FTSE 100 LIVE: Stocks fall as investors await Iran's response to US strikes

Oil prices fluctuated on Monday, initially spiking in early trading and then falling into the red, before hovering around the flatline.

Brent crude futures (BZ=F) edged 0.1% higher to $77.09 a barrel, at the time of writing, while West Texas Intermediate (CL=F) held steady at $73.81 a barrel.

The fluctuations in oil prices come as investors assess the potential impact of an escalation in the Iran-Israel conflict on supply, with concerns about disruption to shipments through the Strait of Hormuz.

Neil Shearing, group chief economist at Capital Economics, said: “This carries around 20% of global oil production and 20% of liquified natural gas trade and so is a critical choke point. In response to the US attacks over the weekend, Iran’s parliament voted to close the Strait, although a final decision rests with the country’s security chiefs.”

He said that “prediction markets think it is now more likely than not that the Strait of Hormuz will be closed at some point this year.”

“However, the moves in the oil market do not yet represent a significant threat to the global economy. While oil prices have risen by around $8pb (per barrel) since the start of the conflict, they still remain below the level this time last year,” Shearing added. “This is due in large part to an expansion of supply from OPEC+. If sustained, we estimate that the increase in oil prices so far would add only 0.1-0.2 percentage point to inflation in advanced economies. This is unlikely to have a significant bearing on central bank policy decisions.”