Investors have been warned not to get too optimistic after last week’s stock market resurgence with another weekend of uncertainty in the Middle East prompting further havoc.
London’s FTSE 100 and the US S&P 500, among others, both saw strong ends to the week as sentiment turned positive over hope that the Strait of Hormuz would be reopened.
But that situation was quickly reversed, with Iran saying it was closed once again and refusing further talks. The US, meanwhile, say they have seized an Iranian ship which attempted to evade their own blockade.
Stock markets have taken a hit at the start of this week – with experts warning investors will need “deep reserves of patience” before the entire situation comes to a close.
The FTSE 100 was down more than 0.5 per cent by 10am BST on Monday, with European stocks suffering more – each of France’s CAC 40, Germany’s DAX and Spain’s IBEX 35 were down more than 1 per cent, with the Euro Stoxx 50 down 1.3 per cent.
In the US, futures show indices are expected to drop when markets open later, with the Dow Jones, the Nasdaq and the S&P 500 all set to fall by more than 0.5 per cent.
Richard Hunter, head of markets at interactive investor, said it continued to mean an up-and-down time for investments, with many markets at the other end of the see-saw to oil prices, which rose once more on Monday.
“An all too familiar theme has emerged, with markets taking two step forwards and then one step back, and almost entirely driven by news flow from the Middle East,” he said.
“On Friday, Iran reportedly declared that the Strait of Hormuz was ‘completely open’, lighting a fire under stocks and in particular those affected by the conflict so far, such as the airlines and cruise ship operators, while oil prices plummeted on the prospect of some kind of return to normality.”
However, for those investing for the long-term, avoiding the temptation to sell out of recent underperformers remains the focus, with London’s main index up more than 7 per cent for the year despite the issues which saw stocks drop.
“While short-term traders are attempting to navigate a parlous course which involves violent swings and uncertainty, longer term investors are tending to look through the noise and concentrate on a return to normality with a relatively benign economic backdrop currently in place. The FTSE100 has been something of a poster child for this investment mentality, and despite a weaker open after the weekend’s developments, the index remains firmly ahead by 7 per cent in the year to date,” he added.
