The FTSE 100 is expected to open around 29 points, or 0.3%, higher at 10,580 on Monday, extending Friday’s strong rebound.
London’s blue-chip index closed 1.06% higher at 10,552.05 on Friday and gained around 0.9% over the week.
Oil prices eased in early European trading despite a sharp escalation in the Middle East.
Brent crude fell to around $103.60 a barrel after trading above $105 earlier, as investors appeared reluctant to add a larger geopolitical premium without evidence of significant disruption to oil production or shipping.
That came despite further attacks on Riyadh’s King Khalid International Airport over the weekend.
A Houthi strike on Saturday killed 13 people and wounded more than 300, according to the latest Saudi figures, while a further attack on Sunday killed one person and injured 11.
US President Donald Trump said Washington was considering joining Saudi military action against the Iran-aligned Houthis, although no decision had been announced.
For energy markets, the immediate question is whether the conflict spreads towards Saudi oil facilities, refineries, export infrastructure or major shipping routes. So far, crude’s retreat suggests traders are distinguishing between serious geopolitical escalation and events that directly remove barrels from the market.
The US 10-year Treasury yield moved above 5.3% last week, while the 30-year yield climbed above 5.7%, placing renewed pressure on equity valuations and expectations for future interest rates.
US bond markets are closed on Monday for Columbus Day, although Wall Street equities will trade normally.
Friday’s US session ended firmly higher, with the Dow gaining 0.8% and the S&P 500 and Nasdaq both rising 0.6%, helped by a temporary easing in bond yields.
Asian markets were mixed on Monday, with the Shanghai Composite down 0.2%, Hong Kong’s Hang Seng up 0.2% and Australia’s S&P/ASX 200 gaining 0.8%. Japanese markets are closed.
European trade relations with China also remain in focus after talks between EU Trade Commissioner Maroš Šefčovič and Chinese Commerce Minister Wang Wentao produced progress on several trade disputes. China described the discussions as a new starting point, while further negotiations are expected.
Sterling was little changed at around $1.324, while gold traded close to $4,186 an ounce.
The UK economic calendar is relatively light on Monday, although investors will hear from Bank of England Deputy Governor Sarah Breeden and Monetary Policy Committee member Catherine Mann. The Bank confirms Breeden is due to discuss digital assets and the G20 presidency, while Mann will participate in a panel examining inflation, energy and exchange rates.
The larger macro event comes later this week with US inflation data, particularly important after the sharp rise in Treasury yields.
For London investors, Monday’s key signal is that oil is falling despite escalating Middle East headlines.
That is supportive for the FTSE outside the energy sector, but the balance remains fragile: any attack that materially disrupts Saudi production or regional shipping could rapidly reverse the move, while another upside inflation surprise could push global bond yields back towards last week’s highs.
