FTSE 100 Edges Higher Ahead of Key ECB Interest Rate Decision

London's FTSE 100 index edged higher in early trading Thursday as market participants positioned for a key interest rate decision from the European Central Bank (ECB). The cautious optimism was tempered by elevated oil prices and escalating geopolitical tensions between the U.S. and Iran.

As of 03:18 ET (07:18 GMT), the FTSE 100 was up 0.06%. Other major European indices also saw slight gains, with Germany’s DAX rising 0.12% and France’s CAC 40 adding 0.30%.

ECB Decision and Geopolitical Risks

Investors are closely watching the ECB, with markets having almost fully priced in a 25-basis-point interest rate hike across all three of its key policy rates. The decision is the main European economic event of the day, guiding investor sentiment.

However, a tense backdrop in the Middle East is limiting market upside. Iranian state media reported that projectiles struck several areas along Iran’s southern coastline, while CBS News reported that U.S. military aircraft were damaged in Iranian missile strikes on an airbase in Jordan. These events have impacted shipping in the Strait of Hormuz, a critical oil transit chokepoint, with vessel transits falling significantly, according to Reuters ship-tracking data.

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Analysts at ING noted that current signals "point to further escalation, keeping upside pressure firmly in place" for oil prices. Brent crude futures eased slightly to $100.89 a barrel, while West Texas Intermediate slipped to $95.83.

UK Corporate Highlights

On the corporate front, several UK companies reported significant updates:

• Associated British Foods (ABF) announced that its retail division, Primark, will introduce home delivery in the UK. The company also forecast that like-for-like sales are expected to fall by 3% in the fourth quarter.
• Currys reported a 7% increase in like-for-like sales for the first quarter, citing strong demand for cooling products during the summer heatwave.
• THG saw its first-half adjusted EBITDA more than double to £42.8 million. However, the e-commerce company warned that new EU parcel duties would likely slow its revenue growth in the third quarter to approximately 2%.