Oil prices jumped more than 5% on Wednesday after US President Donald Trump declared the temporary ceasefire with Iran was “over” following fresh strikes between the two nations around the Strait of Hormuz. Brent crude, the global benchmark, climbed to a daily high of $79.26 a barrel before settling at $77.86, up 5.1%.
The surge in energy costs sent shockwaves through global stock markets, with the UK’s FTSE 100 falling 1% (110 points) to 10,556, while Germany’s Dax lost 1.6% and Spain’s Ibex shed 2%. In Asia, Japan’s Nikkei dropped 2.1%, China’s CSI 300 declined 0.77%, and South Korea’s Kospi tumbled 5.5%, also hit by a semiconductor sell-off.
Government bond yields rose sharply as higher oil prices stoked inflation fears. The yield on the 10-year UK gilt climbed 9 basis points to 4.94%, while Germany’s 10-year Bund yield rose 5 basis points to 3.034% – the highest since 11 July. The two-year German yield also rose to 2.637%, its highest since 22 June.
Energy stocks gained on the FTSE 100, with BP, Shell and British Gas parent Centrica leading the risers, while travel and technology shares fell. Market strategist Matthew Ryan of Ebury said the “million dollar question” was whether this marked a complete breakdown of negotiations or a temporary setback.
The US and Iran traded strikes after earlier agreeing an interim deal to end their conflict. Trump, speaking at a NATO summit in Ankara, also announced he was cutting trade with Spain over defence spending, adding to market uncertainty.
