The question hangs over the market like a dark cloud: has the White House lost the narrative in the Gulf? As gilt yields wobble and the pound takes a modest hit, Downing Street’s refusal to comment speaks volumes. Investors are now pricing in a higher risk premium on UK assets, fearing entanglement in a conflict that could send oil prices through the roof.
The silence from Number 10 is deafening, and in the City, silence often signals trouble. Capital flight is already beginning, with hedge funds quietly shifting positions out of sterling. The lack of a clear diplomatic strategy from Washington is fuelling volatility.
If the president cannot control his own hawks, the market will impose its own discipline. Fiscal responsibility demands clarity, but all we get is obfuscation. The bottom line: uncertainty is the enemy of investment, and right now, uncertainty is in the driving seat.
Watch for further weakness in the FTSE and a spike in gold prices as the safe-haven trade resumes.
