Iran conflict: markets and money questions answered

Important information - the value of investments and the income from them can go down as well as up, so you may get back less than you invest.

Past performance is not a reliable indicator of future returns

Source: LSEG, total returns from 28.2.21 to 28.2.26. Excludes initial charge.

Of course, nothing in markets is guaranteed and past performance is not a guide to future returns. But long-term data does provide useful perspective when headlines feel most unsettling.

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Below, we answer some of the most common questions about how markets have responded so far and what it could mean for your investments and finances.

How have market and asset prices moved?

The stock market's initial response was fairly contained. But after more than a week of strikes, there's a growing realisation that the conflict may be more extended than markets had hoped. As of Monday morning, 10 days into the conflict, the FTSE 100 was at 10,124 points - a fall of 1.6% in early trading and a decline of 7.3% from the Footsie's all-time peak of 10,922.85 on Friday 27 February.

The index remains 16% up on a year ago. It is back to where it was two months ago.

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Asian stock markets have been even more volatile. South Korea’s Kospi index, for example - which achieved fantastic growth in recent months - suffered its biggest two-day decline since 2008, dragged down by tech giants Samsung and SK hynix. Asia relies heavily on oil and gas shipped from the Middle East, which has contributed to the sell off.

On Monday, Asian markets fell sharply: 

• South Korea's Kospi down 6%
• Japan's Topix down 3.8%
• Taiwan's Taiex down 4.4%
• Hong Kong's Hang Seng down 1.9%
• Mainland China's CSI 300 down 1%

Among UK sectors, defence and energy stocks have risen since the strikes. Among the fallers are travel-related stocks, especially airlines, as well as stocks most affected by the prospect of higher-than-expected interest rates that may be needed to tackle inflation. Banks and housebuilders have been notable fallers.   

Where has the gold price gone since the conflict began?

Gold initially rose by 4% following the escalation, moving above $5,400 an ounce. This reflected its traditional role as a perceived ‘safe haven’ during periods of uncertainty. However, the move was not dramatic or sustained. The price has since fluctuated and broadly stabilised at around $5,100 an ounce, not far from where it was before the strikes on Iran began.

This relative lack of reaction may surprise some in view of gold’s status as the safe haven people turn to in turbulent times. It may be that investors had already seen trouble coming during the build-up of American forces in the region, or that the price was already seen as very high after its spectacular run of recent years. The dollar has also strengthened, which tends to dampen upward pressure on the gold price, which is priced in dollars.

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What has happened to the oil price?

Oil and gas prices have risen in spurts. Brent crude was at around $72 a barrel before the conflict and then traded at $80-$90 for much of the first week. However, the price jumped as high as $119 a barrel on Monday, the highest since 2022, amid concerns over supply and delivery disruptions. 

The Strait of Hormuz - a critical shipping route through which a significant share of global oil and liquefied natural gas flows - is central to market concerns. More than a fifth of global oil and liquefied natural gas (LNG) passes through this chokepoint. Iran has also targeted key energy sites in the Middle East, which has hampered production.

Prices later fell back to below $110 after the FT reported that G7 finance ministers will on Monday meet to discuss a possible joint release of petroleum from reserves co-ordinated by the International Energy Agency. 

‘Oil would need to remain at elevated levels for three to four months to materially affect inflation and growth,’ said Salman Ahmed, Global Head of Macro and Strategic Asset Allocation at Fidelity. ‘A temporary spike is manageable. A sustained period of higher prices would feed through inventories, margins and purchasing power, tightening financial conditions more meaningfully.’

Will household bills go up?

For UK consumers, the impact on household energy bills is unlikely to be immediate. Domestic energy prices are regulated by Ofgem’s price cap, which is reviewed quarterly. This mechanism can delay the transmission of wholesale price spikes to households and has just been set for the period between April and June.

Petrol prices have risen and will rise further if the oil price rise is sustained. The RAC says unleaded petrol averaged 132p per litre in the week ahead of the conflict with diesel at 142p. It says retail prices typically take around two weeks to reflect changes in the wholesale market. Pump prices are also influenced by the currency market: falls in the pound against the dollar, in which oil is priced, will apply additional upward pressure.

What about interest rates?

Expectations for interest rates rose significantly this week. Prior to the conflict, the UK bond market was pricing in a near-certain cut to the Bank of England rate in March - taking the rate from 3.75% to 3.5% - and then at least another quarter-point cut before the end of 2026.

By the end of last week markets were expecting a cut in June, with a further cut during the year now in the balance. Potential disruption to global energy and supply chains is seen as an inflationary risk, making it harder for the Bank to cut rates.

Movements in Bank Rate expectations tend to affect pricing of new rates on mortgage and savings accounts. Mortgage rates have fallen from a peak in 2023. As of 3 March 2026, the best rate on a five-year fixed rate mortgage was 3.75%. However, early reports from the mortgage market from Moneyfacts suggested new deals with lower rates had been shelved following the military action. 

For savings, the rates on best-buy cash accounts have been declining since last summer. As of 3 March 2026, the best rate on a Cash ISA which allows easy access to your money was 4.5%.

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