Malaysia Airlines MH17 crash and Middle East unrest put world markets on edge

The FTSE 100 followed Asian stock markets lower and the oil price rose as the deadly attack on the jet frayed the nerves of the Square Mile

Rising international tensions sent the City running for cover today as world markets reacted to the Malaysia Airlines passenger jet crash and unrest in the Middle East.

The FTSE 100 followed Asian stock markets lower and the oil price rose as the deadly attack on the jet over Ukraine, believed to have been made by pro-Russian separatists, frayed the nerves of the Square Mile. Sentiment was also hit by Israel sending troops into Gaza for the first time in five years.

London’s blue-chip benchmark was down 0.5 per cent in a rocky day for European markets following the biggest one-day drop for Wall Street’s S&P 500 since April, 1.2 per cent. Moscow’s Micex index fell 2 per cent in early trading and the rouble lost ground against the dollar for the sixth day in a row as the United Nations security council convened following the attack.

The announcement of fresh US sanctions against Russia for its alleged support of separatist rebels in eastern Ukraine ratcheted up the tension, pushing investors into the safe havens of US Treasury bonds, which saw the biggest spike in prices since March. The gold price was flat after surging in the immediate wake of the airliner’s crash.

Alastair McCaig, market analyst at IG Group, said: “There’s a measure of caution out there. It’s a ‘risk off’ day. With this kind of situation there is likely to be more newsflow over the weekend, but the markets are shut so there’s no chance to react. There have been positives lately like a decent US earnings season, so investors are taking some money off the table.”

 

Brent crude jumped more than a dollar to $108.33.

UniCredit head of fixed income strategy Michael Rottmann said: “Tensions will most likely continue into the weekend. Furthermore, Israel sending ground troops into the Gaza Strip adds to geopolitical concerns. While at current levels both Bunds and US Treasury valuations look extremely rich, it is clearly not the time to position in the opposite direction.”

Malaysia Airlines shares were down as much as 18 per cent at one stage after the second disaster for the company in four months following the unexplained disappearance of flight MH370 in March. The company, led by chief executive Ahmad Jauhari Yahya has seen a third of its share price value wiped out in the first half of the year following the two disasters.

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