FTSE 100 Index drops as Barclays, NatWest, and Lloyds sink amid 2 key risks

The FTSE 100 Index retreated for the fourth consecutive day, reaching its lowest level since March 30th. It has dropped by over 6.30% from its highest point this year as geopolitical risks jumped.

FTSE 100 Index chart | Source: TradingView

FTSE 100 Index drops amid rising risks in the UK

The FTSE 100 Index retreated sharply on Tuesday, mirroring the performance of other European indices and American stock index futures.

In Germany, the DAX Index dropped by 0.96%, while in France, the CAC 40 fell by 0.65%. The Euro Stoxx 50 Index dropped by nearly 1%

This price action is happening amid the rising concerns that the United States and Iran will go back to war. In a statement on Monday, President Donald Trump said that the ongoing ceasefire was on a massive life support as he rejected Iran’s response to the US offer to end the war.

Iran’s response focused on reopening the Strait of Hormuz in exchange for sanctions relief and a commitment to continuing negotiations on the nuclear weapons program.

There is a possibility that the US and Israel will launch their attacks when Trump returns from China. Such a move would have a major impact on the UK economy, where energy prices have soared in the past few months.

The most recent economic data showed that the headline consumer price index (CPI) jumped to 4.6% in April this year from 3.3% in the previous month. As a result, there are fears that the  Bank of England (BoE) will decide to hike interest rates later this year.

These fears explain why the UK's borrowing costs have continued rising. The 1-year Gilt yield rose to 5.11%, its highest level since 2008. Similarly, the five-year yield rose to 4.663% from the pandemic low of minus 0.105%.

The FTSE 100 Index is also falling amid the ongoing political crisis after last year's election, in which the ruling Labour Party suffered a major bloodbath. Keir Starmer, the Prime Minister, is now weighing options on whether to resign or keep pushing on.

Polymarket traders believe that his time as the premier is numbered. 57% of the respondents believe that he will be out by March, May 31st, while 86% expect him to be out by December.

Barclays, NatWest, and Lloyds shares lead losses as energy jumps 

Banks were the top laggards in the FTSE 100 Index today, with Barclays stock dropping by over 4.42%. NatWest dropped by 4.27%, while Lloyds fell by 4%.

UK banks have been highly sensitive to the ongoing Iran war because of its impact on the UK economy and the potential for non-performing loans.

Still, on the positive side, these banks released strong financial results, with Lloyds’ profit before tax rising to £2 billion from the £1.5 billion in the same period last year. Its underlying net interest income rose by 8% to £3.6 billion.

Similarly, Natwest’s net interest income jumped to £3.39 billion from £3.02 billion in the same period a year earlier. Its total income jumped to £4.3 billion, with Barclays ' profit before tax hitting £2.8 billion.

On the other hand, Intertek Group’s stock jumped by over 6.5%, making it the best-performing company in the FTSE 100 Index today. Energy companies like BP and Shell jumped by over 2.47% and 1.76%, respectively. This jump happened as the crude oil prices soared, with Brent rising to over $100.

The other top gainers in the FTSE 100 Index were companies like British American Tobacco, London Stock Exchange (LSEG), Coca-Cola, and Unilever.