FTSE 100 Edges Higher as Softer Inflation Data Offsets Geopolitical Jitters

London's FTSE 100 index edged higher in early trading Tuesday, as new data showing a slowdown in UK shop price inflation provided a boost to investor sentiment. However, gains were capped by persistent geopolitical uncertainty in the Middle East, which continued to drive energy prices higher.

UK Shop Price Inflation Eases

Data from the British Retail Consortium (BRC) showed that shop price inflation eased to 1.4% year-over-year in September, down from 1.5% in August. The figure came in below the 1.5% forecast but remained above the three-month average of 1.3%.

The report detailed a slowdown in both key categories:

• Food inflation fell to 2.5% from 2.8%.
• Non-food inflation dipped to 0.8% from 0.9%.

The BRC noted that retailers are absorbing rising operational costs, including business rates and energy bills, but warned there is a limit to how much they can shoulder. This moderation in shop prices contrasts with the broader Consumer Price Index (CPI), which rose to 3.1% in August and is forecast to exceed 4% in early 2027, driven in part by higher energy costs, according to the source.

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Geopolitical Tensions Weigh on Markets

Broader market sentiment remains cautious amid ongoing tensions between the U.S. and Iran. The uncertainty has put upward pressure on oil prices, with Brent crude futures rising 1.34% to $99.15 a barrel and WTI crude gaining 1.24% to $93.75.

Analysts noted the significant impact of energy costs on the global financial landscape. "We are in a one factor world where rates are likely to drive all asset classes and rates are being driven by oil prices," wrote Jefferies economist Mohit Kumar in a client note. The firm stated it is in "reduced risk mode" pending clarity on the geopolitical situation. This pressure was reflected in the bond market, where 10-year U.S. Treasury yields have crossed 5.25%.

European Market Snapshot

As of 03:16 ET (07:16 GMT), the FTSE 100 was up 0.33%. Other major European indices were mixed, with Germany’s DAX slipping 0.20% and France’s CAC 40 falling 0.10%. In currency markets, the British pound fell 0.15% against the dollar to trade at $1.3238.