FTSE 100 Drops 5% as UK Economy Feels Full Force of Oil Crisis

Britain’s benchmark stock market index fell more than 5% during the week — its worst performance since Donald Trump’s tariff shock of April 2025 — as the UK economy absorbed the full force of the oil crisis triggered by the Iran conflict. With Brent crude surging past $90 a barrel and bond markets in turmoil, the economic pressures on British consumers, businesses, and policymakers have intensified dramatically.
The FTSE 100’s fall reflected broad-based losses across sectors, but it was airlines that suffered most acutely. IAG, parent company of British Airways, saw its shares drop more than 12% during the week as the prospect of sharply higher jet fuel costs threatened to devastate margins. Wizz Air, the low-cost carrier, fared even worse — losing nearly a fifth of its stock market value after issuing a profits warning that cited the Middle East crisis as likely to cost it €50 million.
UK bond markets mirrored the equity market turmoil. Yields on five- and ten-year government bonds recorded their biggest weekly jump since the Liz Truss mini-budget of September 2022 — one of the most chaotic episodes in recent British economic history. The surge in yields reflected investors’ concern that higher oil prices would reignite inflation, making it impossible for the Bank of England to cut rates as previously anticipated.
Those concerns proved well-founded, at least in the short term. Probability of a Bank of England rate cut this month plummeted from 80% to just 15% over the course of the week, as the inflation implications of surging energy costs became clear. The UK, while less directly dependent on Gulf energy than some European neighbors, is not immune to the global consequences of a sustained oil price spike.
On the energy side, the drivers of the crisis remain unresolved. Kuwait has already cut production due to storage constraints, Saudi Arabia and the UAE face the same problem within 20 days, and Qatar’s LNG exports are severely disrupted. Qatar’s energy minister has warned of oil at $150 a barrel if the conflict continues. For British households and businesses facing yet another potential round of energy cost increases, the week’s developments represent a deeply unwelcome development.