Major airlines have been forced to cancel and re-direct flights to Israel in the wake of Iran’s missile and drone attack on Saturday.

EasyJet has temporarily stopped flights to and from Tel Aviv until this Sunday, while Wizz Air has said it will resume on Tuesday after cancelling services from Saturday until Monday.

More here.

Back in the markets, the oil price is sliding further into the red.

Brent crude is now down 1.6% at $88.96 per barrel, as traders cling to hopes that tensions in the Middle East will not escalate further following Iran’s retaliatory strike on Israel last weekend.

Some senior names at Tesla have also left the company.

That include Andrew Baglino, Tesla’s senior vice president for powertrain and energy engineering. Baglino has posted that he made the difficult decision to leave yesterday – which suggests he’s chosen to quit, rather than seeing his role axed.

Baglino writes:

When I joined as a junior firmware / electrical engineer back in 2006, a future Tesla that produced the world’s top selling vehicle was well beyond my expected set of outcomes. A reminder to all of us to set higher expectations, I guess :)

Bloomberg’s Ed Ludlow reports that Rohan Patel, Tesla’s senior global director of public policy and business development, has also left.

Tesla’s plans to cut 10% of its workforce haven’t given its share price a lift.

Shares in Tesla have dropped by 3.5% in early trading to $165.05, down from $171.05 on Friday night.

That knocks $19bn off its market capitalisation so far today, down from $544bn to $525bn.

So far this year, Tesla has now lost a third of its value.

Back in the City, the FTSE 100 share index has shrugged off its earlier losses.

The blue-chip share index is now up 5 points, or 0.07%, which pushes it back over the 8,000-point mark.

That means its less than 50 points away from the record high of 8,047 points, which could come back into play if market nervousness recedes….

The US retail sales report will “further support” the Federal Reserve’s stance that there is no rush to start lowering interest rates, reports Andrew Hunter, deputy chief US economist at Capital Economics.

Hunter told clients:

Although growth over the first quarter as a whole was hit by the weather-related weakness in January, the March gain leaves retail spending growth looking in better shape than the data previously implied.

And although overall real consumption growth still looks to have slowed from the 3.3% annualised gain seen in the fourth quarter of last year, it was still apparently more than 2.5% annualised. Alongside the recent resurgence in employment growth, the continued resilience of consumption is another reason to suspect the Fed will wait longer before starting to cut interest rates, which now we think won’t happen until September.

Today’s strong retail sales suggest the US economy is holding up well, which may deter the Federal Reserve from cutting interest rates soon.

The US dollar has strengthened since the better-than-expected US retail sales were announced, hitting its highest level since last November.

This has pushed the Japanese yen down to a new 34-year low, at 154.28 yen to the dollar, which will intensify the pressure on Tokyo to intervene and support its currency.

Energy giant BP is also cutting jobs at its electric vehicle charging arm.

Reuters reports that BP has cut over a tenth of positions at its EV charging business, BP Pulse, and also withdrawn from several markets.

It is now focusing on the US, the UK, Germany and China – four countries where it sees the fastest EV growth – and pulled out of several other markets. This means around 100 jobs were axed; most staff affected have been redeployed, with just a handful leaving BP.

Shares in Tesla are down 0.7% in pre-market trading, as traders digest reports that it will cut 10% of its staff in a cost-cutting drive.

They fell 2% on Friday, and are down around 31% so far this year.

India’s stock market has hit its lowest level since the end of last month, as geopolitical tensions weighed on shares.

The Sensex index lost 1.1% in today’s nervous trading, amid a rise in volatility.

Newsflash: The devastating impact of the Covid-19 pandemic on the world’s poorest countries has brought poverty reduction to a halt and led to a widening income gap with nations in the rich west, the World Bank has warned.

In a report released to coincide with its half-yearly meeting, the Washington-based organisation said half of the world’s 75 poorest nations had seen income per head rise more slowly than in developed countries over the past five years.

Urging governments and the private sector to do more to help tackle what it called a “great reversal”, the Bank said that since 2019 there had been a surge in food insecurity and debt distress.

The Bank’s data showed that one in three countries eligible for grants and concessional loans under its International Development Association (IDA) arm was poorer, on average, than it was on the eve of the Covid-19 pandemic. Not since the last five years of the 20th century had more than half of the poorest countries experienced income per head grow more slowly than in developed countries.

Here’s the full story:

Although oil is down this morning, it’s only dipped to its lowest level since last Wednesday.

That suggests that some, but not all, of the risk premium in the oil price has dissipated, with Brent crude down $1 per barrel at $89.50.

