The FTSE 100 closed down 176.84 points, or 1.7%, at 10,489.04 on Wednesday as Middle East tensions escalated after US President Donald Trump declared the ceasefire with Iran over. The FTSE 250 ended down 361.18 points (1.5%) at 23,017.64, while the AIM All-Share fell 11.11 points (1.4%) to 758.07.
Oil surges, stocks slump after Trump's remarks
Oil prices jumped following Trump's comments at a Nato summit in Turkey, where he said dealing with Iran is “a waste of time.” Brent crude for September delivery rose to $80.00 a barrel, up from $73.88 on Tuesday. The spike boosted energy stocks: BP rose 3.5% and Shell added 2.3%, leading a handful of FTSE 100 risers.
However, airline stocks came under selling pressure as investors worried about higher fuel costs and potential disruption to Middle East air travel. British Airways owner IAG fell 4.8%, while Wizz Air lost 5.0% on the FTSE 250.
Stephen Innes at SPI Asset Management commented: “The risk now is escalation by inches. Not a single thunderclap that announces a new war, but a series of ‘necessary’ responses, each one defensible on its own, each one pushing the region closer to the edge. That is how war premiums are rebuilt. Not always with a trumpet blast.”
Global markets decline
In Europe, the Cac 40 in Paris ended down 2.2%, as did the Dax 40 in Frankfurt. In New York, the Dow Jones Industrial Average fell 1.6%, while the S&P 500 and Nasdaq Composite each dropped 1.1%.
UK jobs data and IMF inflation outlook
In the UK, the latest KPMG and Recruitment & Employment Confederation jobs report showed the permanent placements index climbed to 49.1 points from 44.1 in May, moving closer to the neutral 50-point threshold, indicating a slower decline in hiring. Temporary placements growth reached its strongest level in more than three years.
The International Monetary Fund said UK inflation is set to ease back to the 2% target by mid-2027, quicker than previously expected, according to its latest World Economic Outlook update.
The pound traded at $1.3358, down from $1.3376 on Tuesday, while against the euro it firmed to €1.1722 from €1.1704. The US 10-year Treasury yield rose to 4.60% from 4.52%, and the 30-year yield widened to 5.09% from 5.03%. Gold fell to $4,022.15 an ounce from $4,144.14.
Miners fall, Segro and Vistry in focus
On the FTSE 100, miners declined as metal prices fell. Antofagasta dipped 6.4%, Rio Tinto fell 4.9%, Endeavour Mining slid 7.1%, and Anglo American eased 6.3%.
Segro fell 1.8% after outlining financial targets and a pathway to “superior value creation” as it seeks to ward off interest from suitor Prologis. The warehouse landlord flagged potential future headline rent of £429 million from its development pipeline and £460 million of income potential from Europe's data centre opportunity.
On the FTSE 250, Vistry fell 7.1% after CFO Tim Lawlor stepped down and the housebuilder forecast a first-half pre-tax loss of around £30 million. RBC Capital Markets analyst Anthony Codling said it was “one step forward, three steps back” and warned “things could get worse before they get better.”
The biggest FTSE 100 risers were BP, up 16.7p at 491.3p; Shell, up 68.5p at 3,079.5p; Centrica, up 2.0p at 171.5p; Admiral, up 36.0p at 3,650.0p; and Pershing Square Holdings, up 26.0p at 3,796.0p. The biggest fallers were Endeavour Mining, down 271.0p at 3,562.0p; Antofagasta, down 241.0p at 3,527.0p; Anglo American, down 229.0p at 3,381.0p; Fresnillo, down 153.0p at 2,570.0p; and Rio Tinto, down 335.0p at 6,490.0p.
