Oil Steadies After 4% Surge as Fed Decision Looms

Oil prices steadied on Wednesday after jumping over 4% the previous day, driven by supply concerns linked to the Israel-Iran conflict. Asian equities fell and European stock futures pointed lower, while the US dollar held firm as investors awaited the Federal Reserve's interest rate decision. In the UK, May inflation data is due, with expectations for a slight slowdown ahead of Thursday’s Bank of England policy announcement.

Equities

The FTSE 100 fell 0.4% on Tuesday, with more than 70% of its companies in negative territory, although the index remained close to its all-time high. BP and Shell both rose over 1% as oil prices climbed, supported by concerns over supply disruption linked to the conflict between Israel and Iran.

Construction group Morgan Sindall surged 14.6% after saying full-year pre-tax profit would be “significantly ahead” of expectations, giving the FTSE 250 some support, though the mid-cap index still edged 0.2% lower.

Shares in major banks lost ground. Barclays, HSBC and Standard Chartered all fell more than 1%, as investors grew cautious ahead of the Bank of England’s interest rate decision on Thursday. Travel and leisure companies came under heavy selling pressure: Wizz Air dropped 7.5% and IAG, owner of British Airways, declined by 4.4%.

In the US the Dow fell 0.7%, the S&P 500 lost 0.8% and the Nasdaq slipped 0.9%. The drop came as the conflict between Israel and Iran entered its fifth day, prompting the US military to send more fighter jets to the region. The Cboe Volatility Index rose to 21.6, the highest closing level since late May.

Among US stocks, solar companies led the losses after Senate Republicans proposed phasing out energy tax credits by 2028. Enphase Energy shares fell 24%, while Sunrun dropped 40%. Elsewhere, Eli Lilly slipped 2% after announcing it would buy Verve Therapeutics in a deal worth up to $1.3 billion. Shares in Verve jumped sharply on the news.

Energy stocks were the only sector in the S&P 500 to rise. Lockheed Martin gained 2.6%, reflecting investor interest in defence shares amid heightened geopolitical tensions.

Forex & Commodities

The US dollar slipped 0.2% on Wednesday, trading at 144.90 yen, after reaching a one-week high earlier in Asian hours. Despite edging lower, it held on to roughly 1% of gains made against the yen, Swiss franc, and euro since Thursday, supported by demand for safer assets amid the Israel-Iran conflict. The euro firmed 0.2% to $1.150, while the Swiss franc was unchanged at 0.816 per dollar. The broader dollar index eased 0.1% after gaining 0.6% the previous day. Sterling gained 0.26% to $1.346 after UK inflation data showed consumer prices rose 3.4% in May, in line with expectations, ahead of Thursday’s Bank of England policy decision.

Gold prices rose slightly, supported by the weaker dollar. Spot gold added 0.1% to $3,393 an ounce, while US gold futures were up 0.1% at $3,411.60. SPDR Gold Trust, the largest gold-backed ETF, reported a 0.43% increase in holdings to 945.94 tonnes. Analysts at Goldman Sachs reaffirmed their end-2025 gold price target of $3,700 an ounce, citing central bank buying and expected US interest rate cuts as key drivers.

Oil prices edged lower after a 4% gain in the previous session. Brent crude fell 0.6% to $75.96 a barrel, and US West Texas Intermediate dropped 0.5% to $74.46. The retreat came as traders weighed geopolitical risks against expectations that the US Federal Reserve will keep interest rates unchanged later today. Analysts said between $5 and $10 of the current oil price reflects risk linked to potential supply disruption in the Strait of Hormuz.