The FTSE 100 returned to positive territory on Friday, recovering some losses after a week of turbulence caused by escalating tensions in the Middle East.
London’s blue-chip index steadied as trading stabilised, following sharp swings earlier in the week when fears of a widening conflict rattled global markets.
Energy prices remain the main driver of investor sentiment. Brent Crude is still trading above $85 a barrel—approximately 20% higher than before the latest flare-up in regional tensions—raising fresh concerns about the inflationary impact of prolonged instability.
In Washington, Donald Trump has pledged to reduce energy prices, promising swift action to increase supply.
However, analysts warn that any relief may be temporary if geopolitical risks continue to threaten key oil shipping routes.
Meanwhile, another battle is emerging in the technology sector.
The US Department of Defence and Anthropic are reportedly engaged in discussions about the future role of artificial intelligence in military systems. This dispute reflects growing tensions between Silicon Valley companies and defence planners over how quickly powerful AI models should be integrated into battlefield decision-making and weapon systems.
For the markets, the dual themes of energy volatility and technological competition are likely to remain central in the weeks ahead as investors consider the economic fallout from the crisis in the Middle East. The FTSE 100 returned to positive territory on Friday, recovering some losses after a week of turbulence caused by escalating tensions in the Middle East. London’s blue-chip index steadied as trading stabilised, following sharp swings earlier in the week when fears of a widening conflict rattled global markets.
Energy prices remain the main driver of investor sentiment. Brent Crude is still trading above $85 a barrel—approximately 20% higher than before the latest flare-up in regional tensions—raising fresh concerns about the inflationary impact of prolonged instability.
In Washington, Donald Trump has pledged to reduce energy prices, promising swift action to increase supply. However, analysts warn that any relief may be temporary if geopolitical risks continue to threaten key oil shipping routes.
Meanwhile, another battle is emerging in the technology sector. The US Department of Defence and Anthropic are reportedly engaged in discussions about the future role of artificial intelligence in military systems. This dispute reflects growing tensions between Silicon Valley companies and defence planners over how quickly powerful AI models should be integrated into battlefield decision-making and weapon systems.
For the markets, the dual themes of energy volatility and technological competition are likely to remain central in the weeks ahead as investors consider the economic fallout from the crisis in the Middle East.
Susannah Streeter, chief investment strategist, Wealth Club said: “The FTSE 100 has veered back into positive territory at the end of a tumultuous week characterised by big bouts of volatility. With intense bombardments of Iran continuing, and retaliatory strikes coming thick and fast across the Middle East, energy prices remain elevated. Airlines have clawed back some gains in early trade, but still remain battered by the repercussions of stranded passengers, dented confidence and higher fuel costs. What a difference a week makes – this time last week the Footsie looked set to flirt with 11000, but it’s now down more than 4%, with conflict denting sentiment, given the knock-on effect for listed companies.
Oil prices have risen by around 20% this week, with Brent Crude settling above $85 a barrel. Crude had dipped slightly following a pledge by President Trump to bring down prices, including releasing oil from US emergency supplies and even enabling the Treasury to dabble in the oil market by trying to influence futures contracts. However, such tinkering is likely to only have a short-term effect given that the market is driven by real physical supply, and severe disruption continues in the Middle East, particularly through the Strait of Hormuz. Already prices are filtering through to the pumps, with diesel reaching a 16-month high, and more increases are set to come given the lag effect of wholesale to forecourt prices. Gas costs have retreated from the highs reached mid-week but remain elevated, given the key LNG export plant in Qatar is still out of action.
The stage is set for an epic AI scrap about safeguards after Anthropic vowed to take legal action against the US Defense Department for labelling its models as a supply-chain risk. The Pentagon’s move came after Anthropic refused to give defence agencies complete access to its tools over concerns about the potential for mass domestic surveillance and fully autonomous weapons. Labelling it a supply-chain risk puts Anthropic’s entire business model at huge risk, given its Claude large language models have already been integrated into services of big players like Amazon and Alphabet, who also have government contracts.
The Pentagon’s move is seen as ideological, and the onus will be on the Pentagon to prove how Anthropic’s models really are a supply risk, which is likely to be a high bar. The ban won’t take place immediately given how integrated Claude has been in defence operations, soaking up huge amounts of knowledge, demonstrating just how messy this will be. This has thrust safety concerns front and centre, with the battle lines being drawn against total government control of AI. The Information Technology Industry Council, whose members include Nvidia, Amazon.com, Apple and OpenAI, has said it’s highly concerned about the turn of events.
While responsible defence contractors have made a pledge to keep humans in the loop as AI developments continue apace, the prospect of fully autonomous weapons is real given the lack of a binding international treaty.”
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