Gas prices rise amid growing nervousness over storage
Gas prices are rising this morning, putting pressure on European countries who need to stock up their storage levels before the winter.
The month-ahead UK gas price is up around 1% at 184p a therm, close to yesterday’s highs when gas hit its highest since January 2023.
Continental European gas prices are up 1.3%.
Rupert Thompson, IBOSS chief economist, reports that European gas prices are being pushed up by growing nervousness over “the relatively low storage levels ahead of winter.”
UK government borrowing costs are a little higher this morning.
The yield, or interest rate, on 10-year UK bonds has risen by 2 basis points (0.02 of a percentage point) to 5.19%. Thirty-year gilt yields are also up around 2bps at 5.83%.
These are small moves, and yields remain lower than last week – when 10-year yields hit their highest level since the 2008 financial crisis.
But they’re also a reminder of the pressures which higher oil prices, and resulting higher inflation, put on the public finances.
Copper hits record high amid US hoarding
Boom! The copper price has hit a new alltime high this morning.
The three-month copper contract on the London Metal Exchange hit a record high of $14,617 a ton this morning, surpassing the previous record set on Monday.
Copper is generally seen as a gauge of economic growth prospects. But the current rally is also being attributed to hoarding in the US, as importers try to stock up before Donald Trump imposes new tariffs on copper (as some people anticipate).
Updated
Saudi Arabia: energy sites near Yemen halted after attacks
Saudi Arabia has now said operations at several energy facilities in the kingdom’s south were halted after attacks ignited fires in the region bordering Yemen (where the Houthis are based).
Bloomberg has the details:
The strikes took place on Tuesday and wounded a number of people, the state-run Saudi Press Agency reported, citing officials at the energy ministry that it didn’t identify. It didn’t name any of the facilities. The Saudi energy ministry and Saudi Aramco didn’t have any further comments.
A series of attacks have targeted Saudi Arabia’s southwestern region since Yemen’s Iran-backed Houthi militants said they would blockade Saudi Arabia’s oil flows in response to Riyadh’s siege of the Yemeni capital, Sana’a. Oil facilities in Jazan, where a 400,000 barrel-a-day refinery has been shut since an earlier attack in July, were hit again on Monday.
The summer heatwave has dampened demand at British homeware retailer Dunelm, sending its shares sliding.
Dunelm reported this morning that trading had been significantly softer in the first six weeks of its new financial year (which began at the end of June). It blamed “the extended period of unusually hot weather”.
Dunelm, which sells home furnishings such as bedding, curtains, furniture, beds and mattresses, added that “we have seen better trading following cooler weather”.
Shares are down 8%, putting Dunelm at the bottom of the FTSE 250 index of medium-sized companies listed in London. The company also reported a 3.1% rise in sales in the last financial year, but profits were flat.
Tariff wars rear up as Canada retaliates against the US
Trade war tensions have also risen today, as Canada imposes retaliatory tariffs on US goods.
The tariffs kicked in this morning, targeting sectors including steel, dairy, appliances, agricultural equipment, pulp and paper, and electronics.
The move is in response to the US’s decision to impose a 50% tariff on $20bn of Canadian goods last month.
Susannah Streeter, chief investment strategist at Wealth Club, says:
“Trade tensions and geopolitical stalemate are adding to inflationary concerns – pushing prices up across a large basket of commodities, which will feed through to household and business costs. The moves are adding to the note of caution reverberating on financial markets, as investors assess the likelihood that interest rates may have to stay higher for longer to keep a lid on consumer prices.
Tariff wars have reared up again after Canada slapped billions of dollars of retaliatory tariffs on American goods, after talks with the US administration collapsed. The former trade allies have turned foes, with President Trump turning up the heat, and the latest measures are likely to add another layer of uncertainty for businesses and consumers. Canada’s retaliatory tariffs on around $20 billion of US goods came into effect today, with duties ranging from 15% to 50%.
Europe's stock markets dip at the open
European stock markets have opened in the red, as the rising oil price weighs on sentiment.
The FTSE 100 share index has dipped by 0.2%, or 20 points, to 10,801 points, with banks among the big fallers. Energy firms BP (+0.9%) and Shell (+0.35%) are higher, though.
Other markets are weaker, though – France’s CAC has dropped by 0.4%, and Spain’s IBEX is 0.2% lower.
Germany has been hit by a surprise drop in exports, knocking hopes that its economy was rebounding.
German exports fell by 0.8% in July compared with the previous month, data from the federal statistics office showed this morning.
This was due to a fall in shipments to European Union countries.
There is a renewed inflation risk coming from energy markets, warns Naeem Aslam, CIO of Zaye Capital Markets.
Oil has now risen for a third consecutive session, and the market is increasingly questioning whether higher energy costs could feed into transportation, manufacturing and consumer inflation.
That matters for both U.S. and European equities because more expensive oil can squeeze corporate margins while simultaneously forcing central banks to keep monetary policy restrictive. Energy companies may benefit from higher crude prices, but airlines, industrial companies, retailers and other fuel-sensitive businesses face a less favourable cost environment.
Introduction: Oil heads back towards $100 a barrel
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
The global economy faces the prospect of $100 a barrel oil again, as the conflict in the Middle East continues.
Brent crude has risen back over the $98 a barrel mark already this week, its highest level since 24 July. Oil has been pushed up by reports that Yemen’s Iran-aligned Houthis attacked energy facilities in Saudi Arabia.
Saudi authorities said operations at some energy facilities had been halted today following attacks by Yemen’s Iran-aligned Houthis that wounded more than 70 people.
The attacks add to the pressure on oil and gas production in the region, which remains badly disrupted by the ongoing Iran war.
Yesterday, the Financial Times reported that Saudi Aramco’s oil facilities in the Saudi Arabian city of Jizan – where one of the country’s largest refineries is based – have been attacked
Earlier today, Iran threatened to create a new restricted zone in the Gulf if the US pressed on with its ‘economic warfare’ against Tehran.
Such a zone would, presumably, further undermine US efforts to reopen the strait of Hormuz.
Mohsen Rezaei, the secretary of Iran’s Supreme National Security Council, said Iran had “ fundamentally recalibrated” its posture towards US forces.
Rezaei posted on X:
In recent days, Washington has received a clear warning from Iran’s new missiles. Economic warfare will be met by a maritime exclusion zone across the Persian Gulf to the blockade perimeter. The operational posture toward U.S. warships and bases has been fundamentally recalibrated.
Shipping traffic through the Strait of Hormuz has already slowed this week – just seven commodity vessels sailing through the Strait of Hormuz on Monday, down from eight on Sunday. Before the war began, about 130 ships a day would cross the strait.
This is all a headache for central bankers, as high oil prices create inflationary pressures through the economy. Later today, MPs in London will question Bank of England governor Andrew Bailey, and colleagues, about their recent decision to hold the Bank Rate at 3.75%.
MPs are likely to question witnesses on the potential inflationary impact of the ongoing war in Iran and how the MPC considers recent developments in AI, the committee says.
The agenda
7am BST: German trade data for July
7.45am BST: French trade data for July
2.15pm BST: Bank of England policymakers appear before the Treasury select committee
