London Daily

Focus on the big picture.
Saturday, Oct 10, 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
British Prime Minister Burnham Pledges Closer EU Ties During Visit to Germany
UK Announces New Sanctions on 17 Russia-Linked Entities During Foreign Secretary's Ukraine Visit
UK and Germany Finalize Kensington Treaty to Strengthen Defense and Technology Cooperation
Britain Maintains Diplomatic Mission in East Jerusalem Despite Israeli Closure Deadline
English Councils Push Government to Rethink Proposed Funding Cuts
Scottish Homebuilding Falls to Lowest Level in 11 Years
BBC Chief Matt Brittin Defends Restructuring as Staff Challenge Job Cuts
UK Finance Warns High Energy Costs and Bond Yields Are Complicating Fiscal Outlook
UK Adopts All 44 Recommendations on Regulating AI in Healthcare
Chancellor John Healey Prepares Autumn Budget as Borrowing Costs Strain Public Finances
UK Investigators See Strong Indications of Iranian Link After RAF Fairford Security Operation
Laura Trott Pledges Tighter Controls on Political Activism in UK Classrooms
Welsh Ministers Launch Long-Term Review of North Wales and Anglesey Crossings
Welsh Government Orders 18-Month Study of Road Solutions Around Newport
Reform UK MP Sarah Pochin Faces Scrutiny Over £800,000 Second Home Purchase
British Households Grow More Concerned About Fuel and Energy Prices
NHS Leaders Warn of Rising Winter Pressure on Emergency Departments
Kemi Badenoch Proposes £2.3 Billion Employer National Insurance Cut for Young Workers
Middle East Conflict Could Erase UK Fiscal Headroom, Economists Warn
Manchester City Found Guilty of Multiple Premier League Financial Rule Breaches
UK Security Services Find Strong Indications of Iranian Role in RAF Fairford Incident
Costa Coffee Returns to Operating Profit on Iced Drinks and Menu Changes
Asos Warns Customers After Unauthorized Access to Retail App and Data
Kemi Badenoch Puts Growth and Deregulation at Center of Conservative Conference
Campaigners Warn of Deepening Social Care Crisis for Disabled Adults
Study Finds Rising Early-Onset Cancer Rates Among Adults Under 50 in Britain
UK Coach Operators Warn High Diesel Prices Could Force Route Cuts
FCA Opens Independent Review Into Handling of Epstein-Linked Whistleblower Case
Argentina Vows to Block Falkland Islands Offshore Oil Development
UK Chancellor Prepares Fiscal Measures and Welfare Reforms Ahead of Autumn Budget
Sainsbury’s and Morrisons Explore Potential Multi-Billion-Pound Merger
UK Weighs Tariffs on Chinese Electric Vehicles to Align With European Union
UK Threatens Diplomatic Expulsions Over Planned Closure of East Jerusalem Consulate
UK Energy Price Cap Hits Three-Year High as Middle East Conflict Raises Costs
Seventh Arrest Made in Suspected Terror Plot at RAF Fairford
Systemic Education Collapse Sparks Mass Student Uprisings in France
Green Party Faces Backlash Over Resolution Equating Zionism With Racism
Conservatives Debate Scrapping Environmental Rules for New Homes
Cornwall Insight Warns UK Energy Bills Could Approach £2,000 This Winter
UK Coach Operators Warn of Service Cuts as Diesel Prices Exceed £2
Scottish Parliament Approves £68 Billion Budget With New Tax and Property Measures
FCA Opens Independent Review Into Handling of Epstein Whistleblower
UK Government Drops Plan to Suspend Jury Trials in England and Wales
Bank of England Holds Interest Rate at 3.75% as Markets Watch November
Two Iranian Nationals Charged Over Alleged Plot Targeting Manchester Jewish Community
UK Fiscal Headroom Halves to £11 Billion Ahead of Budget, EY Warns
US Bomber Withdrawal From RAF Fairford Prompts UK Security Review
Sarah Wakfer Appointed Chair of Northern Ireland’s Health and Care Regulator
Scotland Housing Completions Fall to 11-Year Low Amid National Shortage
UK Water Companies Face Tougher Oversight and Unannounced Regulatory Inspections
×