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After an incredible begin to 2026, the FTSE 100 has suffered one other ‘Trump slump’. After the US attacked Iraq on 28 February, the UK index began sliding. How unhealthy might issues get?
As I write, the Footsie stands at 10,162, down 7.1% from its report excessive of 10,934.94 on 27 February. This is shut to a correction: a ten%+ fall from a earlier peak. However, it is far from a stock-market crash: a 20%+ plunge.
For the London index to report a correction, it could want to hit 9,841.45. That’s a slide of three.2% from its present stage. I can see this occurring if this new Gulf struggle drags on.
That stated, for the FTSE 100 to crash, it could have to collapse to 8,747.95. That’s 13.9% beneath its present place. While this is actually possible, one thing nasty might need to occur for issues to get this unhealthy.
Then once more, the value of a barrel of Brent crude oil has surged 24.5% in the final week. On Monday morning, it briefly spurted shut to $120, earlier than falling again to beneath $104 as I write. In the previous, sustained uplifts in the oil value have harmed international development and triggered steep falls in share costs.
In my view, the FTSE 100 doesn’t look crazily low-cost proper now, both in historic or geographical phrases. Indeed, it might simply be argued that traders might acquire low-cost publicity to international development by shopping for into Footsie companies.
For instance, right here’s one British firm that my household portfolio owns for juicy dividends and potential capital development.
BP: daring play?
For the report, we purchased BP (LSE: BP.) shares for our household portfolio in August 2023, partly as a hedge in opposition to greater oil costs. We paid 484.1p a share for our stake, attracted by the inventory’s beneficiant dividends.
As I write, BP shares commerce at 506p, valuing the former British Petroleum at £78.8bn. To date, we’re sitting on a modest paper acquire of 4.5% — hardly thrilling. However, we now have invested our quarterly dividends into shopping for extra BP inventory, which boosts our returns.
The BP share value is up 19.6% (*100*) six months and 20.9% (*100*) one 12 months. Over 5 years, it has gained 56.4%, versus 50.9% for the wider FTSE 100. In quick, it has seen regular (however far from spectacular) returns since spring 2021.
The above features exclude dividends, that are a significant part of the long-term returns from UK shares. BP’s present dividend yield is a tidy 4.8% a 12 months, properly above the 3.1% a 12 months on provide from the Footsie.
If oil provides from the Middle East proceed to fall or get reduce off, then I’d anticipate the oil value to soar once more. In these circumstances, I’d additionally anticipate the BP share value to rise (*100*) time.
Finally, this 117-year-old power agency is in transition, with new CEO Meg O’Neill set to take the reins in April 2026. Like many new bosses, she might set BP on a brand new course, maybe triggering short-term uncertainty. Likewise, the inexorable transfer from fossil fuels to renewable power creates large challenges for the group.
Even so, I’ve no intention of promoting our BP shares at present costs and should even purchase extra!
