March 2 (Reuters) - UK stock indexes fell on Monday, swept up in a global selloff, as an escalating military conflict in the Middle East sparked a jump in oil prices and pushed investors towards safe-
UK stocks dip as Iran conflict sparks global selloff
Market reaction to Middle East conflict
Global selloff and oil price surge
March 2 (Reuters) - UK stock indexes were swept up in a global selloff on Monday, as an escalating military conflict in the Middle East fuelled a jump in oil prices and drove investors towards safe-haven assets.
Oil prices surged almost 7% after retaliatory Iranian attacks disrupted shipping in the crucial Strait of Hormuz following the weekend's bombing by Israel and the United States that killed Iranian Supreme Leader Ayatollah Ali Khamenei. [O/R]
Sector performance and index movements
While British oil majors such as Shell rose 1.9% and defence companies like BAE Systems climbed 6%, other equity sectors, particularly banks and travel companies, came under heavy selling pressure as investors braced for travel and economic disruptions.
The blue-chip FTSE 100 closed down 1.2%, having touched a record high in the prior session, while the domestically oriented FTSE 250 index fell 1.4%.
Inflation and interest rate concerns
"If the issues persist, then the market will start to worry about new inflationary pressures and that could lower expectations for near-term interest rate cuts," said Dan Coatsworth, head of markets at AJ Bell.
Banks including HSBC, Barclays and Lloyds Banking Group fell between 2.5% and 4.2%, as surging oil prices fuelled concerns about a resurgence of inflation and a potential dent to the economy.
British government bond yields rose as investors trimmed their expectations for Bank of England interest rate cuts. Traders were pricing in a 52% chance that the BoE will cut rates later this month, down from about 78% last week.
Travel sector impact
BoE policymaker Alan Taylor said that it was too soon to tell how the conflict in the Middle East would impact Britain's sluggish economy.
British Airways operator IAG fell 5.5% after the airline said on Saturday it had cancelled flights to Tel Aviv and Bahrain until March 3. The broader FTSE 350 travel & leisure index fell 4.3%, with hotels and cruise operators among the major decliners.
Reporting credits
(Reporting by Sruthi Shankar in Bengaluru; Editing by Harikrishnan Nair and Ros Russell)
