{"id":484581,"date":"2026-03-19T20:17:09","date_gmt":"2026-03-19T20:17:09","guid":{"rendered":"https:\/\/www.newsbeep.com\/uk\/484581\/"},"modified":"2026-03-19T20:17:09","modified_gmt":"2026-03-19T20:17:09","slug":"markets-keep-the-faith-but-oil-staying-above-100-could-test-that-optimism-nils-pratley","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/uk\/484581\/","title":{"rendered":"Markets keep the faith \u2013 but oil staying above $100 could test that optimism | Nils Pratley"},"content":{"rendered":"

Was it only at the new year that the fanfare was heard for the FTSE 100 index breaking through 10,000 for the first time<\/a>? It was \u2013 on 2 January \u2013 and the index then added another 900 points by the end of February. On Thursday, the Footsie briefly fell below that round number as Iran struck Qatar\u2019s enormous Ras Laffan complex<\/a>, which normally supplies a fifth of the world\u2019s liquefied natural gas, before closing at 10,063, down 2.3% on the day.<\/p>\n

There are two ways to view that price action. One is to say the sharp reversal from the peak represents a necessarily severe reaction to the war on Iran<\/a>. Another is to conclude that a flat year-to-date return, after a bountiful 20% gain in 2025, suggests stock markets have barely begun to take seriously the inflationary impact if the war lasts many more weeks, or even months, and keeps oil above $100 a barrel.<\/p>\n

\u201cMarkets are very resilient and complacent, \u200band we are a bit surprised about that,\u201d said Nicolai Tangen, the head of Norway\u2019s $2tn (\u00a31.5tn) sovereign wealth fund, earlier this week. Well, quite.<\/p>\n

The resilience of companies themselves, as he suggested, is perhaps one explanation. Firms can cut costs and try to pass on increases in input prices. Recent shocks, such as the Covid pandemic and Russia\u2019s invasion of Ukraine, may have forced them to inject greater flexibility into their supply chains. It is still far too early to hear profit warnings. In the case of the Footsie, a size-weighted index, there are also a few big constituents that obviously benefit from higher oil and gas prices: Shell and BP are up 24% and 31% respectively since the new year.<\/p>\n

Another explanation is that investors may be right \u2013 despite the strike on Ras Laffan \u2013 to keep the faith and believe that energy prices will calm down soon. That seems to be the consensus opinion. Bank of America\u2019s closely watched regular poll of fund managers this week found that only 11% expect a barrel of Brent to be over $90 by the end of the year, and the average forecast was just $76.<\/p>\n

That finding, though, also suggests there is plenty of room for expectations to be upset if the energy price shock intensifies. The pass-through effects would be fairly rapid. In a UK context, current oil and gas prices \u201care already enough to add around 1% to headline inflation in the coming months, while shortages of fertilisers could push food inflation higher later in the year\u201d, reckons David Rees, the head of global economics at the fund manager Schroders.<\/p>\n

In the circumstances, the Bank of England\u2019s decision to hold interest rates<\/a> was the only one possible. Policymakers are as clueless on the length of the war, and the cost of energy six weeks or six months from now, as stock market investors. The Bank\u2019s messaging was inevitably of the fudged variety. On one hand, it stands \u201cready to act as necessary\u201d on interest rates to control inflation. On the other, \u201cmarkets are getting ahead of themselves in assuming rate rises\u201d, said the governor, Andrew Bailey.<\/p>\n

But one suspects we won\u2019t have to wait too much longer to see central banks\u2019 real analysis of the inflation risks. If oil stays at $100 for another month, higher interest rates will be the way to bet.<\/p>\n","protected":false},"excerpt":{"rendered":"Was it only at the new year that the fanfare was heard for the FTSE 100 index breaking…\n","protected":false},"author":2,"featured_media":484582,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[84,1294,56,54,55],"class_list":["post-484581","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-business","tag-economy","tag-uk","tag-united-kingdom","tag-unitedkingdom"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/484581","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/comments?post=484581"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/484581\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media\/484582"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media?parent=484581"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/categories?post=484581"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/tags?post=484581"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}