The London Stock Exchange’s FTSE 100 index showed unexpected resilience on Monday, trading higher despite significant geopolitical volatility in the Gulf. The index climbed 15 points to 10,512, largely supported by gains in energy heavyweights BP and Shell, which rose 2.7% and 1.6% respectively following a spike in global oil prices.
Markets reacted sharply to the intensifying military exchange between the US and Iran. Tehran has claimed that the Strait of Hormuz is effectively closed to shipping, while US officials maintain the waterway remains open and are actively providing escorts for commercial vessels. According to Tickmill market analyst Patrick Munnelly, the escalation has pushed global markets into an “inflation-shock posture,” characterized by higher crude prices, firmer dollar values, and diminished expectations for near-term interest rate cuts.
While energy stocks provided a buffer, the broader market remains cautious. Tech investment vehicles and mining stocks faced downward pressure, reflecting concerns over the potential for a persistent risk premium in energy transit. Analysts at Deutsche Bank noted that the widening scope of strikes on military and energy infrastructure underscores a period of high uncertainty, with market participants closely monitoring bond yields as 2-year Treasuries rise, signaling a demand for higher real returns amid inflationary fears.