There are fears the fight in a region that plays a key role in global energy supplies and shipping routes could have a similar impact to Russia’s full-scale invasion of Ukraine four years ago which pushed up the cost of energy, causing price rises for businesses and consumers around the world.
In its latest fiscal outlook document, the UK’s Office for Budget Responsibility said the escalation of the conflict could upset its forecasts, warning it could have “very significant impacts on the global and UK economies”.
German Chancellor Friedrich Merz, who met with Trump at the White House on Tuesday, also voiced concerns about economic damage.
“That’s the reason why we all hope this war will come to an end as soon as possible,” he said.
The FTSE 100 index of the largest firms listed in London fell 2.75% by the end of trading on Tuesday, while Germany and France’s main indexes closed down 3.44% and 3.46% respectively.
In the US, the S&P 500 fell sharply at the open but recovered some of those losses, ending down 0.9%.
In Asia, Japan’s Nikkei fell 3.3%. Hong Kong’s Hang Seng and the Shanghai Composite in mainland China were also down. The Kospi in South Korea, which was shut for a public holiday on Monday, fell by more than 7%.
The benchmark UK gas price rose above 165p a therm on Tuesday, which it last traded at a year after the start of the Ukraine war. It closed at 138p a therm — still over a fifth higher than Monday’s price.
UK gas prices have now doubled since the US and Israel began a wave of air strikes on Iran on Saturday.
The spike in gas prices came after QatarEnergy, one of the world’s biggest exporters, halted production following “military attacks” on its facilities.
It later said it would stop producing other materials including aluminium, methanol and urea used for fertiliser.
