Oil prices jumped more than 5% on Tuesday, sending shockwaves through global markets, after President Donald Trump declared the ceasefire with Iran “over” and the two sides traded fresh strikes near the Strait of Hormuz. Brent crude hit a daily high of $79.26 a barrel, triggering a sharp sell-off in equities and a surge in government bond yields amid renewed inflation fears.
European stock markets closed sharply lower, with the UK’s FTSE 100 falling 1% to 10,556, Germany’s Dax tumbling 1.6% and Spain’s Ibex losing 2%. Wall Street also opened lower, with the S&P 500, Dow Jones and Nasdaq all declining. Asian markets had already slumped earlier, led by a 5.5% plunge in South Korea’s Kospi and a 2.1% fall in Japan’s Nikkei, as investors fled risk assets.
The breakdown of the ceasefire came after the US and Iran conducted strikes around the vital oil chokepoint of the Strait of Hormuz. Trump, speaking at a NATO summit in Ankara, said the interim deal aimed at ending the conflict was “over” and announced a halt to trade with Spain over defence spending. Energy stocks bucked the trend, with BP, Shell and Centrica rising on the FTSE 100, while travel and technology shares fell.
Eurozone government bond yields climbed to their highest in almost a month as higher oil prices stoked inflation expectations. Germany’s 10-year yield rose 5 basis points to 3.034%, while the two-year yield hit 2.637%. In the UK, the yield on the 10-year gilt jumped 9 basis points to 4.94%. Analysts said the key question was whether the ceasefire collapse marked a complete return to hostilities or a temporary setback.
