London Daily

Focus on the big picture.
Tuesday, Jan 13, 2026

Markets react to PM's political crisis and oil falls 10% as investors fret over global recession

Markets react to PM's political crisis and oil falls 10% as investors fret over global recession

A report by the Bank of England did nothing to soothe investor concern that Western economies are facing the real prospect of going into reverse as the year progresses.

Global financial markets are enduring a day of turmoil over rising fears of a recession for the US and Europe, while a slump in the value of the pound has accelerated amid the crisis engulfing Boris Johnson's government.

There was a rush for safe havens in Europe on Tuesday, later mirrored in the US, with stock markets plunging and the pound and euro coming under intense pressure from the dollar - a traditional place of shelter in volatile times.

Sterling hit its lowest level against the greenback since the start of the pandemic at $1.18.9 - a plunge of almost two cents on the day - while the single currency slumped to a 20-year low versus the dollar.


The pound's value barely moved when it emerged that Sajid Javid and Rishi Sunak had quit their government roles, leaving the UK without a health secretary or chancellor and the PM clinging precariously to power.

Traders reported that while a strong dollar was evident in the currency market, there were particular concerns in Europe over mounting gas prices.

However Norway, the second-largest supplier on the continent after sanctions-hit Russia, later alleviated fears around tightness of supply after a union claimed the country's government had used its power to impose a settlement and end a strike that had threatened crucial exports.

The Bank of England also added to the general gloom when its latest Financial Stability Report warned that the economic outlook for the UK and the wider world had darkened because of the backdrop of surging inflation - much of it energy linked.

It told UK banks to ramp up capital buffers - a requirement for cash to be held in reserve - to help them withstand the slowdown ahead.

The growing fears of an inflation-led slump did help Brent crude oil, which reached 14-year highs in the wake of Russia's invasion of Ukraine, fall by more than 10% on the day to $101 a barrel in anticipation of falling demand.


A sustained period around that level could help bring down the cost of fuel at the petrol pumps but there are many other factors at play for forecourt costs despite accusations from motoring groups that retailers had already been slow to pass on falling wholesale costs.

Stock markets were widely down by more than 2% across Europe.

The FTSE 100 in London closed the day 2.9% lower at 7,025 points, with mining and energy stocks enduring the worst of the pain.

It meant that £54bn was erased from the market value of the index.

Chris Beauchamp, chief market analyst at online trading platform IG, said there was evidence of a 4th July bank holiday hangover.

"The return of US traders from their holiday has dealt the death blow to hopes of a European market rally that lasts longer than about 24 hours.

"This recurrence of selling has put indices across the board into the red, as growth and inflation fears return right on cue.

"Normally July provides some welcome relief to markets after a choppy June, but so far the instinct to sell any bounce, no matter how small, remains all-encompassing," he wrote.

