FTSE 100 Gains as Middle East Tensions Drive Oil Prices Higher

London's FTSE 100 index gained on Monday, lifted by a sharp rally in oil prices as escalating tensions and infrastructure shutdowns in the Middle East fueled concerns over global energy supplies.

As of 07:15 GMT, the FTSE 100 was up 0.53%, outperforming its continental European counterparts. In contrast, Germany’s DAX index fell 0.12% and France’s CAC 40 lost 0.24%. The British pound slipped against the dollar, with the GBP/USD pair down 0.22% to 1.3497.

Oil Prices Surge on Supply Fears

The primary driver for UK stocks was a significant jump in crude oil prices. Brent crude futures climbed 2.86% to $107.60 a barrel, while U.S. West Texas Intermediate (WTI) rose 2.77% to $102.81. The rally was triggered by several developments raising the prospect of tighter supply:

• Saudi Pipeline Shutdown: Saudi Arabia shut down its 7 million barrel-per-day East-West pipeline following attacks on its energy infrastructure. Analysts at ING described the pipeline as "a vital bypass route for Saudi oil exports during disruptions through the Strait of Hormuz."
• Hormuz Tensions: Oman postponed a planned meeting between Gulf states and Iran aimed at managing the critical Strait of Hormuz. ING noted that "the delay pushes any prospect of de-escalation even further out of reach."
• Reduced Transit: Ship-tracking data from Reuters reportedly showed that transits through the Strait of Hormuz fell to single digits over the weekend, compared to a 10-day average of 14.

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Analyst Outlook and Domestic Focus

While the market reacted to immediate supply risks, analysts are weighing the longer-term balance. ING stated it is currently maintaining its base case forecast for Brent to average $80 a barrel in the fourth quarter, though it acknowledged the recent escalation poses risks to that outlook. On the demand side, the International Energy Agency's (IEA) latest report included aggressive cuts to its 2026 global oil demand forecasts.

In the UK, investors were also monitoring domestic developments as Prime Minister Andy Burnham prepared to host a roundtable with business leaders from companies including HSBC, BP, Shell, and Revolut. The event, aimed at positioning the government as a partner for growth, comes ahead of Chancellor John Healey’s first budget, scheduled for October 28.