FTSE 100 Slips as U.S.-Iran Conflict in Persian Gulf Intensifies

UK stocks and other European benchmarks opened lower on Monday as an escalating military conflict between the United States and Iran in the Persian Gulf fueled concerns over global oil supply disruptions. The heightened geopolitical risk sent crude prices higher and weighed on broader market sentiment.

Gulf Tensions Flare

The sell-off follows reports from U.S. Central Command (CENTCOM) that its forces sank an Iranian tanker, the M/T Kylo, in the Gulf of Oman. The action, which also disabled two other tankers, was described as a response to alleged missile launches by Iran’s Revolutionary Guard Corps at U.S. Navy vessels. CENTCOM stated the U.S. ships evaded the missiles without casualties.

In response, Tehran announced plans for a new restricted maritime zone and a formal shipping corridor through the critical Strait of Hormuz, warning it would only commit to keeping the waterway open if U.S. attacks cease. U.S. War Secretary Pete Hegseth stated on social media, "if Iran shoots at U.S. ships, we will destroy (and sink) their oil tankers."

Market Reaction and Outlook

The risk-off mood was reflected across European markets. As of 07:25 GMT, London's FTSE 100 was down 0.13%, while Germany’s DAX and France's CAC 40 fell 0.13% and 0.07%, respectively.

The conflict directly impacted commodity prices, a key concern for inflation-watchers. Brent crude futures rose 0.95% to $97.19 a barrel, while West Texas Intermediate (WTI) gained 0.66% to $92.09. "The oil market remains well-supported with little sign of a peace between the US and Iran," ING commodities strategists wrote in a Monday note. They added that speculators had lifted their net long position in ICE Brent by 37,837 lots to 261,435 as of last Tuesday.

Ad

Analysts at Jefferies noted that risky assets were already under pressure after a stronger-than-expected U.S. payrolls report last week increased the odds of a September Federal Reserve interest rate hike. Investors are now focused on this week’s U.S. consumer price index (CPI) report and the European Central Bank's policy decision.

UK Economic and Corporate Movers

On the domestic front, new data from Lloyds showed UK house prices fell 0.4% year-on-year in August. This marked the first annual decline since November 2023 and missed economists' expectations for a 0.2% rise.

In company news:

• IQE (IQE.L) shares rose after the semiconductor materials firm swung to a first-half adjusted core profit of £6 million, citing strong demand from the AI and defense sectors.
• Gamma Communications (GAMA.L) was in focus after The Sunday Times reported that private equity firm Waterland is planning a rival bid to Epiris's accepted £1.08 billion offer.
• Standard Life (SDLF.L) reported better-than-expected first-half profit, supported by steady demand for its pension risk transfer offerings.