FTSE 100 slips as oil and inflation worries rise

The main catalyst was a surge in Brent crude toward $99 a barrel after Yemen’s Iran-backed Houthi group attacked energy infrastructure in Saudi Arabia, widening a conflict that has already kept traders on edge. Higher oil prices lifted BP 0.68% and Shell 0.52%, while miners outperformed as copper hit a record, sending Antofagasta up 4.7% and Glencore 4.2% and pushing the industrial metals mining index 2.7% higher.

That commodity strength was not enough to lift the broader market. Pharmaceutical stocks were among the biggest drags, with Smith+Nephew falling 3.6% and AstraZeneca losing 1.4%, while Dunelm slumped 14.3% after warning on annual profit and blaming, in part, a hot summer that hurt sales of homeware and furnishings.

Investors are weighing the risk that higher energy costs feed through to consumer prices just as markets brace for major US inflation data and UK growth figures later this week. LSEG data showed traders pricing a 60% chance the Federal Reserve raises rates next week, while expecting the Bank of England to hold steady, even after Governor Andrew Bailey said markets were adding a risk premium because of the possibility of further energy price gains.

The macro backdrop is the bigger issue for investors: a renewed oil shock is lifting global bond yields, tightening financial conditions and keeping pressure on rate-sensitive assets. For the FTSE 100, commodity exposure is providing some protection, but the index remains vulnerable if inflation data force central banks to stay tighter for longer.