The ongoing conflict between Israel and Hamas, marked by a significant military assault on Israel and retaliatory Israeli air strikes, has led to a surge in oil prices of over 2%. This escalation, which has caused a significant drop in airline stocks, including IAG, Lufthansa, Wizz Air, and Easyjet, has also led to a boost in the FTSE 100 index on Monday. The rise in oil prices, indicated by increasing Brent Crude and WTI Crude benchmarks due to concerns over oil output from the Middle East, has exacerbated investor concerns.
Industry experts from AJ Bell and Hargreaves Lansdown have expressed concerns about the potential spread of the conflict and its impact on volatile oil prices. This situation has significantly affected the financial health of airlines amid pent-up travel demand. The situation has also led to reduced travel demand in the Middle East, seen in the suspension of Easyjet and Wizz Air flights to Tel Aviv. Wizz Air emphasized safety as their top priority amidst these tensions.
The conflict and subsequent rise in oil prices have also affected other sectors. Notably, it triggered a fall in Carnival (NYSE:CCL) cruise ship operator's shares. On the other hand, it led to gains in commodity-dense sectors like precious metal miners (0.6%), the energy sector (2.9%), and aerospace and defense stocks (1.2%). Safe-haven assets like long-term government bonds also experienced heightened demand due to these geopolitical tensions.
In corporate news on Monday, Metro Bank announced a £325 million ($396.5 million) capital raise and a hefty £600 million debt refinancing. This move transferred majority shareholder control to its largest investor, Colombian billionaire Jaime Gilinski, sparking a 19% surge in its shares.
Conversely, specialty chemicals group Croda International faced a 9% share drop after announcing an annual profit forecast cut due to destocking and weak market demand. This announcement impacted the broader specialty chemicals sector. In other developments, GSK entered into an exclusive partnership with China's Chongqing Zhifei Biological Products for a shingles vaccine.
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