The FTSE 100 has entered what’s known as correction territory on Monday, after another fall of 2 per cent for the day made it more than a 10 per cent drop from recent highs.

A market index or share falling past that point is known as correcting – which can often happen after being overbought or, in the case of this situation, when external events change suddenly. The ongoing situation with the Middle East war is now into its fourth week and investors have left global markets in their droves over fears for how much longer matters could continue to unravel.

London’s prime benchmark, the FTSE 100, was within touching distance of 11,000 points at the end of February. The points mark is a representation of the total weight or performance of the 100 companies within the index. Fast forward to last week and it dropped below 10,000 on Friday for the first time since reaching the milestone level in early January.

And a 2 per cent drop in the first two hours of trading this week has seen that plummet to 9,710 points – representing an 11 per cent drop-off from its high point since the first strikes on Iran were launched. The index is also now down for the whole of 2026 for the first time, after outperforming the main US index, the S&P 500, across 2025.

A stock, sector or index dropping 20 per cent from recent high points is known as a bear market, or crash territory.

Elsewhere in Europe, the Dax in Germany was 1.8 per cent lower and France’s Cac 40 fell 1.4 per cent.

It follows heavy falls overnight in Asia as the rhetoric from the US and Iran suggested little sign of a resolution to the conflict, with the Nikkei in Japan ending down more than 3 per cent.

Brent crude lifted 1 per cent to nearly 114 US dollars a barrel after Iran warned it will strike electrical plants across the Middle East if US president Donald Trump follows through on his threat to bomb power stations in the Islamic Republic.

Prime Minister Sir Keir Starmer is heading an emergency Cobra meeting on Monday after a call on Sunday with US president Donald Trump to discuss reopening the Strait of Hormuz shipping route after they both agreed it was “essential” to stabilising global energy markets.

Mr Trump has set a 48-hour deadline that ends just before midnight UK time on Tuesday, warning Iran that the US would attack its power stations unless the country releases its grip on the Strait of Hormuz.

But Iran has said it will retaliate by striking electrical plants across the Middle East if Mr Trump follows through on his threat.

Chris Beauchamp, chief analyst at IG, said: “Investors who have spent the weekend watching fresh strikes in the Middle East are now waiting to see what will happen when Trump’s 48-hour deadline expires tonight.

“But they are in no mood to hang around, and have continued to sell stocks and precious metals.

“Each day that the war goes does more damage to the global economy and drives inflation higher, with recession chances rising by the hour.”

The ongoing war in the Middle East has triggered an energy crisis for the world and “no country is immune” to its shockwaves, the International Energy Agency (IEA) warned on Monday. Addressing the National Press Club in Australia’s capital, Birol said the current situation has evolved into an unprecedented disruption, combining multiple shocks to oil and gas supplies.“This crisis as things stand is now two oil crises and one gas crash put all together,” he said. He also drew comparisons with the oil shocks of the 1970s and the fallout from Russia’s 2022 invasion of Ukraine.Highlighting the broader economic risks, Birol said, “The global economy is facing a major, major threat today, and I very much hope that this issue will be resolved as soon as possible.”Commenting on the fallout of the energy crisis, Fatih Birol said, “no country will be immune to the effects of this crisis if it continues to go in this direction,” adding, “so there is a need for global efforts.”The conflict has already caused extensive damage to energy infrastructure, with Birol noting that at least forty facilities across nine countries in the region have been “severely or very severely damaged”.“At least forty… energy assets in the region are severely or very severely damaged across nine countries,” he said.The disruption was intensified by the near shutdown of the Strait of Hormuz, a key transit route for roughly one-fifth of global oil and gas shipments. The standoff has deepened as the war entered its fourth week, with Donald Trump and Tehran issuing repeated threats, including Washington’s demand for the reopening of the waterway.Birol identified the reopening of the Strait of Hormuz as the most critical step towards stabilising the situation, while also flagging rising fuel shortages in Asia as a growing concern. Oil markets reflected the strain, with US benchmark crude briefly touching the $100-per-barrel mark early on Monday. As fuel prices continue to rise, he added that there would not be any specific crude level to trigger another release.He added that the agency is currently consulting governments worldwide and remains prepared to release additional oil from emergency reserves if needed, though he clarified that no specific price level would automatically trigger such a move. Meanwhile, US President Donald Trump issued an ultimatum to Iran to reopen the strategically critical Strait of Hormuz within 48 hours, warning of military consequences if it failed to comply. He said, “If Iran doesn’t fully open, without threat, the Strait of Hormuz, within 48 hours from this exact point in time, the United States of America will hit and obliterate their various power plants, starting with the biggest one first! Thank you for your attention to this matter.” In response, Tehran warned, signalling that any attack on its energy infrastructure would prompt retaliation beyond conventional military targets. The message was conveyed by Ebrahim Zolfaghari and carried by Islamic Republic of Iran Broadcasting. He said any strike on Iran’s fuel and energy sector would trigger action against a broader range of targets linked to the United States and its regional allies.Earlier this month, 32 member nations of the IEA agreed to release 400 million barrels of oil from their emergency reserves to the market, to deal with the ongoing energy supply disruption.

Prime Minister Shehbaz Sharif has banned the use of high-octane fuel in all government vehicles, with the decision taking effect immediately, the Prime Minister’s Office announced on Monday.

The ban comes with the decision to increase the petroleum levy on high-octane fuel.

Under a notification issued for this purpose, the levy on high-octane has been raised by Rs200 per litre to Rs305.37 per litre, pushing the new price of High Octane Blending Component (HOBC) in the country to Rs535. The decision to increase the levy from Rs100 to Rs300 per litre was taken in a meeting chaired by the prime minister.

Under the new ban, if the use of high-octane fuel in any government department’s vehicle is unavoidable, the user may do so at their own personal expense. A strict ban has been imposed on its use at government expense.

Read: Govt increases Rs200 levy on high-octane fuel for luxury cars to ease crisis

The purpose of the decision, according to the Prime Minister’s Office, is to ensure the efficient and responsible use of national resources.

PM Shehbaz directed all federal departments, authorities, and subordinate institutions to ensure immediate and full implementation of the ban. He also directed the relevant authorities to devise an effective system to monitor compliance and to take strict action in case of violations.

Read More: PM Shehbaz says rejected advice to further raise fuel prices, govt to absorb burden

Earlier, a 50% reduction in fuel for government vehicles had already been implemented, along with the grounding of 60% of government vehicles. The savings achieved through these measures have been utilised to provide relief to the public and to supply cheaper fuel.

The prime minister said that strict implementation of the austerity policy and the reduction of unnecessary expenditures are the need of the hour, adding that this step will reduce government spending and enable better use of public resources.

The government on Sunday approved a significant Rs200 per litre increase in the fuel levy on high-octane used in luxury vehicles, in a move to cope with the fuel crisis amid Middle East tensions.

Also Read: Govt urges public to adopt further austerity measures, cooperate to conserve energy amid Mideast fuel crisis

According to a statement issued by the PMO, Shehbaz, chairing a video-link meeting, announced that the levy of Rs100 per litre on high-octane fuel would be raised by an additional Rs200, bringing the total levy to Rs300 per litre.

The government expects the measure to save Rs9 billion per month, with the savings earmarked to provide relief to the general public.

The statement further clarified that the increase applies only to high-octane fuel used in luxury cars. Petrol prices for ordinary vehicles, as well as fares for public transport and air travel, will remain unchanged.