The FTSE 100 suffered its worst day in 11 months on Tuesday, closing 2.75% lower amid escalating conflict in the Middle East. The sell-off followed US-Israeli airstrikes on Iran, with global markets rattled by soaring energy prices and renewed inflation fears.
Brent crude jumped 6% to nearly $83 a barrel, while UK gas prices surged 30% to a three-year high. The pound fell to a three-month low against the dollar, dropping 0.8% to $1.33, as investors fled risk assets.
In Asia, Japan’s Nikkei fell 3.1% and South Korea’s Kospi plunged 7.2%. US markets also slid, with the Dow closing 0.8% lower. Gold retreated 5% after Monday’s safe-haven rally, while Bitcoin dropped 2.3%.
Economists warned that rising energy costs threaten Chancellor Rachel Reeves’s plans to control inflation and revive growth. Mortgage rate cut expectations have plummeted, with markets now pricing only a 29% chance of a Bank of England rate cut in March, down from 80% last week.
UK government borrowing costs rose sharply, with yields on two, ten, and thirty-year bonds surging around 10 basis points. The International Monetary Fund cautioned that the crisis could disrupt global trade and financial stability.
