FTSE 100 Dips as AI Shock and Tariff Fears Rattle Markets

Investors are wary as they brace for further volatility sparked by unpredictable US trade policy and the fallout from AI advances. London’s FTSE 100 is on the back foot in early trade, with more pessimism seeping through following sharp falls on Wall Street.

Nevertheless, the blue‑chip index is still showing resilience, particularly compared to indices stateside, helped by solid corporate results. Chemicals giant Croda and medical supplies firm ConvaTec surprised on the upside and also showed optimism about the outlook. Utility companies are also proving a draw for investors in the uncertain climate.

Jitters over the impact of new artificial‑intelligence‑powered tools on some incumbents are spreading, with the cyber‑security industry now reeling from the effects. Developments released by Anthropic have been like a wrecking ball through realms of listed companies, with Claude Code Security still wreaking havoc on cyber firms.

CrowdStrike shares fell sharply for a second session, bringing others down with it, amid worries the new tool can easily replicate some of its services. The wider economic impact is also a fear factor, given the potential for deep job losses, and labour markets have already been weakening. While this would ordinarily help lift hopes for faster interest rate cuts, sticky inflation won’t make that course of action quite so easy.

Focus is turning to President Trump’s State of the Union address tonight for clues about future US trade policy. Investors are bracing for another twist in the tariff tale. The blanket 10% global duties have come into force, but the threat of upping these to 15% is still dangling.

Plus, the President and his team appear to be looking at other options in the trade arsenal, including considering imposing new tariffs under the pretext of national security on industrial sectors such as large batteries, chemicals, power grids and telecoms equipment. The President won’t want to lose face against trade opponents, which is why relying on the TACO trade, and the expectation he’ll ‘chicken out’, bears risks.

The State of the Union address could also see Trump justify the military build‑up in the Gulf and potentially a fresh attack on Iran. Oil prices are hovering near seven‑month highs as tense negotiations are set to resume on Thursday, with the threat of military action still high. The concern is that it would not just disrupt shipments from Iran, but oil supplies across the region.

Another niggle of worry which risks turning into a bigger headache is unwelcome developments in the private credit market. Blue Owl Capital, a major player in private credit, changed the withdrawal mechanism for one of its funds, prompting a share slide amid concerns there could be deeper problems in the market, to which large institutions like pension funds are exposed.

It comes after the collapse of First Brands and Tricolor, a car‑financing company. Blue Owl has brushed off concerns, saying it is returning capital to investors more rapidly under the new agreement. In this more anxious environment, any hint of a problem is sending investors scuttling for cover, and checking for sufficient diversification and high‑quality exposure is sensible.