London's FTSE 100 declined 0.6% on Thursday, joining Germany's DAX (down 0.7%) and France's CAC 40 (down 0.5%) as European markets reacted to the European Central Bank's latest policy move. The ECB raised its deposit, marginal and main refinancing rates by a quarter‑point to 2.50%, 2.75% and 3.00% respectively, matching market expectations but stopped short of outlining a future tightening path. The decision came amid heightened inflation risk from rising energy prices linked to the Iran‑related conflict in the Middle East.
The euro‑dollar pair was largely unchanged, while sterling slipped 0.2% to $1.3525. In the United States, the Producer Price Index for August rose 0.4% month‑on‑month, in line with forecasts, pushing the annual rate to 5.4%. Energy accounted for more than three‑quarters of the monthly goods increase, with diesel fuel up 24.1% and processed intermediate goods up 11.5% year‑on‑year.
Geopolitical developments intensified market volatility. Houthi forces seized the Yemeni Red Sea port of al‑Makha, giving Iran‑aligned fighters control over the approach to the Bab al‑Mandeb Strait. The advance threatens Saudi Arabia's crude exports from its Yanbu terminal. Riyadh responded with roughly 40 air strikes across several Yemeni districts. Iranian state media reported projectile strikes along Iran's southern coast in Sirik, Minab County and Qeshm Island. Preliminary ship‑tracking data showed vessel transits through the Strait of Hormuz fell to seven on Wednesday, well below the ten‑day average of 14. In a separate incident, U.S. military aircraft sustained damage in Iranian ballistic‑missile strikes on Jordan's Al Azraq airbase.
Commodity markets reacted sharply. Brent crude futures for November delivery surged 5.5% to $106.82 a barrel, while U.S. West Texas Intermediate for October delivery jumped 5.7% to $101.50. Gold prices fell, with December futures down 1.3% at $4,402.13 an ounce and spot gold slipping 0.9% to $4,361.16.
In the United Kingdom, retailers reported mixed results. AB Foods, the owner of Primark, announced a new UK home‑delivery service but projected a 3% decline in like‑for‑like sales for the fourth quarter ending September 12. Currys posted a 7% rise in first‑quarter like‑for‑like sales, driven by strong demand for cooling appliances amid a summer heatwave and growth in the Nordic markets. THG disclosed that adjusted EBITDA for the first half more than doubled to £42.8 million, but warned that EU parcel duties would curb third‑quarter revenue growth to around 2%.
