British equities opened in negative territory on Friday as a mix of higher crude oil prices and persistent geopolitical tensions in the Middle East weighed on sentiment, even after UK retail figures came in stronger than anticipated.
At 03:18 ET (07:18 GMT), Britain’s blue-chip index had fallen 0.5%. Sterling weakened 0.04% versus the U.S. dollar to trade at 1.3468. On the Continent, Germany’s DAX was down 0.14% and France’s CAC 40 fell 0.7%.
Investor caution was driven in part by remarks from U.S. President Donald Trump, who indicated there was no pressing urgency to end the conflict with Iran. He said Iran’s military and economic position had been significantly weakened and reiterated that the United States would maintain strict control over the Strait of Hormuz until a deal is reached, while leaving open the prospect of further military action. That posture has amplified concerns about ongoing disruptions to global energy flows.
Oil prices held close to recent highs following a sharp weekly rally, sustained by fears of supply interruptions related to activity in and around the Strait of Hormuz. The waterway, which previously accounted for about a fifth of global oil supply, has experienced lower traffic amid military activity and enforcement measures, supporting worries that energy costs could remain elevated.
Domestically, UK retail activity provided a contrasting datapoint. The Office for National Statistics reported that retail sales climbed 0.7% in March, exceeding expectations for a smaller increase. On a year-over-year basis, sales rose 1.7%. However, underlying demand painted a mixed picture: core sales excluding fuel rose only modestly and missed annual forecasts.
The market reaction reflects a tug-of-war between macro and geopolitical pressures that buoy energy prices and risk sentiment, and pockets of economic resilience such as the better-than-expected retail reading. For investors, the immediate outlook remains influenced by developments in the Middle East and the trajectory of energy markets, alongside domestic consumer trends.
Key points
- FTSE 100 opened 0.5% lower as higher oil and Middle East tensions pressured equities.
- Sterling slipped 0.04% to 1.3468 against the dollar; DAX and CAC 40 also fell.
- UK retail sales rose 0.7% in March and were up 1.7% year-on-year, but core sales excluding fuel increased only modestly.
Risks and uncertainties
- Geopolitical risk in the Middle East - continued military activity could sustain disruptions to energy supply and keep oil prices elevated, affecting energy and equity markets.
- Energy market volatility - sustained high oil prices may pressure inflation and corporate margins in energy-importing sectors.
- Mixed domestic demand - while headline retail sales surprised, weak core retail momentum suggests consumer demand remains uneven, which could influence consumer-facing sectors and retail stocks.