Following the overnight airstrikes on three Iranian nuclear sites oil has jumped to its highest level in almost six months.
In early morning trading on Monday Brent crude rose to $78 as investors are fearful of what Iran will do next in retaliatory strikes.
The FTSE 100 saw gains from BP and Shell with stock prices sharply rising 1.1% and 0.8% respectively, the index held steady up 2.9 point at 8777.6.
The Standard reported, Joachim Klement at Panmure Liberum saying, “If the Strait of Hormuz is shut, we expect a major stagflationary shock similar to 2022.
“In this case, a 10% to 20% correction seems likely and we could see a new bear market if the trade war escalates again in early July.”
Should the Strait of Hormuz be disrupted and not shut then “the inflation shock will be significant, but not enough to derail markets and the economies of the US, the UK and Eurozone for too long.”
“In this scenario, we expect an initial correction of stock markets of 5% to 10%.
“Whether this correction lasts longer and becomes deeper depends very much on how the trade war unfolds in the next couple of weeks.”
