Oil prices jumped more than 5% on Tuesday after US President Donald Trump declared that the fragile ceasefire with Iran was effectively over, following fresh strikes between the two nations around the Strait of Hormuz. Brent crude, the global benchmark, rose 5.1% to $77.86 a barrel, hitting a daily high of $79.26, while gas prices also increased.
The escalation rattled global financial markets, with stock indices falling sharply. The UK’s FTSE 100 dropped 1% (110 points) to 10,556, Germany’s Dax lost 1.6%, and Spain’s Ibex fell 2%. In Asia, Japan’s Nikkei ended 2.1% lower, China’s CSI 300 declined 0.77%, and South Korea’s Kospi tumbled 5.5%. On Wall Street, the S&P 500 fell nearly 0.5%, the Dow Jones slid 0.9%, and the Nasdaq slipped 0.3%.
Government bond yields rose as higher oil prices stoked inflation fears. Germany’s 10-year bond yield climbed 5 basis points to 3.034%, its highest since 11 July, while the UK 10-year gilt yield rose 9 basis points to 4.94%. The two-year German yield also increased 5 basis points to 2.637%, reflecting expectations of tighter monetary policy from the European Central Bank.
Energy stocks outperformed, with BP, Shell and Centrica leading gains on the FTSE 100, as higher crude prices boosted the sector. Conversely, travel and technology shares fell on concerns over fuel costs and reassessment of the AI boom. Matthew Ryan, head of market strategy at Ebury, told Reuters the key question was whether this marks a complete breakdown in negotiations or merely a temporary setback.
In other news, the Dutch prosecutor’s office announced legal action against Tata Steel’s Dutch branch, alleging deliberate discharge of harmful substances. The firm is suspected of criminal offences including unlawful release of pollutants and failing in its duty of care. Tata Steel IJmuiden said it takes concerns seriously and will continue improvement measures, though it noted that some under-baked coke production is technically unavoidable.
