The London stock market experienced mixed sessions this week as escalating US-Iran tensions and political changes in the UK rippled through global risk sentiment, indirectly affecting cryptocurrency markets. The FTSE 100 dipped 0.2% on Thursday to 10,492.99 before steadying on Friday at 10,576.97, while energy shares surged on rising oil prices. These moves have contributed to a cautious environment for digital assets, with Bitcoin and Ethereum showing sensitivity to the same macroeconomic forces.
On Thursday, Iran labelled the Strait of Hormuz an 'inviolable red line' following US President Donald Trump’s threat to strike Iranian infrastructure. The warning heightened fears of supply disruptions, pushing crude oil higher and triggering a sector rotation that saw technology and financial shares underperform. By Friday, the US had intensified its bombing campaign on Iranian bridges and an airport, and Tehran retaliated with attacks on US military bases in the Middle East. This escalation lifted energy stocks by 1.7% but weighed on banking and personal goods shares.
The geopolitical turmoil coincided with the confirmation of Andy Burnham as the UK’s next prime minister, set to take office on July 20. Burnham, who will be the sixth UK PM since the 2016 Brexit referendum, has signaled a focus on clean energy investment and restrictions on new North Sea oil and gas licensing. The political transition adds another layer of uncertainty for investors already navigating regional conflict.
Crypto markets have not been insulated from these developments. Bitcoin, often viewed as a barometer of risk appetite, has edged lower in tandem with equity weakness, while Ethereum faced similar pressure. Traders noted a flight from risk assets, with the US-Iran standoff and UK political shift undermining investor confidence. Analysts point out that while cryptocurrencies can sometimes serve as safe havens during geopolitical crises, the current environment—marked by threats to critical oil transit routes—has instead reinforced their correlation with traditional risk assets.
Market observers are now watching how Burnham’s incoming government might approach crypto regulation. The Labour leader’s emphasis on public ownership and green energy could influence future policy, but no immediate announcements are expected. For now, the macro headwinds driven by the Middle East conflict and political change in Westminster are likely to keep crypto markets subdued, with further volatility expected as the situation unfolds.
