The FTSE 100 Index retreated by nearly 1% on Monday, mirroring the performance of other global indices after the closure of the Strait of Hormuz. It dropped to £10,600 from last week’s high of £10,717.
IAG, EasyJet, and Rolls-Royce shares lead the drop
Companies in the travel and adjacent industries were among the top laggards in the FTSE 100 Index today. Rolls-Royce shares dropped by over 3% to 1,275p.
This decline happened because the company makes most of its money from the civil aviation industry, where it charges airlines fees for all flying hours. As such, a weakness in the civil aviation industry means that its business will be affected.
At the same time, the Iran war is leading to supply chain challenges, which may affect its margins in the near term.
Airline companies like IAG and EasyJet were among the top laggards as they dropped by 2.80% and 3.22%, respectively. This war will lead to higher jet fuel prices as crude oil jumps. The West Texas Intermediate (WTI) Brent crude oil prices jumped to $85 and $95, respectively.
The war is also impacting demand, especially in the Middle East routes, where demand has largely dried up in the past few months.
UK housebuilders and banks were in the red
In addition to companies in the travel industry, the other top laggards were housebuilders and banks.
Vistry Group dropped by 4.35% to 351p, and is down by over 52% from its highest point this year. Taylor Wimpey dropped to 85p, down by 25% from the year-to-date high and is one of the worst-performing companies in the FTSE 100 Index this year. Persimmon stock has dropped by over 50% in the same period.
UK housebuilders have plunged because of high interest rates, margin pressures as costs rise, and weak demand for houses in the country.
Banks like Lloyds, NatWest, and Barclays were among the top laggards as they dropped by over 2.56%. These banks are hovering near their highest levels this year, and analysts believe that they have become undervalued. Banks will likely benefit from the relatively high interest rates in the UK, which will boost their earnings per share (EPS).
The other top laggards in the FTSE 100 Index were mining companies like Antofagasta, Fresnillo, and Anglo American, which dropped as commodity prices dived.
Oil and gas, and retail stocks jumped
On the other hand, companies in the oil and gas industry were among the top gainers today, a move that was triggered by the rising crude oil prices. BP stock jumped by 2.9%, bringing its annual gain to 55%. Shell stock, on the other hand, rose by 2.50%.
These companies are set to see strong revenue growth as crude oil has jumped from a low of $55 earlier this year to $95 today.
Centrica, which owns British Gas, rose by 2.3% as the rising gas prices raise hope of increased margins in the near term. This surge will help to offset the slow growth experienced last year.
Some of the other top gainers in the FTSE 100 Index were companies like British American Tobacco, Tesco, Admiral, and BT Group.
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