The City woke to a bloodbath in Asia this morning, with Tokyo’s Nikkei shedding 6% and Seoul’s Kospi down 5% as the Middle East crisis spooks global investors. The FTSE 100 opened 2% lower, but the real damage may be longer term: London’s delicate tech listings pipeline, already gasping for air, could be the next casualty.
Some £200bn evaporated from Asian bourses overnight as a fresh wave of geopolitical anxiety swept through markets. The trigger was a suspected drone attack on a Saudi Aramco facility, but the real fear is contagion. Oil prices surged 8%, pushing Brent crude above $90 a barrel, while safe havens like gold and the dollar surged. The yield on the 10-year gilt fell 12 basis points to 4.15%, reflecting a flight to quality that punishes risk assets.
For London, the timing could not be worse. The capital’s tech sector has been on life support since the ARM Holdings IPO flop last year. Now, with global risk appetite evaporating, the handful of UK tech hopefuls waiting in the wings may see their valuations slashed or their listings postponed indefinitely. "Investors are in risk-off mode," said a senior banker at a London-based investment bank. "They’re not going to touch anything that smells of growth or uncertainty."
The rout is a stark reminder of the link between geopolitics and market efficiency. Central banks, which were expected to begin easing in the second half of the year, now face a fresh dilemma: rate cuts to cushion the blow would fuel inflation, while staying hawkish risks tipping economies into recession. The Bank of England, already wrestling with sticky inflation, is particularly vulnerable. Gilt yields suggest the market is pricing in a delayed rate cut, which will squeeze the government’s fiscal headroom further.
The government’s spending pledges, already looking ambitious, now appear reckless. The Chancellor’s fiscal rules are creaking under the weight of higher debt service costs and a slowing economy. If the rout continues, we could see a repeat of the 2022 gilt crisis, this time accelerated by a tech recession.
Investors should brace for more volatility. The correlation between oil prices and tech stocks is rising, and London’s exposure to both is troubling. For now, the only safe bet is caution. The City will watch the Middle East with one eye and the tech pipeline with the other, hoping that this storm passes before the listing window slams shut.
