Markets tumble and oil prices rise as global focus remains on Strait of Hormuz

Financial markets fell sharply and oil prices extended gains further as the Middle East war entered its fourth week with global focus remaining on the need to break Iran’s stranglehold on the key shipping route for energy supplies.

Brent crude lifted 1% to nearly 114 US dollars a barrel after Iran warned it will strike electrical plants across the Middle East if US president Donald Trump follows through on his threat to bomb power stations in the Islamic Republic.

The FTSE 100 Index fell back further from the 10,000 market, dropping 1.6% soon after opening on Monday to stand 161.5 points higher at 9756.8.

London’s blue chip share index dropped below 10,000 on Friday for the first time since reaching the milestone level in early January.

In Europe, the Dax in Germany was 1.8% lower and France’s Cac 40 fell 1.4%.

It follows heavy falls overnight in Asia as the rhetoric from the US and Iran suggested little sign of a resolution to the conflict, with the Nikkei in Japan ending down more than 3%.

Prime Minister Sir Keir Starmer is heading an emergency Cobra meeting on Monday after a call on Sunday with US president Donald Trump to discuss reopening the Strait of Hormuz shipping route after they both agreed it was “essential” to stabilising global energy markets.

Mr Trump has set a 48-hour deadline that ends just before midnight UK time on Tuesday, warning Iran that the US would attack its power stations unless the country releases its grip on the Strait of Hormuz.

But Iran has said it will retaliate by striking electrical plants across the Middle East if Mr Trump follows through on his threat.

Chris Beauchamp, chief analyst at IG, said: “Investors who have spent the weekend watching fresh strikes in the Middle East are now waiting to see what will happen when Trump’s 48-hour deadline expires tonight.

“But they are in no mood to hang around, and have continued to sell stocks and precious metals.

“Each day that the war goes does more damage to the global economy and drives inflation higher, with recession chances rising by the hour.”

Kathleen Brooks, research director at XTB, said: “This could be a pivotal week for the conflict, and we could see who blinks first.

“All eyes are on the Strait of Hormuz, which is the epicentre for financial markets.

“If the Strait is reopened then the oil price could sink. However, if Iran does not adhere to Trump’s ultimatum, then it could seriously weaken the president’s hand, with untold consequences for global markets.”