British financial markets swung sharply on Tuesday morning as escalating tensions in the Middle East rattled investor confidence, sending equities lower while oil prices surged and gold prices fluctuated amid heightened volatility.
London's benchmark FTSE 100 fell more than 3 percent in early trading, with banking, travel and industrial stocks leading declines as investors moved to reduce risk exposure. The broader FTSE 250 index also dropped markedly, reflecting widespread selling pressure across sectors.
Energy markets saw dramatic moves. Brent crude, the international benchmark, jumped about 9 percent to above 85 U.S. dollars per barrel, its highest level since July 2024, as fears mounted over disruptions to shipping through the Strait of Hormuz. The spike in oil prices intensified concerns about renewed inflationary pressure in Britain and Europe.
The United States and Israel launched strikes against Iran. On Monday, Iran said that the Strait of Hormuz has been closed, warning that the country's armed forces will take action against any movement by oil tankers through the Strait of Hormuz.
Nestled between the Gulf and the Gulf of Oman, the strait serves as the only sea passage from the Gulf to the open ocean, cementing its status as one of the world's most strategically vital chokepoints. Around 20 percent of global oil shipments pass through this critical strait.
In the precious metals market, gold prices showed sharp intraday swings. After rising earlier on safe-haven demand, bullion prices retreated as investors reportedly liquidated positions to cover losses in equity and bond markets. Analysts said the volatility reflected broad portfolio rebalancing rather than a change in long-term demand fundamentals.
UK government bond yields climbed as traders scaled back expectations of near-term interest rate cuts by the Bank of England. Rising energy prices revived concerns about persistent inflation, prompting markets to reassess the outlook for monetary policy in the months ahead.
Analysts said that the direction of UK markets in coming sessions would largely depend on whether energy infrastructure and shipping routes in the Gulf remain operational. A sustained rise in oil prices, they warned, could weigh further on equities and complicate the policy path for the Bank of England.