Iran Conflict Fuels Oil Spike, Rate Hike Bets

London's FTSE indices, along with European equities, saw substantial declines. Brent crude surged to over USD103 a barrel, having briefly touched USD120, and has risen over 60% since late February, while European gas prices climbed 30%.

This spike in energy costs has intensified inflation concerns, leading markets to now price in a Bank of England rate hike and two European Central Bank increases this year—a stark reversal from previous expectations of cuts. Investor sentiment deteriorated sharply in March across both the Eurozone and the US.

While oil majors Shell and BP saw gains, the broader market reaction was negative, with bond yields widening and major currencies weakening against the dollar. G7 finance ministers are reportedly considering a coordinated release of strategic oil reserves to mitigate the impact.