FTSE Monday Open Maps Iran Escalation: Defence Up, Oil Majors Mixed, Gilt Yields Reverse Higher
The Monday FTSE open reflects the Iran-escalation news cleanly. Defence stocks BAE Systems, Babcock and Melrose are leading early gainers; BP and Shell are mixed on the Brent rebound vs the broader risk-off; banks are softer on the gilt-yield reversal. UK 10-year gilt yields are pushing back above 5% on the risk-off flow, reversing Friday’s sub-5% close. Sterling is softer at $1.3405; gold is firmer at $4,475 an ounce. The Bank of England MPC is expected to digest the renewed war-risk premium against the inflation-easing path that had been priced in last week.
The 5.04% gilt-yield re-cross above 5% reverses the entire Friday rally and brings the 2026 fiscal-headroom question back into focus. The Chancellor’s cost-of-living package — cancellation of the 5p fuel-duty rise, free bus travel for children over the summer holiday, VAT cuts on summer attractions, removal of import tariffs from 100 food items, and a £120 million ceramics support package — now lands into a tightening macro backdrop. If the Iran framework collapses fully and Brent moves to $105-115, the Bank of England may delay further rate cuts; the gilt-yield curve will steepen. The cost-of-living package costs are not materially affected but the Treasury’s fiscal-headroom calculation contracts. The Ofgem October price-cap reset would absorb less of the July 13% hike if Brent stays above $95 through mid-summer.