The FTSE 100 slumped 2.9% on Tuesday, its steepest one-day decline since April 2025, as the escalating conflict in the Middle East unnerved investors. Banks and travel stocks led the retreat amid concerns that prolonged geopolitical tensions and surging oil prices could disrupt economic activity and keep inflation elevated, prompting traders to pare back expectations for imminent interest rate cuts. Oil major BP was a rare bright spot, gaining about 1% as crude prices jumped. Major lenders including HSBC Holdings, Barclays and Lloyds Banking Group slid between 3.2% and 5.4%. International Airlines Group tumbled more than 6.5% as airspace closures forced flight cancellations, pulling the broader FTSE 350 travel and leisure index down 3%. Adding to the cautious mood, the Office for Budget Responsibility lowered its growth forecast for 2026.