We may be in for a rocky ride, warns Bank of England as oil price jumps again and stocks slide
The Bank of England’s deputy governor has warned that markets ‘may be in for a rocky ride’ as Middle East tensions sparked fresh volatility yesterday.Sarah Breeden said latest events showed how ‘large, correlated shocks can arrive with little warning’ and were stirring ‘familiar echoes’ of past crises.The remarks were published by the Bank as stock markets retreated following a weekend of growing tensions between the US and Iran.That scotched hopes late last week of a resolution to the conflict, which had sparked a rally on Friday.Yesterday, the FTSE 100 closed 0.6 per cent, or 58.55 points, lower at 10,609.08, while Germany’s DAX and France’s CAC 40 each fell more than 1 per cent. Wall Street stocks were also trading lower last night, while oil prices rebounded, with Brent crude – having dipped below $90 a barrel last week – climbing to above $95 during Monday’s session. The Bank of England’s deputy governor Sarah Breeden, pictured, said latest events showed how ‘large, correlated shocks can arrive with little warning’ Meanwhile, UK borrowing costs rose, with yields on ten-year UK bonds – known as gilts – rising to as high as 4.84 per cent, after having closed at 4.77 per cent on Friday.In a speech, Breeden said the Middle East conflict ‘continues to add to uncertainty and unpredictability’ following a series of shocks in recent years, including the pandemic, Russia’s invasion of Ukraine and Liz Truss’s disastrous mini-Budget in 2022. She said: ‘The vulnerabilities that have preceded past crises have not disappeared. They have re-emerged elsewhere.‘Across private markets, government bond markets, and in stretched valuations, you can hear the familiar echoes of leverage, complexity, concentration and opacity. 'If some of these crystallise simultaneously, we may be in for a rocky ride.’At the centre of the market volatility is the Strait of Hormuz, through which around one fifth of the world’s oil and gas usually passes. It has been closed since the war began. Iran declared it reopened at the end of last week but then said it was closed again. Meanwhile, the US has blockaded Iran’s ports and over the weekend seized an Iranian-flagged cargo ship, lifting tensions and leaving hope for more peace talks in flux.Susannah Streeter, chief investment strategist at Wealth Club, said: ‘Fresh worries are percolating about the fragility of the Iran ceasefire, sending oil prices higher and keeping investors on edge. 'The euphoria unleashed after the Strait of Hormuz reopened on Friday has dissipated.’Richard Hunter of broker Interactive Investor said: ‘An all too familiar theme has emerged, with markets taking two steps forwards and then one step back, and almost entirely driven by news flow from the Middle East.’DIY INVESTING PLATFORMSAJ BellAJ BellEasy investing and ready-made portfoliosHargreaves LansdownHargreaves LansdownFree fund dealing and investment ideasinteractive investorinteractive investorFlat-fee investing from £4.99 per monthFreetradeFreetradeInvesting Isa now free on basic planTrading 212Trading 212Free share dealing and no account feeAffiliate links: If you take out a product This is Money may earn a commission. These deals are chosen by our editorial team, as we think they are worth highlighting. This does not affect our editorial independence.Compare the best investing account for you
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We may be in for a rocky ride, warns Bank of England as oil price jumps again and stocks slide
