London’s equity markets opened lower on Monday, tracking a broader global risk-off sentiment after the United States moved to blockade Iranian shipping.
The move followed the collapse of weekend peace talks between Washington and Tehran, which dampened expectations of a swift resolution to the ongoing Middle East conflict.
The benchmark FTSE 100 index fell 0.4% to 10,558.38 points as of 0944 GMT.
The mid-cap FTSE 250 declined more sharply, shedding 0.8%.
The downturn reflected growing investor caution as geopolitical risks escalated and energy prices surged.
Oil surge drives global risk
Market sentiment weakened after the failed diplomatic efforts triggered a fresh spike in oil prices, which climbed above $100 per barrel once again.
The increase in crude prices added to inflationary concerns and weighed on global equities, including those in London.
The latest developments come after both the FTSE 100 and FTSE 250 recorded gains in the previous week, supported by a two-week ceasefire between the US and Iran.
However, that fragile truce had already shown signs of strain as hostilities continued, setting the stage for renewed volatility.
Banks under pressure, energy stocks gain
Heavyweight banking stocks were among the biggest drags on the FTSE 100.
HSBC and Barclays led the declines, falling 1.1% and 1.3%, respectively, as investors rotated away from risk-sensitive sectors.
In contrast, energy companies benefited from the surge in oil prices.
Shares of Shell and BP both rose approximately 1.8%, providing some support to the broader index amid otherwise widespread losses.
Travel and leisure stocks hit by rising fuel costs
Travel and leisure stocks were particularly hard hit as higher oil prices raised concerns over increased operating costs.
Cruise operator Carnival dropped 3.9%, while airline stocks also faced significant pressure.
EasyJet declined 4.3%, and Wizz Air fell sharply by 7.3%.
The losses in Wizz Air were further exacerbated after Bernstein downgraded the stock to “market-perform” from “outperform,” adding to negative sentiment in the aviation sector.
Policy response in focus as energy costs rise
Amid the rising energy prices, attention has turned to potential government intervention.
A report indicated that Finance Minister Rachel Reeves is expected to outline measures later this week aimed at supporting businesses struggling with elevated energy costs linked to the Middle East conflict.
The anticipated policy response could play a crucial role in stabilising sectors most affected by the energy price surge, particularly those with high fuel dependency.
Corporate updates fail to lift sentiment
On the corporate front, homebuilder Vistry announced the appointment of insider Adam Daniels as its new chief executive officer.
Despite the leadership change, the company’s shares fell 4.9%, reflecting the broader market weakness.
Meanwhile, fintech firm Wise provided a rare bright spot, with its shares climbing 5.3%.
The gains came after the company reported a 26% increase in fourth-quarter cross-border transaction volume, signalling strong underlying business momentum despite the challenging macro environment.
Overall, London markets remain highly sensitive to geopolitical developments, particularly those impacting energy supply and prices.
With tensions in the Middle East showing little sign of easing, investors are likely to remain cautious in the near term, keeping pressure on equities while supporting energy-linked sectors.
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