London’s FTSE 100 climbed on Monday, finishing 0.6% higher, as falling oil prices lifted investor sentiment ahead of this week’s Bank of England interest rate decision. The blue-chip index began the session on a steady note before gains accelerated, supported by signs that some disruption in global energy markets could be easing.
Oil prices fell after the U.S. announced it would allow certain Iranian, Indian, and Chinese vessels to pass through the Strait of Hormuz, partially restoring a critical shipping route for global crude and liquefied natural gas. Brent crude slipped to $101.25 a barrel while U.S. West Texas Intermediate (WTI) dropped to $95.04. Both benchmarks had surged more than 40% this month, reaching highs not seen since 2022, after U.S.-Israeli strikes on Iran prompted Tehran to halt shipping through the strategic waterway, which handles roughly one-fifth of global oil and LNG supplies.
Investors were also encouraged by discussions among International Energy Agency member nations about potential releases from emergency oil reserves to help curb rising energy costs. Despite the drop in crude prices, London’s energy sector gained 1.3%, with oil majors BP and Shell both rising more than 1%.
The ongoing war in the Middle East, now in its third week, continues to disrupt markets and weigh on economic confidence. Data released Monday indicated that British consumers have become the least confident since early last year, reflecting concerns over higher energy costs and economic uncertainty.
President Donald Trump has been in discussions with European and other global allies about reopening the Strait of Hormuz. White House Press Secretary Karoline Leavitt confirmed talks during an interview with Fox News. British Prime Minister Rishi Sunak said the U.K. would coordinate with allies on a “viable” plan to secure the route. U.S. Treasury Secretary Scott Bessent told CNBC that any intervention to stabilize prices would depend on how long the conflict persists.
The International Energy Agency has described the disruption in the Gulf as the largest in history, with Saudi Arabia, Iraq, and the UAE cutting production in response. Over the weekend, Trump threatened additional strikes on Iran’s Kharg Island, a key export hub, after prior attacks on military targets provoked retaliation from Tehran.
Analysts warn that if the conflict continues, the effects on energy markets and the global economy could be severe. PVM analyst Tamas Varga noted that inventories are steadily depleting, with significant damage already done to production, exports, and refining. Meanwhile, U.S. Energy Secretary Chris Wright said he expects the conflict to conclude within weeks, which would allow oil supplies to rebound and ease energy costs.
Markets this week will closely monitor interest rate decisions in the U.K., U.S., and Europe, as central banks weigh the economic impact of rising energy prices against inflation trends.
