LIVE: FTSE surges but Wall Street wavers as investors monitor Iran war developments

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A prolonged increase in energy prices as a result of the conflict in the Middle East could add about 1% to the UK rate of inflation by the end of year, a member of the Office for Budget Responsibility’s (OBR) budget responsibility committee has said.

Professor David Miles told MPs in a Treasury committee session, focused on this year’s spring forecast, on Tuesday that if there is “no change in the picture on prices from now on forward, we estimate something like a 1% higher level of consumer prices in the UK by the end of the year”.

“So we had thought, without taking all of this into account that by the end of this year, the inflation rate in the UK might be pretty close to 2%,” he said.

However, Miles said that if both spot and futures prices – which are important for the Ofgem energy price cap – do not change from where they currently stand, then by the end of this year the “inflation rate would end the year not near 2% but nearer 3%”.

Shares in Volkswagen (VOW3.DE) were up 3.4% in afternoon trading on Tuesday, despite the German carmaker reporting a drop in annual profits.

Volkswagen reported sales revenue of €321.9bn (£280bn) for 2025, down from €324.7bn for the previous year. However, the company’s pre-tax profit fell 44.6% for the year to €9.3bn.

In a letter to shareholders in the company’s annual report, Volkswagen CEO Oliver Blume announced that the carmaker planned to cut around 50,000 jobs in Germany by 2030.

“As a result of collective bargaining agreements and downsizing measures, we managed to achieve cost savings of around €1bn in fiscal year 2025 as planned,” he said. “We are on course to meet our goal of achieving net annual cost savings of more than €6bn across the group by 2030.”

Our US colleagues write:

“US stocks diverged on Tuesday as investors weighed President Trump’s comments about the Iran war nearing an end against remarks from Defense Secretary Hegseth that the most intense barrage of strikes yet would occur on Tuesday

The Dow Jones Industrial Average (^DJI) and S&P 500 (^GSPC) lost roughly 0.1% and 0.2%, respectively, in the minutes after the opening bell. Moving in the other direction, the tech-heavy Nasdaq Composite (^IXIC) picked up roughly 0.1%.”

The CEO of Saudi Arabia’s Aramco warned that there could be “catastrophic consequences” for the oil market, if the conflict in the Middle East continues to disrupt flows.

Aramco CEO Amin Nasser highlighted in an earnings call on Tuesday that global oil inventories were at a five-year low and said that it was crucial for shipping in the Strait of Hormuz to resume.

“There would be catastrophic consequences for the world’s oil markets and the longer the disruption goes ​on, and ​the more drastic the consequences for ​the global economy,” he said, according to a Reuters report.

US stock futures retreated by midday on Tuesday, after gaining earlier in the session, as investors weighed different signals around the conflict in the Middle East.

Dow Jones Industrial Average futures (YM=F) were down 0.2% at the time of writing, while contracts on the S&P 500 (ES=F) declined by a similar margin and the Nasdaq 100 (NQ=F) edged 0.1% lower.

Total UK retail sales increased 1.1% year-on-year in February, unchanged from the rate of annual growth recorded for the same month last year, according to figures released by the British Retail Consortium (BRC) on Tuesday. This figure was also below the 12-month average growth of 2.3%.

Food sales increased by 2.9% year-on-year in February, up from 2.3% a year ago, while non-food sales declined 0.4% on an annual basis, deteriorating from flat growth in February 2025.

Helen Dickinson, CEO of the BRC, said: “February’s grey, wet weather hit retail sales hard. Spending was weak across most categories, online and in-store, as households pulled back after Christmas and January’s rebound.

“Food sales were flat in real terms as shoppers tightened their belts. Valentine’s Day did provide a bright spot, with jewellery, watches and perfume performing better as people still treated loved ones.”

Elon Musk’s rocket and satellite company SpaceX is considering listing its shares on New York’s Nasdaq (^IXIC), Reuters reported on Tuesday morning.

