Daily market update: oil, gold, inflation, interest rates, defence stocks

The uncertainty factor reigns again.

Scenes in the Middle East have caused widespread nervousness across financial markets. The US attacks on Iran have caused oil prices to soar amid fears of disruptions to supplies, pushing up costs for businesses and consumers. That ranges from costing more to fill up the car to making it more expensive to run factories.

If the issues persist then the market will start to worry about new inflationary pressures and that could lower expectations for near-term interest rate cuts. Central banks hold or raise rates in the fight to bring inflation lower.

Financial markets typically prefer lower rates to higher ones, and any prospect of rates staying put or even going up would be taken as a negative for share and bond prices.

A higher cost of borrowing would be negative for consumer and business sentiment, and feed into slower economic growth.

While these scenarios will be front of mind, investors might be taking one day at a time while they try to ascertain if this is a short, sharp event or one that could drag on for ages.

Staying calm and not making knee-jerk reactions to investment portfolios is important. There is no reason to panic and sell investments at the first sign of trouble. Equity markets are in the red following the weekend events, but they are only giving up a small portion of recent gains. History suggests that staying invested through both good and bad times is better than trying to time the market.

Just look at how concerns around AI spending and industry disruption haven’t derailed financial markets. Certain pockets have seen setbacks, but many places have continued to push higher in recent months as there was still enough good news coming from the broader corporate world to keep investors happy.

It’s common to see people adding supposed safe-haven investments in times of stress, and that trend is in play now. Areas like gold, US Treasuries, defensive sectors like utilities and tobacco, cash, money market funds, and real assets such as infrastructure are all classic safe-haven territories. Defence contractors also sit in this pack when the worry issues are related to geopolitical tensions, as is the case now.

BAE Systems jumped 7% in early trading as investors potentially took the view that worrying events in the Middle East could prompt governments around the world to further boost defence spending.

Gold rose by 3% to $5,418 per ounce, which is a large one-day movement but not enough to take the precious metal to a new record high. The intraday record high was $5,594 per ounce on 29 January 2026.

The FTSE 100 fell by 1%, less than half than other major market indices in Europe, thanks to its large weighting towards oil producers, gold miners and defence contractors. A higher oil price is good for BP and Shell’s earnings, while a stronger gold price implies greater profit potential for Fresnillo and Endeavour Mining.

Airline stocks fell as a sharp increase in the oil price is bad for costs and disruption to air traffic is bad for sentiment towards the sector. British Airways’ owner IAG fell 7%.

InterContinental Hotels

An already difficult period for the hotels sector given the geopolitical backdrop has been compounded by the spectre of regulatory action. The UK competition authority (CMA) is to probe several chains over information sharing.

Data and new tools to analyse data can be valuable to consumer-facing businesses, allowing them to understand their customers and co-ordinate their services and pricing accordingly. However, Holiday Inn owner InterContinental Hotels, Hilton and Marriott are under investigation by the UK competition regulator on the basis they may have exploited and shared data in a way that went outside of the rules.

Their data provider CoStar is also captured by the probe for the provision of the pricing algorithms which helped the businesses set their charges.

The CMA has been active in recent years, making interventions across various industries, and this latest move suggests the regulator is keen to stay on top of a fast-moving world where companies’ use of technology could have significant implications for consumers.

Smith & Nephew

Having enjoyed a decent run heading into its latest results, investors seem decidedly underwhelmed by the numbers and guidance.

The company was affected by the disruption to elective surgeries caused by the pandemic and is now at the end of its three-year recovery plan.

Smith & Nephew continues to have its feet held to the fire by the presence of activist investor Cevian Capital on the shareholder register. It has faced calls to spin off its core orthopaedics division but has been strong in resisting such a move.

The company’s new RISE strategy is supposed to build on the improvements it has made over the last three years to help it hit 2028 targets but the guidance for 2026 looks uninspiring.

It is, in fairness, in line with what Smith & Nephew outlined in December but the level of growth would represent a slowdown from a strong final three months of last year, and the guided free cash flow is less than the company achieved in 2025.

In part this is thanks to a one-off property sale, but investors will hope a conservative outlook reflects an attempt to manage expectations.