Daily market update: Markets steady, oil above $110, Universal Music Group

Markets were steady with investors largely non-committal as they await the apparent cliff-edge deadline imposed by the Trump administration.

President Trump’s threats widespread strikes on Iran if the Strait of Hormuz is not reopened by the early hours of tomorrow morning UK time, if taken at face value, create the conditions for a binary set of outcomes.

Either there is a climbdown on the part of Washington or Tehran, which could prompt a major rally in equities and easing of energy prices, or a major escalation with all the implications that might have for financial markets.

An alternative scenario is that the deadline is extended, and the markets face another uneasy period of trying to gauge the latest mood music in the US and Iran.

In London, BP and Shell were higher as oil prices ticked over the $110 per barrel mark. While stocks tell their own story, it is striking how far energy markets are from pricing in a dampening down in Middle East tensions.

The FTSE 100's precious metals mining contingent was on the back foot as gold retreated on continued strength in the dollar and the potential for interest rate hikes, factors which have outweighed any safe-haven attractions during the current crisis.

Universal Music / Pershing Square

Bill Ackman has long admired Warren Buffett’s style of finding good companies going cheap and buying them outright. Ackman has now gone full-on Buffett with a takeover offer for Universal Music Group (UMG) via one of his Pershing Square investment vehicles.

Pershing Square is currently the fourth largest shareholder in Amsterdam-listed UMG with a 4.7% stake. French billionaire Vincent Bollore is the one who needs to be convinced by Ackman’s proposal, given his company owns 18.5% of UMG and additional exposure through 30%-owned Vivendi which hold 13.4% of UMG. China’s Tencent is also a major shareholder with an 11.4% stake. Those are chunky stakes, and so Ackman will need a full-on charm offensive to win them over.

Ackman has previously argued that UMG would be better served on the US stock market where investors might attribute a higher valuation. The business floated to much fanfare in 2021 and commanded a premium rating, initially trading on nearly 35 times forward earnings. That rating quickly eased to around 25-times, but it’s dropped dramatically to 16-times since last summer. That’s down to a mix of concerns around the pace of growth and a shift in interest rate expectations. Rates staying higher for longer is bad news for a long duration company like UMG as that has a negative impact when calculating what its future cash flows are worth today.

On paper, you might think UMG is a money-making machine. In reality, it’s not that simple. UMG is the world’s largest music company; it owns a rich portfolio of iconic music labels and is home to nine of the top 10 global recording artists of 2025. It’s a way for people to invest in the likes of Taylor Swift and Sabrina Carpenter, with the company soaking up music royalty payments and investing in future stars.

UMG hasn’t sung the right notes since being a listed business. Investors have grown concerned about slower than expected growth in music streaming which matters because UMG relies heavily on the likes of Spotify and Apple Music for royalty payments. If growth isn’t supersonic, then investors won’t be prepared to pay as much for the shares – hence the de-rating we’ve seen since last summer.

A lot of music is now consumed via TikTok and Instagram. UMG had a spat with TikTok around royalty rates a few years ago, and while that dispute has since been settled it does point to broader concerns around getting paid by social media networks.

Cut-throat competition in the music business also doesn’t help. Record labels must plough significant amounts into marketing to make their artists stand above the crowd, and that means UMG must constantly spend money to make money. Investors are often short-sighted and prefer companies to scoop up the cash and return it to them, not reinvest it back into the business.