The FTSE 100 is set to open flat on Monday, with IG futures indicating a slight gain after a volatile week shaped by geopolitical tensions and rising U.S. borrowing costs.
The UK’s benchmark index closed at 10,816 on Friday, up 0.6% from Thursday, capping a mixed week with a late rally. The gain followed a broader sell-off in global markets, driven by concerns over long-dated U.S. Treasury yields reaching levels not seen since the 2008 financial crisis.
Iran retaliates to Trump’s economic threats
Tensions between the U.S. and Iran escalated over the weekend after Iran promised “earthquake-like retaliation” in response to President Donald Trump’s warning of an “economic D-Day.” Trump urged Gulf nations to impose sanctions on Tehran.
The exchange increased market uncertainty. Gold prices pushed through the $2,500 mark as investors turned to the metal as a safe asset during the turmoil.
Dan Coatsworth, head of markets at AJ Bell, said global markets had “lost their foothold” after weeks of climbing a “wall of worry.” The FTSE 100 performed better than most indices, supported by its large exposure to resource stocks.
Investors are now awaiting Nvidia’s earnings report next week, which could refocus attention on corporate performance. Coatsworth noted that as autumn approaches, caution has set in among traders. Many are looking for reassurance from Federal Reserve Chair Kevin Warsh at the upcoming Jackson Hole symposium later this month.
Bond yields weigh on sentiment
The sharp rise in U.S. Treasury yields, especially for long-dated bonds, unsettled investors. Concerns grew that the Trump administration was struggling to manage public finances. Similar sell-offs spread across European markets, including the UK and France.
The FTSE 100’s resilience last week may not last if geopolitical risks continue or if corporate earnings fall short of expectations.
Coatsworth warned that the current rally appears unstable. Without a clear resolution to U.S.-Iran tensions or a drop in bond yields, the index’s next move could depend on a single trigger.