London shares tumbled sharply today, sending the FTSE 100 to its lowest level in nearly two weeks as escalating conflict between Iran, the United States and Israel triggered a surge in oil prices and reignited inflation fears across global markets.
The UK benchmark index was trading at 10,482.66, down 297.45 points, a fall of 2.76% in live trade. The drop extended early losses after reports that Iranian drones struck the US Embassy in Saudi Arabia, intensifying concerns following recent American and Israeli attacks on Iranian targets.
Oil jumps as Strait of Hormuz threat escalates
Energy markets reacted immediately. Brent crude rose 3.7% to $80.61 a barrel, while liquefied natural gas prices surged by around 30% after fresh warnings from Tehran over shipping routes.
Ebrahim Jabbari, an adviser to the commander-in-chief of Iran’s Islamic Revolutionary Guard Corps, told state television that Iran would “set fire to anyone who tries to pass through” the Strait of Hormuz. He added that ships entering the region would face a “serious response”.
The threat is significant because roughly 20% of the world’s oil and gas supplies pass through the Strait of Hormuz, making it one of the most critical energy chokepoints globally. Disruption — or even the risk of disruption — has an outsized impact on prices. The strategic importance of the route is well documented in global energy assessments, including analysis from the U.S. Energy Information Administration.
Global markets turn lower
The selloff in London mirrored weakness across Europe and Asia. Germany’s DAX index fell about 2.2%, France’s CAC 40 lost roughly 1.7%, and the pan-European STOXX 600 dropped close to 2%.
Earlier in the session, Japan’s Nikkei 225 slid more than 3%, while China’s Shanghai Composite declined around 1.4%. US futures were also in negative territory, pointing to a weaker start for Wall Street as traders reassessed risk exposure.
Currency markets reflected the defensive shift. The pound weakened around 0.7% against the US dollar to trade near $1.3310, as investors sought safety in dollar-denominated assets.
Inflation fears resurface
The renewed spike in energy prices has complicated the interest-rate outlook. Philip Lane, chief economist at the European Central Bank, warned that a prolonged war in the Middle East and sustained disruption to energy supplies could lead to a “substantial spike” in inflation.
Lane noted that while energy-driven price shocks can be temporary, the overall impact would depend on the breadth and duration of the conflict. He cautioned that the effect would be amplified if markets began repricing risk more broadly, tightening financial conditions further.
That dynamic places central banks in a delicate position. Higher oil and gas prices can slow economic growth by squeezing household spending and corporate margins, while at the same time lifting headline inflation — limiting room for policy easing.
Pressure across FTSE sectors
The FTSE 100’s composition means energy producers may benefit from higher crude prices, but broader index performance often reflects global growth expectations. Financial stocks, consumer names and travel companies tend to suffer when volatility rises and fuel costs climb.
Airlines and transport operators are particularly sensitive to jet fuel costs, while retailers face renewed pressure on consumer spending power. Banks must navigate the tension between elevated rates supporting margins and slower growth increasing credit risk.
Domestic backdrop in focus
The market turbulence overshadowed Chancellor Rachel Reeves’s preparations to deliver her spring statement on the health of Britain’s public finances. While fiscal messaging remains important for gilt yields and sterling, global geopolitical risk currently dominates trading screens.
Investors are watching whether rising energy prices could alter economic forecasts or inflation projections in the UK, especially if crude remains above the $80 threshold for a sustained period.
What markets are watching next
For now, volatility is firmly back in control. Traders are focused on three immediate variables: developments around the Strait of Hormuz, movements in oil and gas prices, and signals from central banks about inflation tolerance.
With the FTSE 100 at a two-week low and nearly 300 points lower on the day, sentiment remains fragile. Until geopolitical tensions ease or energy markets stabilise, rallies may struggle to gain momentum as investors prioritise capital preservation over risk-taking.
