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.

• Read: The sleep at night investment funds
• Read: 4 charts every investor needs when markets fall

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 response was fairly contained in the week following the strikes on Iran. The FTSE 100 was at 10,600 by lunchtime on Thursday, around 3% below where it started the week. The most nervous day was Tuesday when investors recognised the conflict would not be as quick as at first hoped. The FTSE 100 fell around 2.8% but regained poise on Wednesday.

• Read the latest market news

Asian stock markets saw more volatility. 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.

Back home, FTSE 100 banks and airlines are down this week. Housebuilders such as Taylor Wimpey and Barratt Redrow are also under pressure, as investors rethink the outlook for interest rates. Airlines are particularly sensitive to higher fuel costs, while financial stocks can react to shifting expectations around interest rates and economic growth. Housebuilders have faced renewed scrutiny as investors reassess the outlook for borrowing costs and consumer confidence.

Where has the gold price gone since the conflict began?

Gold initially rose by 4% following the escalation, reflecting its traditional role as a perceived ‘safe haven’ during periods of uncertainty. However, the move has not been dramatic or sustained. After an early rise, prices have fluctuated and broadly stabilised at $5,178 an ounce, not far from where it was a week earlier.

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.

• Read: Gold: five questions answered
• Read: What is the best way to invest in gold?

What has happened to the oil price?

As you would expect, oil and gas prices have risen sharply. Brent crude was trading at $84 a barrel by midday on Thursday, up from $72 a week earlier.

This reflects concerns about potential supply disruption. 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.

Even the risk of disruption can be enough to push oil prices higher. So far, however, the increase has been more moderate than during major supply shocks such as Russia’s invasion of Ukraine in 2022. Much will depend on whether disruption proves temporary or more sustained.

‘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 will start to rise if the oil price rise is sustained. The RAC says unleaded petrol averaged 132p per litre last Friday 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.

Now markets expect 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%.

• Read: How far will interest rates fall?