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After a good start in 2026, the FTSE 100 faced another ‘Trump slump’. After the US invaded Iraq on 28 February, the UK index began to slide. How bad can things get?
As I write, the Footsie stands at 10,162, down 7.1% from its record high of 10,934.94 on 27 February. This is close to a correction: a 10%+ drop from the previous peak. However, it is far from a stock market crash: a 20%+ drop.
For the London index to record a correction, it would need to hit 9,841.45. That’s a 3.2% slide from its current level. I can see this happening if this new Gulf war continues.
That said, for the FTSE 100 to crash, it would have to drop to 8,747.95. That is 13.9% below its current position. While this is possible, something bad could happen to make things this bad.
And again, the price of a barrel of Brent crude oil increased by 24.5% last week. On Monday morning, it briefly rose to $120, before falling back below $104 as I write. In the past, the continued rise in oil prices has hurt global growth and caused stock prices to fall.
In my opinion, the FTSE 100 does not look very cheap right now, either historically or geographically. Indeed, it could easily be argued that investors can gain cheap exposure to global growth by buying Footsie businesses.
For example, here is one British company that my family’s portfolio holds for good returns and potential capital growth.
BP: playing with courage?
For the record, we bought BP (LSE: BP.) shares in our family portfolio in August 2023, partly as a hedge against higher oil prices. We paid a dividend of 484.1pa on our stake, attracted by the stock’s open dividends.
As I write, BP shares are trading at 506p, valuing the former British Petroleum at £78.8bn. So far, we are sitting on a paper gain of 4.5% – which is not very exciting. However, we invested our quarterly profits in buying more BP stock, which boosted our returns.
BP’s share price is up 19.6% in six months and 20.9% in one year. Over five years, it has gained 56.4%, compared to 50.9% for the broader FTSE 100.
The above returns do not include dividends, which are the main component of long-term returns from UK shares. BP’s current dividend yield is 4.8% per annum, much higher than the 3.1% per annum offered by Footsie.
If the supply of oil from the Middle East continues to fall or is cut off, I would expect the price of oil to rise again. In these circumstances, I would also expect BP’s share price to rise over time.
Finally, the 117-year-old energy company is in transition, with new CEO Meg O’Neill set to take over in April 2026. Like many new managers, she may set BP on a new course, perhaps causing short-term uncertainty. Likewise, the inevitable move away from fossil fuels to renewable energy poses major challenges for the group.
However, I am not willing to sell our BP shares at current prices and may buy more!