Bloomberg reported at the end of February that SpaceX is targeting filing confidentially for an initial public offering (IPO) as soon as March.

Citing people familiar with the matter, it was reported that the company would seek a valuation of more than $1.75tn.

Shares in Persimmon (PSN.L) jumped 7% on Tuesday morning, on the back of the housebuilder’s full-year results.

Persimmon said new home completions had increased 12% over the year to 11,905 units, with new housing revenue up 16% at £3.31bn. Underlying pre-tax profit grew 13% to £445.6m in 2025.

Looking ahead, the company said: “We are monitoring the impact the conflict with Iran could have on our markets in 2026, including on customer sentiment, build cost inflation and interest rates.”

“Assuming the conflict and its impact is short, we expect to deliver between 12,000 and 12,500 completions in the year, with underlying operating profit towards the upper end of current consensus.”

Persimmon said it expected underlying profit before tax to be in line with current consensus. As of early March, company-compiled consensus expectations are for 12,136 home completions in 2026, an underlying operating profit range of £486m to £517m and underlying profit before tax mean of £470m.

Chris Beauchamp, chief market analyst at IG, said: “Last week’s panic over housebuilders seems misplaced, at least in Persimmon’s case. Revenue and profits are both up, assuaging fears about a renewed period of weakness for the group.

“While it hedged itself with some caution about confidence in this period of volatile energy costs, this is a solidly confident outlook, albeit dimmed slightly with the risk that the BoE has to slow its planned rate cuts until clarity appears on the path of interest rates,” he said.

Victoria Scholar, head of investment at Interactive Investor, said: “Trump’s comments suggesting that he is striving for peace have also lifted European equities with banks and travel and leisure gaining while oil equities are under pressure.

“BP (BP.L) and Shell (SHEL) are at the bottom of the FTSE 100 (^FTSE) while BA’s parent company IAG (IAG.L), easyJet (EZJ.L) and Barclays (BARC.L) are among the top gainers.”

Despite hopes of an end to the Iran war, gold prices jumped in early European trading on Tuesday, buoyed by a weaker dollar.

The US dollar index (DX-Y.NYB), which tracks the greenback against a basket of six currencies, fell 0.6% to 98.58 at the time of writing.

A softer dollar tends to boost the appeal of gold, given that the precious metal is typically priced in the US currency, making it cheaper for overseas buyers.

Gold futures (GC=F) surged 1.8% to $5,194 per ounce on Tuesday morning, while spot gold advanced 0.9% to $5,185.30 an ounce.

Read more on today’s commodity and currency moves here.

Brent crude futures (BZ=F) fell nearly 7% on Tuesday morning to $87.27 per barrel at the time of writing, while West Texas Intermediate futures (CL=F) slipped by over 7% to $87.79 a barrel.

Matt Britzman, senior equity analyst at Hargreaves Lansdown, said: “Oil prices in the 80s/90s are still a tricky backdrop, but it’s significantly better than pushing toward 150, which had been a fear at points yesterday.

“Investors should also take some comfort from the growing list of potential measures at the White House’s disposal,” he said. “President Trump has options, like waiving oil-related sanctions and having the US Navy escort tankers through the Strait of Hormuz to keep supply flowing and prices in check.”

“G7 finance ministers have also said the group stands ready to release oil from strategic reserves if necessary,” Britzman added. “It’s too early to call an end to the volatility, but having levers to pull should help calm some nerves.”

Saxo UK investor strategist Neil Wilson said that “oil and gas prices, while sharply lower over the last 24 hours, remain higher than before the war. Stocks are still down materially.”

“The risks are still high, just not as elevated as predicted over the weekend,” he said.

“And as colleague suggested yesterday morning, Trump had to do something to calm markets – so this cannot be seen as a sign peace is about to break out – there is a tactical element to these comments, but nevertheless it underlines that the US isn’t going to push this to breaking point, which removes some of the fatness from the tails to the risk picture,” Wilson added. Not the beginning of the end, but the end of the beginning.

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