UK equities opened lower on Monday as investors reacted to a sharp escalation in tensions between Iran and Israel, prompting a move away from risk-sensitive assets and driving energy prices sharply higher.
The FTSE 100 was down 0.27% in early trading, while losses across continental Europe were more pronounced. Germany’s DAX declined 1.16% and France’s CAC 40 fell 0.86% as markets assessed the implications of the latest military developments in the Middle East.
Sterling eased marginally against the U.S. dollar, slipping 0.01% to 1.3340. Oil prices surged amid concerns over regional stability and potential supply disruptions. Brent crude rose 4.84% to $97.57 a barrel, while West Texas Intermediate gained 4.42% to $94.54.
The sell-off followed direct military exchanges between Israel and Iran, marking the most significant escalation since the ceasefire agreed in April. Israeli forces reportedly carried out strikes against military-related targets in western and central Iran, including facilities linked to the Karoun petrochemical complex in Mahshahr.
Iran responded through the Islamic Revolutionary Guard Corps, which said it had targeted Israeli air bases at Nevatim and Tel Nof as part of what it called Operation Nasr. Further missile launches towards Israel were reported on Monday morning, triggering air raid warnings across Tel Aviv and central parts of the country.
The situation broadened further as Yemen’s Houthi movement launched additional attacks against Israel and announced a complete ban on Israeli-linked maritime navigation in the Red Sea. Meanwhile, Iran suspended civilian flights at several major airports, and reports indicated widespread internet disruptions across parts of the country.
Market participants are also closely monitoring developments around the Strait of Hormuz, a key global energy transit route. Iranian officials indicated that future access arrangements could be subject to revised conditions, adding to concerns over potential disruptions to oil shipments.
Diplomatic efforts continued behind the scenes, with U.S. President Donald Trump reportedly urging restraint in discussions with Israeli Prime Minister Benjamin Netanyahu. However, rhetoric from regional leaders remained confrontational, increasing uncertainty over the direction of the conflict.
Separately, OPEC+ agreed over the weekend to increase production quotas by 188,000 barrels per day in July in an effort to help stabilise energy markets.
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Tate & Lyle agrees £2.7 billion takeover offer
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Debenhams expands into beauty through Revolution partnership
Debenhams Group (LSE:DEBS) has entered into a licensing agreement with Revolution Beauty (LSE:REVB) to develop fragrance and beauty products under several of its fashion and lifestyle brands, extending its presence into higher-growth consumer categories.
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