Raffi Boyadjian, lead investment analyst at XM, says:

It seems that the immediate market reaction to Iran’s onslaught of missiles is relief, as the attacks were well telegraphed in advance, giving the Israelis and Americans plenty of time to prepare for defensive action. Even oil futures barely flinched, spiking modestly higher at Monday’s open before pulling lower.

Elsewhere this morning, industrial production across the eurozone has crept up, but was sharply lower than a year ago.

Industrial production increased by 0.8% in the euro area in February data from Eurostat shows, compared with January.

But on an annual basis, industrial output was 6.4% lower than in February 2023 across the euro area.

This annual decline was partly due to a 3.6% drop in energy output, but was also driven by a near 9% decline in production of capital goods (heavy-duty machinery).

Oil is continuing to drop this morning, with Brent crude down 1% today at $89.52 per barrel.

Having risen last week in anticipation that Iran would respond to the bombing of its diplomatic complex in Syria two weeks ago, oil is now retreating on relief that the damage was not worse.

AJ Bell investment director Russ Mould says:

The situation remains fraught and, beyond the geopolitical and humanitarian implications, a more widespread conflict in the Middle East could see energy prices surge and unpick central banks’ careful efforts to bring down inflation.

Budget airline easyJet is now the top riser on London’s FTSE 100, up 1.7%.

British Airways parent company, IAG, is close behind having gained 1.4%.

Europe’s aviation regulator has reaffirmed its advice to airlines to use caution in Israeli and Iranian airspace.

The European Union Aviation Safety Agency (EASA) said it and the European Commission would “continue to closely monitor the situation to assess any potential safety risks for EU aircraft operators and be ready to act as appropriate”.

Current guidance is that airlines should exercise caution in both country’s airspace.

EASA also says no civil overflights were placed at risk last weekend, during the tensions surrounding Iranian drone and missile strikes on Israel, Reuters reports.

Dozens of flights were cancelled last weekend as airlines avoided large swaths of airspace in the Middle East, with Israel, Iran, Jordan, Iraq and Lebanon all temporarily closing their airspace.

These posts from yesterday show the impact:

After heavy losses at the end of last week, the US stock market is set to open higher today.

The Dow Jones industrial average is up 0.4% in the futures market, while the broader S&P 500 index is on track to rise 0.5%.

Both indices fell over 1% on Friday, as markets positioned for bad news over the weekend.

Kathleen Brooks, research director at XTB, says the initial reaction this morning seems to be one of relief – although that could quickly change if Israel were to retaliate against Iran,

Brooks explains:

When Iran launched drone and military attacks on Israel on Saturday night, it was the culmination of a build up of tensions over a number of weeks. Iran had threatened to retaliate in recent days, Israel on Friday said that it would strike back if it did.

Stocks tanked, the S&P 500 fell 1.46% on Friday, the Brent crude oil price rose by 3.4% in April, while gold climbed to a record high above $2,400 per ounce on Friday, before falling back sharply. The market was deeply concerned about the scale of this attack and whether it would lead to a wider escalation of war in the Middle East.

At the start of a new week, that uncertainty has disappeared, there was minimal damage from the strikes and there were no fatalities. This is why US stock market futures are predicting a higher open for US stocks and why the oil price did not rise on Monday.

Brent crude oil has dropped by 0.5% this morning, to $90 per barrel, a subdued reaction which suggests markets believe the fallout from Iran’s strike on Israel will be contained.

Oil has risen this year, up from $75/barrel at the start of January, indicating that a geopolitical price premium had already been built into the cost of energy.

Bartosz Sawicki, market analyst at Conotoxia fintech, predicts that the geopolitical risk premium is set to remain elevated, adding:

Israel’s government’s potential response is still extremely uncertain. The stakes are high. Significant retaliation could lead to a wider conflict, consequently triggering a rally in oil prices, robust demand for the US dollar, and renewed buying of gold.

Iran produces almost 3.5m barrels of oil per day, or 3.3% of world production, so any hypothetical loss of those supplies (perhaps though sanctions) could leave the world undersupplied.

Across the markets, there were limited losses in Australia overnight, where the ASX 200 share index has fallen 0.5%.

South Korea’s KOSPI 200 has also dropped 0.5%, while India’s SENSEX has lost 0.75% – relatively mild falls.

Kyle Rodda, senior financial market analyst at Capital.com, explains:

Asian cash equities have dropped to reflect the heightened risk of war in the Middle East. However, the move wasn’t as deep as what was reflected in futures prices from Friday’s close.

A lift in US futures today indicated relief that the attack wasn’t worse and is yet to provoke retaliation and significant escalation. The markets await Israel’s response to assess the risk of a broader conflagration and deepening conflict.