UK and US stock markets recovered on Wednesday, while several Asian indexes fell sharply as volatility in oil and gas prices continued to unsettle investors.
London’s FTSE 100 and major US and European indexes rose after two days of losses. However, markets across Asia declined for a third consecutive day as concerns about the ongoing conflict between the United States, Israel and Iran weighed on sentiment.
Energy markets remained the main source of uncertainty. Although oil and gas prices dipped slightly on Wednesday, they remain significantly higher than before the conflict began. The increase followed major disruption to shipping routes through a key waterway near Iran, where traffic has been largely halted.
Economists warn that sustained increases in energy prices could feed through to higher costs for goods and services, putting fresh pressure on inflation.
In the UK, Chancellor Rachel Reeves is expected to meet North Sea energy companies to discuss the potential impact of the Middle East conflict and explore how the industry can respond to the uncertain situation.
Financial markets had previously expected the Bank of England to cut interest rates twice this year as inflation eased. However, some analysts now believe rising energy costs could complicate that outlook.
The National Institute of Economic and Social Research said persistently high energy prices could force the Bank to reconsider its plans and potentially push interest rates back above 4%.
The Bank of England will announce its next interest rate decision on 19 March, with investors watching closely for signals on how policymakers plan to respond to the evolving economic risks.
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