Newsletter

Related Articles

0:00
0:00
Close
Meghan Markle Could Return to the UK for the First Time in Nearly Four Years If Security Is Secured
Meghan Markle Likely to Return to UK Only if Harry Secures Official Security Cover
UAE Restricts Funding for Emiratis to Study in UK Amid Fears Over Muslim Brotherhood Influence
EU Seeks ‘Farage Clause’ in Brexit Reset Talks to Safeguard Long-Term Agreement Stability
Starmer’s Push to Rally Support for Action Against Elon Musk’s X Faces Setback as Canada Shuns Ban
UK Free School Meals Expansion Faces Political and Budgetary Delays
EU Seeks ‘Farage Clause’ in Brexit Reset Talks With Britain
Germany Hit by Major Airport Strikes Disrupting European Travel
Prince Harry Seeks King Charles’ Support to Open Invictus Games on UK Return
Washington Holds Back as Britain and France Signal Willingness to Deploy Troops in Postwar Ukraine
Elon Musk Accuses UK Government of Suppressing Free Speech as X Faces Potential Ban Over AI-Generated Content
Russia Deploys Hypersonic Missile in Strike on Ukraine
OpenAI and SoftBank Commit One Billion Dollars to Energy and Data Centre Supplier
UK Prime Minister Starmer Reaffirms Support for Danish Sovereignty Over Greenland Amid U.S. Pressure
UK Support Bolsters U.S. Seizure of Russian-Flagged Tanker Marinera in Atlantic Strike on Sanctions Evasion
The Claim That Maduro’s Capture and Trial Violate International Law Is Either Legally Illiterate—or Deliberately Deceptive
UK Data Watchdog Probes Elon Musk’s X Over AI-Generated Grok Images Amid Surge in Non-Consensual Outputs
Prince Harry to Return to UK for Court Hearing Without Plans to Meet King Charles III
UK Confirms Support for US Seizure of Russian-Flagged Oil Tanker in North Atlantic
Béla Tarr, Visionary Hungarian Filmmaker, Dies at Seventy After Long Illness
UK and France Pledge Military Hubs Across Ukraine in Post-Ceasefire Security Plan
Prince Harry Poised to Regain UK Security Cover, Clearing Way for Family Visits
UK Junk Food Advertising Ban Faces Major Loophole Allowing Brand-Only Promotions
Maduro’s Arrest Without The Hague Tests International Law—and Trump’s Willingness to Break It
German Intelligence Secretly Intercepted Obama’s Air Force One Communications
The U.S. State Department’s account in Persian: “President Trump is a man of action. If you didn’t know it until now, now you do—do not play games with President Trump.”
Fake Mainstream Media Double Standard: Elon Musk Versus Mamdani
HSBC Leads 2026 Mortgage Rate Cuts as UK Lending Costs Ease
US Joint Chiefs Chairman Outlines How Operation Absolute Resolve Was Carried Out in Venezuela
Starmer Welcomes End of Maduro Era While Stressing International Law and UK Non-Involvement
Korean Beauty Turns Viral Skincare Into a Global Export Engine
UK Confirms Non-Involvement in U.S. Military Action Against Venezuela
UK Terror Watchdog Calls for Australian-Style Social Media Ban to Protect Teenagers
Iranian Protests Intensify as Another Revolutionary Guard Member Is Killed and Khamenei Blames the West
Delta Force Identified as Unit Behind U.S. Operation That Captured Venezuela’s President
Europe’s Luxury Sanctions Punish Russian Consumers While a Sanctions-Circumvention Industry Thrives
Berkshire’s Buffett-to-Abel Transition Tests Whether a One-Man Trust Model Can Survive as a System
Fraud in European Central Bank: Lagarde’s Hidden Pay Premium Exposes a Transparency Crisis at the European Central Bank
Trump Announces U.S. Large-Scale Strike on Venezuela, Declares President Maduro and Wife Captured
Tesla Loses EV Crown to China’s BYD After Annual Deliveries Decline in 2025
UK Manufacturing Growth Reaches 15-Month Peak as Output and Orders Improve in December
Beijing Threatened to Scrap UK–China Trade Talks After British Minister’s Taiwan Visit
Newly Released Files Reveal Tony Blair Pressured Officials Over Iraq Death Case Involving UK Soldiers
Top Stocks and Themes to Watch in 2026 as Markets Enter New Year with Fresh Momentum
No UK Curfew Ordered as Deepfake TikTok Falsely Attributes Decree to Prime Minister Starmer
Europe’s Largest Defence Groups Set to Return Nearly Five Billion Dollars to Shareholders in Twenty Twenty-Five
Abu Dhabi ‘Capital of Capital’: How Abu Dhabi Rose as a Sovereign Wealth Power
Diamonds Are Powering a New Quantum Revolution
Trump Threatens Strikes Against Iran if Nuclear Programme Is Restarted
Apple Escalates Legal Fight by Appealing £1.5 Billion UK Ruling Over App Store Fees
×