Market snapshot: oil prices surge and stocks slide after Trump speech

US President Donald Trump pictured in the White House. Photo: Chip Somodevilla/Getty Images.

Investors had the wind taken out of their sails as the latest US Presidential address pointed to a continuation of the conflict.

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The remarks were made outside market hours, so Dow futures give a more reliable reflection of what is likely to happen today. That is one of disappointment, with prices set to fall by as much as 2%, which would erase gains made from yesterday. An additional complication is that traders are unlikely to want exposure ahead of a long weekend, having been caught out by developments previously. This could add further downward pressure as the mood shifts once more to a risk-off approach.

The speech contained little to reassure investors, with an aggressive two to three weeks of military activity likely to follow. Nor were there any timelines given to the reopening of the Strait of Hormuz, with the US President simply suggesting that the other allies make their own arrangements in claiming the area.

With supply disruptions firmly back on the agenda, and with oil traders struggling to estimate how long until supplies are fully restored – even if hostilities were to end imminently – the oil price surged once more during the speech, adding another 6% to stand currently at around $107 per barrel.

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The lack of a clear resolution came after what had been another optimistic session in the US, with each of the main indices adding to strong gains made the day previously. However, volatility remains central to market movements currently, and the resumption of hostilities will add to economic concerns globally, alongside the possibility of a growth shock and even stagflation, where low growth and high inflation provide a toxic mix.

The main indices had shaved losses for the year again during the session, notwithstanding that the improvement is likely to unwind later today. Prior to the open, the Dow Jones has shed 3.1% so far this year, with losses of 3.9% and 6% for the S&P 500 and Nasdaq respectively and, in the absence of a clear outline for a ceasefire, the March theme of selling risk assets, buying the US dollar and higher oil prices look likely to return.

In terms of equities, Asian markets were the first to be able to react and unsurprisingly drifted to the downside, with losses of more than 2% in Japan and an average 1% elsewhere. The region continues to be under pressure given its reliance on importing energy from the Middle East, which has tended to damage the progress which many of the local market indices had been making up until the end of February.

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Next in line was the FTSE 100, which slipped at the open. The general downward move also incorporated the traditional Thursday markdown of stocks going ex-dividend, in the form of Barratt Redrow (LSE:BTRW), IMI (LSE:IMI) and Smiths Group (LSE:SMIN).

Elsewhere, a familiar theme returned with some strength in the oil majors, more than offset by pressure on the banks, International Consolidated Airlines Group SA (LSE:IAG) and the mining sector, with Endeavour Mining (LSE:EDV) and Fresnillo (LSE:FRES) topping the loser board given a dollar-related 3% dip in the gold price.

Once more, the FTSE 250 took the brunt of the falls as the perceived lack of strength in the UK economy, alongside the domestic reliance on imported energy, extended its losses to 4.8% for the year so far. The FTSE 100 continues to keep its head above water despite the latest round of pressure, with the primary index having added 3.7% in the year to date, given its more defensive characteristics.