The surge comes amid ongoing concerns about US trade policies, rising oil prices, and UK economic contraction—all contributing to market volatility in recent months.

Oil Price Spike Fuels Energy Stocks

A sharp rise in Brent crude oil prices, driven by escalating US-Iran tensions, boosted energy-linked shares and helped power the FTSE’s gains:

• Oil prices jumped 4%, reaching a two-month high
• Shares in BP and Shell rallied strongly
• Precious metal miners also saw significant gains

The surge followed a UN report suggesting Iran may be violating its nuclear commitments, prompting warnings from Donald Trump and reports of US personnel being withdrawn from the Middle East.

Trade War Eases Slightly but Uncertainty Remains

Investor sentiment improved in recent weeks as trade tariffs were suspended or reduced, and limited trade deals were struck—most notably between the US and UK, and talks progressed with China.

However, the outlook remains shaky:

• April GDP fell by 0.3%, the first sign of real economic pain linked to Trump’s tariffs
• Household bills rose, and employers faced tax and wage pressures
• Stock markets globally tumbled earlier this year when the US intensified protectionist policies

Still, a tentative trade truce between the US and China, negotiated in London, provided some market optimism earlier in the week.

Investors Rotate Away from US Markets

According to Neil Wilson, UK investor strategist at Saxo Markets, investors are rethinking their traditional US-centric strategies:

“We’ve clearly seen a rotation. The notion that there’s ‘no alternative to America’ is being challenged.”

While the FTSE 100 is up 8% so far this year, Germany’s DAX index has climbed almost 20%, suggesting a broader global search for stability and returns.

Wilson adds that the UK market still holds appeal from a value and income perspective, particularly amid ongoing macroeconomic volatility and questions over US exceptionalism.

Tesco and Inflation Data Boost Sentiment

Retail giant Tesco also contributed to the FTSE’s rise, gaining nearly 2% on the back of strong Q1 results.

Elsewhere, weaker-than-expected US inflation figures helped reassure investors that the Federal Reserve may not raise interest rates this summer, despite the continued trade uncertainty. This supported broader international market sentiment.

What It Means for Investors in 2025

The FTSE 100’s strong performance signals growing interest in non-US markets as investors pursue geographic diversification and defensive value stocks. However, the backdrop remains fragile:

• Trump tariffs continue to cast a shadow over global trade
• Geopolitical instability, especially in the Middle East, is driving up commodity prices
• UK-listed companies, which generate most of their income overseas, remain exposed to global economic shifts

Investors in 2025 are likely to focus more on energy, commodities, and consumer defensives, while watching for further developments in trade negotiations and interest rate policy.

Summary: FTSE Rallies on Risk and Resilience

• FTSE 100 closes at a record 8,884, up 8.6% YTD
• Oil stocks and miners lead gains amid US-Iran tensions
• Trade war easing fuels optimism, but economic risks linger
• Investors begin rotating away from US equities
• UK markets seen as value-driven and income-friendly amid global uncertainty

As the global economic order shifts, the FTSE’s rally may reflect a broader rebalancing of investor confidence in 2025.

Sources: (SKY.com, Investing.com)