Shares in oil and defence stocks soared yesterday and airlines tanked as the deadly terror attacks on Israel sent shockwaves through financial markets.
The price of oil surged as much as 5 per cent to $89 a barrel amid fears the conflict with Hamas will hit crude production in the Middle East.
That pushed up oil stocks with BP gaining 2.9 per cent, Shell rising 2.6 per cent and Harbour Energy jumping 4.9 per cent.
Susannah Streeter, head of money and markets at investment platform Hargreaves Lansdown, said: ‘The shocking attacks in Israel have sent the price of oil soaring, as investors assess the potential for the conflict to disrupt supply in the Middle East, if other countries are drawn in.’
Defence stocks also rallied with shares in BAE Systems up 4.5 per cent on expectations that the conflict will boost military spending.
Explosions fill the sky above Gaza City during Israeli airstrikes on Monday following
But airline shares fell over fears that the cost of fuel will soar on the back of higher oil prices.
Investors were also spooked by the impact of the conflict on travel as major carriers including British Airways and Virgin Atlantic cancelled or changed flights to Israel.
BA owner IAG fell 6.1 per cent, Easyjet slipped 5.9 per cent, Wizz Air dropped 6.2 per cent and Jet2 slumped 5.4 per cent.
Jonas Goltermann, deputy chief markets economist at researcher Capital Economics, said the war ‘comes at a tricky juncture for global markets, and could easily increase volatility further’.
London-listed firms that conduct their business in Israel also suffered.
Israel-based online trading platform Plus 500 fell 0.4 per cent and shares in cyber security firm BATM Advanced Communications shed 7.7 per cent.
A BATM said yesterday the firm ‘does not expect the tragic recent developments in Israel to have a material impact on trading’.
Shares in oil producer Energean, which is listed in both London and Tel Aviv, crashed 17.6 per cent due to its exposure to Israel.
The Israeli shekel fell as much as 3 per cent against the dollar but recovered slightly after the Bank of Israel announced it will sell up to £25billion of foreign currency in the open market to maintain stability.
The dollar also made gains as investors flocked to the safety of the US currency.
Ulrich Leuchtmann of Commerzbank, said: ‘If a war breaks out anywhere in the world it is a good idea to hold US dollars.’
