The FTSE 100 has emerged as a surprising bright spot in 2026, remaining flat year-to-date while most global markets reel from the war in Iran. This performance outpaces all G7 peers except Canada and Japan, creating a stark contrast with the UK's struggling economy.

While the OECD slashed UK growth forecasts by 0.5 percentage points - the worst downgrade in the G20 - retailers like Next warn of price increases if conflict persists. Consumer confidence has plummeted to levels not seen since Trump's tariff announcements last April. The disconnect stems from the FTSE 100's composition: multinational giants dominate the index, with oil, gas, and mining companies representing over 20% of market value.

Shell and BP have each surged more than 25% as commodity prices spike, while Glencore and other mining groups also post strong gains. Defense contractors like BAE Systems, up roughly a fifth, benefit from increased defense spending. Meanwhile, the more domestically-focused FTSE 250 has fallen 7%, tracking European benchmarks. The resilience of Britain's blue-chip index offers little comfort to households facing higher energy costs, but it does provide a rare positive signal in an otherwise gloomy economic landscape.