UK markets tumble as Middle East tensions drive energy prices to record highs

UK markets faced sharp declines on Monday as fears over Middle East tensions sent energy prices soaring. The FTSE 100 fell below 10,000 points for the first time in months, closing 2.5% lower at 9,997.41. Investors reacted to rising concerns about a wider conflict disrupting global energy supplies.

The drop in stock markets came as Brent Crude oil jumped to $119 per barrel, while UK natural gas prices hit £172.33 per therm. Gold, often seen as a safe asset in crises, also fell by nearly 10% since the start of the week. The FTSE 250 and AIM index followed the downward trend, losing 2% and 3% respectively.

Global markets mirrored the decline, with the S&P 500 and Euro Stoxx 50 also suffering losses. Meanwhile, borrowing costs for the UK government climbed as gilt yields rose, with the two-year yield reaching 4.4%. The Bank of England kept interest rates steady at 3.75% but signalled a possible increase due to inflation worries. It revised its inflation forecast to 3% for the coming month. The British Chambers of Commerce added to the caution, warning of a potential stagflation risk for the economy.

The market downturn reflects growing unease over the Middle East conflict and its impact on energy prices. With no immediate signs of easing tensions, analysts expect further volatility in financial and commodity markets. The Bank of England's next moves will be closely watched as inflation pressures build.