London’s FTSE 100 index fell 1.2% on Monday to 10,780 points, as investors in the UK’s benchmark stock index responded to the escalating Middle East conflict and its implications for energy prices, corporate profits, and the broader global economy. The decline, though significant, was smaller than those recorded in other European markets, partly reflecting the cushioning effect of strong performances from oil companies and defence stocks.
The session was characterised by sharp divergences between sectors. Airlines were among the worst performers, with IAG falling 6% and easyJet declining 4% as flight cancellations mounted and fuel costs surged. Energy-intensive industrial companies also fell sharply as higher gas prices raised their operating cost outlook. Consumer-facing businesses worried about the dampening effect of higher energy costs on household spending.
On the positive side, BP and Shell each gained approximately 3%, providing meaningful support to the index. The two oil majors have significant weightings in the FTSE 100, meaning that their gains partially offset the broader market decline. BAE Systems rose 5%, adding further support from the defence sector. Together, these gains in energy and defence significantly reduced the overall scale of the FTSE 100’s decline relative to most other European indices.
The FTSE 100’s relative resilience compared to continental European markets — which fell by between 2% and 2.6% — reflects the index’s unusual composition. Unlike most European benchmarks, which are dominated by industrials, financials, and consumer companies, the FTSE 100 has a very high weighting in oil, gas, and mining companies. During energy price surges, this composition provides a natural hedge that cushions the index against the broader market damage caused by higher energy costs.
Analysts warned that the relief provided by oil company gains is partial and potentially temporary. If the energy crisis persists and begins to weigh seriously on economic growth, the negative effects will ultimately overcome the positive contribution of higher oil prices to energy sector earnings. For the FTSE 100 as a whole, a sustained period of high energy prices and geopolitical uncertainty represents a net negative, even if the short-term composition effects provide some cushion.