Geopolitical events are once again causing volatility in global capital markets, and today all eyes are on the FTSE 100, an index of the top 100 UK-listed businesses based on market capitalization. Recent media reports regarding Donald Trump possibly leaving the Iranian conflict has renewed risk appetite, creating a wave of cautious optimism for all public companies worldwide.
📈 FTSE 100 Has Increased
The FTSE 100 is increasing today as investor sentiment has turned positive. Currently the index is up about 0.70%, with all major European indices also advancing.
This positive price action for the FTSE and European indices has been driven predominantly by:
Reduction of geopolitical tension due to possible ending of hostilities in the Middle East
Stabilisation of crude oil prices globally
Renewed confidence in riskier assets
Capital markets typically respond very quickly to geopolitical indicators, and even the potential for reduced hostilities has been sufficient to propel equity values to the upside.
🌍 How Trump is Affecting World Markets
Reports indicate that Trump is considering leaving the Iranian conflict even if he cannot secure control of critical oil supply routes such as the→
💡 Investors recognize a possible decrease in geopolitical risk that will rally stock prices.
The Times": As mentioned, there were many market participants expect a decline in oil prices; in addition to bringing about long-term price stability, anything that indicates the likelihood of peace or reduced conflict will:
-lower the pressure on oil prices
-lower the chances of an overall stable economy
-help raise investor confidence
Despite the current price spikes, energy stocks have continued to perform well in part because of the earlier price spikes resulting in improved prices and lifted the FTSE 100.
⚠️ Continued Volatility
Despite gains made in the market today, the market is fragile.
The current market rally exemplifies the concept of classic market behavior:
❗️ The market reacts to anticipation as opposed to certainty
The mere suggestion of peace can provide enough buying momentum to push prices back up. However:
The long-term risks of this will remain very high
The inflationary pressure from the prices of energy stocks will continue
Concerns relating to global economic growth remain
For investors (particularly investors in cryptocurrencies and stocks), this is a reminder:
💡 Always Remain Cautious and Aware of Market Conditions