Markets steady despite oil surge as investors watch central banks

Global markets opened the week on a cautiously positive note as investors adjusted to rising energy prices and ongoing geopolitical tensions.

Brent Crude Oil rose above $106 a barrel, continuing its recent gains due to disruptions in energy supplies in the Middle East.

Despite rising oil prices, European equities began the session with gains. London’s FTSE 100, along with other major continental indices, moved higher in early trading.

In the U.S., futures for the S&P 500 indicated a stronger start, suggesting that investors are increasingly adapting to what analysts refer to as a “new normal” characterised by heightened geopolitical risks and higher energy costs.

Attention is now shifting to a series of central bank meetings scheduled for this week, including the Bank of England’s decision, as traders seek insights into the future direction of interest rates.

On the UK retail front, there is hope for a potential “white knight” buyer that could help rescue the struggling High Street jewellery chain Claire’s, possibly preventing the brand from facing deeper financial troubles.

Susannah Streeter, Chief Investment Strategist, Wealth Club said: “Oil prices are steadily marching higher again, increasing inflation risks and threatening global growth.

“However, with the initial shock of war in the Middle East fading and investors getting used to the new normal, the FTSE 100 has crept into positive territory at the start of the week.

“The CAC 40 in Paris and the DAX in Frankfurt are also in the green, and stocks on Wall Street are set to open slightly higher. Investors are also keeping their eyes trained on a raft of central bank meetings this week for clues about what the precarious situation in the Middle East will mean for borrowing costs.

“Brent crude, the benchmark, is back above $106 a barrel, escaping efforts to keep a lid on prices. This is helping buoy shares in energy giants in early trade, with BP and Shell among the gainers. Already, nations are in the process of releasing unprecedented levels of emergency supplies onto the market.

“In Asia, this process has begun, while other countries’ reserves will start to flood in at the end of March. Nevertheless, the release will only make up a fraction of the crude being lost through the effective closure of the Strait of Hormuz, which is why crude prices are continuing to ramp higher.

“The plea from President Trump for other nations to provide military support to try to reopen the Strait shows how it’s going to be a hugely complicated and drawn-out process, and it looks unlikely while Iranian forces are still displaying significant firepower.

“Companies, consumers, and governments are left counting the cost of escalating energy prices. Another cost-of-living crisis is looming if the conflict continues for a prolonged period. Although UK Chancellor Rachel Reeves has promised targeted support for some homeowners worst hit by the rise in fuel costs, particularly those reliant on heating oil, the effects are likely to be felt broadly across the economy.

“This is why policymakers at the Bank of England look unlikely to cut interest rates on Thursday, given how volatile the situation is. They will be keeping a watchful eye on whether higher energy prices feed into broader inflation as companies are forced to pass on higher overheads to customers. However, a lengthy period of higher bills could also act as a drag on growth and be potentially disinflationary for other goods and services. The economy was already flatlining before the war in the Middle East broke out, so it lacks the resilience to absorb a prolonged shock.

“Trying to fine-tune the economy if stagflation sets in, with high inflation and stagnant growth, is highly difficult given the blunt tools the Bank of England has at its disposal.

“Policymakers at the Federal Reserve are set to stay in a wary mood when they meet to decide on interest rates this week. It’s Jerome Powell’s penultimate meeting as chair, and he’s set to remain focused on the data to determine the next steps. Given how fluid the situation is, with inflationary risks rising just as the jobs market shows signs of fresh deterioration, it looks like interest rates will stay higher for longer this year, with only one rate cut priced in — and that not until December.

“The biggest about-turn could come from the European Central Bank, and comments from President Christine Lagarde will be closely watched on Thursday. Inflation had looked like it could undershoot the 2% target this year, which had led to speculation about interest rate cuts before the conflict broke out.

“However, with Europe hugely reliant on gas imports — which have seen a spike in price after the closure of Qatar’s key export plant — there are concerns inflationary risks could also shoot up, and an interest rate rise could be part of the ECB’s arsenal this year. The main concern is that employees could demand higher wages to compensate for rising bills, while companies would also hike prices in reaction to sharply higher energy costs.

“Across the board, policymakers are set to remain watchful and wary this week, especially given signs that the conflict could be more protracted and drawn out than the US and Israel had hoped.

“There appears to be a bejewelled white knight coming to the rescue of Claire’s Accessories. The colourful shops, stacked high with hair clips, necklaces, bracelets and fancy-dress fun, used to lure in young families and teenagers to splurge on presents and pocket-money treats.

“But the chain has been faced with stiff competition from TikTok and Insta shops, as well as cheap accessories sold by fast-fashion giants like Shein and Temu. Having so many stores across the UK used to be great for brand recognition; now names are recognised from social media feeds, not building fascias. It’s fallen into administration twice since last summer, with turnaround plans evaporating.

“But French businessman Julien Jarjoura, who has already taken control of Claire’s subsidiary businesses in other European countries, believes there’s a lot of life still in the UK arm. He’s planning to scoop Claire’s Accessories out of the bargain bin and is liaising with administrators about his master plan, which could see more than 150 shops kept open.

“Given his experience supplying the retail scene across Europe with good-value jewellery products, Jarjoura has the credentials to be a savvier operator and deliver competitive products to this core market. With a campaign underway to limit access to social media for under-16s, competition from big online players might become less fierce, and it could be a more clement operating environment for a revamped chain.”