London's investment appeal took a hit this week as Middle East tensions rattled markets that had been riding high on a shift toward 'Halo' stocks - heavy asset, low obsolescence companies like BP, BAE Systems, and Rio Tinto. The FTSE 100 had outperformed the S&P 500 in 2025, driven by capital-intensive sectors as investors moved away from technology and software. BP emerged as a key beneficiary, along with other energy and mining giants.

This rally reflected a broader change in investor sentiment, with money flowing into banking, energy, mining, and defense sectors. Goldman Sachs identified this trend, noting that global investors were diversifying out of US markets. The UK index had been reshaped, with advertising group WPP dropping out and software companies like Relx suffering from AI concerns. Shares in Relx fell more than 30 percent in a year.

However, Iran's missile and drone attacks on Gulf states this week exposed the vulnerabilities of this strategy. Companies like Informa, which had relocated executives to Dubai, saw shares fall sharply. While the FTSE 100's heavy weighting in energy and defense could be a mixed blessing, the UK still needs to build high-growth technology and life sciences companies. AstraZeneca, spun off from Imperial Chemical Industries in 1993, remains Britain's most valuable company at nearly £240 billion.