FTSE 100 falls 0.5% as US-Iran tensions push Brent above $90

London's FTSE 100 slid to 10,545.75 as Brent crude breached $90 a barrel for the first time in months, with Iran threatening to block the Strait of Hormuz and Andy Burnham preparing to take office as prime minister.

London's FTSE 100 fell 0.5% to 10,545.75 on Monday as Brent crude surged past $90 a barrel after Iran threatened to halt oil shipments through the Strait of Hormuz, a chokepoint handling about 21% of global oil consumption.

"Brent's break above $90/bbl has turned the US-Iran escalation from a geopolitical tail risk into the dominant macro input again, pressuring bonds, reviving inflation concerns," said Patrick Munnelly, market strategist at Tickmill Group.

Brent rose 3.2% to $90.95, while WTI gained 2.8% to $84.79 after US forces launched a ninth consecutive night of strikes against Iranian targets. Iran's foreign ministry spokesman Esmail Baghaei later signaled openness to diplomatic talks, helping oil pare some gains — Brent eased to $87.03 by midmorning in London, down 1.2% from the session high.

The escalation threatens to derail the disinflation narrative that emerged after last week's softer US CPI and PPI prints. Brent is now roughly 28.5% above its July low, and while still short of the near-$100 midpoint between pre-crisis levels and the late-April peak around $126, the move has been large enough to trouble central banks without being fully priced into markets.

Oil's supply-risk premium builds

The Strait of Hormuz threat carries outsized consequences for Europe, which relies on Middle Eastern crude for about 20% of its refined product imports. Iran's suspension of a memorandum of understanding deal and the drying up of traffic through the strait keep the supply-risk premium embedded, Munnelly said, even before any full closure scenario is priced.

The last comparable threat to the strait came in 2019, when Brent spiked about 15% over two weeks after attacks on Saudi Aramco facilities before diplomatic channels reopened. This time, US strikes have continued for nine consecutive nights — matching the duration of that earlier episode — though the oil price response has been more measured, suggesting markets still anticipate a diplomatic resolution.

Political transition adds uncertainty

On the domestic front, outgoing Prime Minister Keir Starmer tendered his resignation to King Charles, clearing the way for Andy Burnham to form a new government. Burnham, who is expected to name Shabana Mahmood as chancellor, inherits an economy facing rising energy costs and slowing growth.

The political handover adds a layer of uncertainty for UK equities already under pressure from the oil shock. The FTSE 100's energy-heavy composition — BP and Shell both rose Monday on higher crude prices — provides a partial hedge, but the broader index faces headwinds from potential fiscal policy shifts under the incoming administration.

Cross-asset ripples

The geopolitical jolt extended beyond London. US equity futures pointed to a mixed open, with S&P 500 futures up 0.5% and Nasdaq-100 futures gaining 1% as chipmakers attempted to recover from last week's tech-led rout. The VanEck Semiconductor ETF rose more than 2% in premarket trading.

European indices also felt the pressure, with the Stoxx 600 edging lower as defense stocks gained and airlines — including Ryanair, which reported a 34% drop in first-quarter profit — weighed on the travel sector. Ryanair's profit after tax fell to 538 million euros from 820 million euros a year earlier, missing analyst estimates, as fuel costs jumped and fares declined.

This article is for informational purposes only and does not constitute investment advice.