Flag: The UK stock market combines both commodity and defense industries, making it an effective tool for hedging in Middle Eastern conflicts.

Citigroup strategist stated that after the outbreak of war in Iran, British stocks provide investors with an effective hedge against a new round of geopolitical turmoil. Led by Beata Manthey, the team raised their rating on British stocks from "underweight" to "overweight" in their global stock strategy report. The team believes that the exposure of the British stock market to commodities and defensive industries allows it to withstand the impact of rising oil prices. "The Iran conflict brings new sources of uncertainty to risk assets," the team wrote in their report. "The British market heavily leans towards commodities and defensive sectors, with aviation and defense sectors also playing a significant role, making them effective 'geopolitical hedging tools' in stock portfolios." Manthey pointed out that although global stock markets historically recover relatively quickly after conflicts break out, they often face significant downside risks when events like these lead to sustained increases in energy prices. She stated that Citigroup's commodity strategist expects "a significant increase in oil prices in the short term." On Monday, oil prices saw the largest single-day gain in four years, with global benchmark Brent crude rising by about 8% to nearly $79 per barrel. Manthey and her team downgraded their rating on Japanese stocks from "overweight" to "underweight" because the country's stock market tends to perform poorly when oil prices rise. On Monday, the performance of the FTSE 100 index outperformed other European indices, including the Euro Stoxx 600 index, with defense and commodity stocks leading. At the time of writing, the British benchmark index fell by 0.99%, while the pan-European index fell by 1.5%.