‘It’s a sea of red’: £100billion wiped off the FTSE 100 as war in Middle East sparks ‘fear’ and ‘panic’ on global markets

More than £100billion has been wiped off the value of Britain’s leading companies as analysts warned war in the Middle East was sparking ‘fear’ and ‘panic’ on global markets.

On a brutal day for savers with money tied up in shares through their pension, ISAs and other investments, the FTSE 100 index fell 2.75 per cent or 295.98 points to 10,484.13.

It was the biggest one-day sell-off since Donald Trump announced his ‘Liberation Day’ tariffs in April last year and came as surging energy prices threaten to unleash a damaging bout of inflation and hammer growth.

‘It’s panic selling,’ said Emmanuel Cau, head of European equities strategy at Barclays. 

‘This is a stagflationary scare. The market was complacent about the scale of this war.’

The FTSE 100 has now fallen nearly 4 per cent since the start of trading on Monday – wiping £102billion off the value of the London stock market’s blue-chip firms.

The carnage was echoed around the world amid growing concerns about conflict in the Middle East and the impact of soaring oil and gas prices on living costs, inflation and interest rates.

The main stock market benchmarks in Germany and France fell more than three per cent while shares on Wall Street were sharply lower.

‘It’s a sea of red on the dashboard,’ said Neil Wilson, an investor strategist at online investment platform Saxo, referring to trading screens across the City.

He said markets seem to be betting on an ‘unwinnable war and stagflation’ rather than a return to stability as the US conflict with Iran escalated.

Russ Mould, investment director at AJ Bell, added: ‘Fear was the watchword on Tuesday.

‘Investor worries about the situation in the Middle East are mounting and there is a sense the conflict is at risk of spiralling.

‘In particular there is concern about the impact a surge in energy prices might have on inflation and, in turn, global interest rates.’

The war and ensuing chaos on financial markets overshadowed the Chancellor’s Spring Statement with analysts casting doubt over the forecasts from the Office for Budget Responsibility.

‘The US-Iran conflict rendered the OBR’s short-term forecast out of date before it was published,’ said Andrew Goodwin, chief UK economist at Oxford Economics.

The soaring price of oil and gas – pushed higher by fears about disrupted supplies – has fuelled fears of a fresh energy price shock that would push up costs for households and businesses.

Gas prices have almost doubled in just two days – triggering warnings of a sharp rise in energy bills – while oil has surged to over $85 a barrel for the first time since July 2024.

With key shipping routes such as the Strait of Hormuz effectively closed, it is also feared disruption to trade will drive up prices.

The threat of a fresh inflation spike has dented hopes of further interest rate cuts with financial markets now putting the chances of a reduction by the Bank of England this month at just 30 per cent – down from 80 per cent last week.

Lindsay James, investment strategist at wealth management firm Quilter, said investors face ‘an uncomfortable ride as the path for inflation and interest rates becomes challenged’.

Warning of ‘an extended period where global markets are buffeted’ by events in the Middle East, she added: ‘The worrying element is this conflict has the potential to escalate further, damaging global trade and making the shipment of goods and commodities more difficult. 

‘Cost inflation will start to kick in on all imported goods to Europe from Asia in days to come. This is primarily what is driving markets lower as the threat of a protracted conflict becomes more realistic by the day.’