Early market roundup: Stocks open down after US-Iran escalation

Energy stocks rose with oil prices on Tuesday morning, in light of further fighting in the Middle East, but London stocks opened in the red overall.

The FTSE 100 index opened down 53.99 points, 0.5%, at 10,446.26. The FTSE 250 was down 165.11 points, 0.7%, at 23,231.88, and the AIM all-share was down 2.28 points, 0.3%, at 758.86.

The Cboe UK 100 was down 0.4% at 1,037.48, the Cboe UK 250 was down 0.7% at 19,971.86, and the Cboe small companies was down 0.2% at 18,415.98.

In European equities on Tuesday, the CAC 40 in Paris was down 1.0%, while the DAX 40 in Frankfurt was down 0.7%.

Tensions in the Middle East intensified after Iran's Islamic Revolutionary Guard Corps said it had struck two UAE tankers in the Strait of Hormuz, while the US carried out a third consecutive night of strikes on Iranian targets.

The UAE condemned the tanker attack as "brazen". The IRGC also said it had targeted US facilities in Jordan and Bahrain overnight, while the US military said it had completed strikes aimed at degrading "Iran's ability to attack commercial shipping".

Brent crude surged in response, trading at USD84.15 a barrel early Tuesday, up sharply from USD79.42 late Monday.

The escalation follows US President Donald Trump's announcement that Washington was reinstating a naval blockade of Iranian ports and would impose a 20% charge on all cargo shipped through the Strait of Hormuz.

Sterling was quoted at USD1.3359 early Tuesday, lower than USD1.3378 at the London equities close on Monday. Against the euro, sterling slipped to EUR1.1717 from EUR1.1733. The euro traded at USD1.1397, down from USD1.1400, while the dollar edged up to JPY162.36 from JPY162.32.

UK bonds led a selloff across Europe as surging oil prices rekindle inflationary fears and prompt more bets on Bank of England rate hikes

Among London's blue chips, BP topped the FTSE 100, rising 3.0% as higher oil prices offset weaker production guidance.

BP said second-quarter upstream production is expected to decline to between 2.17 million and 2.22 million barrels of oil equivalent per day from 2.34 million in the first quarter, reflecting seasonal maintenance and disruption linked to the Middle East conflict.

However, the oil major expects stronger oil price realisations, improved refining margins and "slightly higher" oil trading to support earnings, while gas trading should be broadly flat.

BP forecast quarter-end net debt of USD22 billion to USD23 billion, down from USD25.3 billion at the end of the first quarter despite USD2.9 billion of hybrid bond redemptions and USD1.1 billion of Gulf of Mexico settlement payments.

Second-quarter results, due on August 4, will also include around USD500 million of exploration write-offs and approximately USD1.0 billion of post-tax impairment charges.

Peer Shell gained 1.6% after announcing on Monday it had agreed to sell Solenergi Power Private Ltd, including the Sprng Energy group of companies, to Aditya Birla Renewables Ltd for USD1.8 billion.

The transaction, expected to complete by the end of 2026 subject to regulatory approval, involves Sprng Energy's 5.0 gigawatt-peak portfolio of solar and wind assets supplying electricity distributors across India. Shell acquired the business in 2022 for USD1.55 billion.

On the FTSE 250, Atalaya Mining climbed 7.8% after reporting stronger second-quarter copper production and improved ore grades.

The miner estimated second-quarter copper production at 13,493 tonnes, up from 13,175 tonnes a year earlier and well above the 9,939 tonnes produced in the first quarter. It said mill performance improved during the quarter and copper prices remained supportive, while reiterating guidance for 2026 production at the lower end of its 50,000 to 54,000 tonne target range.

Rank Group advanced 5.3% after forecasting a financial 2026 like-for-like underlying operating profit of at least £76 million, ahead of market consensus.

The casino and bingo operator also reported like-for-like net gaming revenue of around £834.1 million for financial 2026, up 6% from the previous year.

In UK politics, Chancellor Rachel Reeves is expected to use what is likely to be her final Mansion House speech to defend her record in office ahead of Andy Burnham's anticipated arrival as prime minister next week.

Reeves is expected to argue that the UK economy has "beaten the odds" under her stewardship, pointing to stronger investment, productivity and wage growth, lower government borrowing and falling NHS waiting lists.

She is also expected to champion greater devolution and closer economic ties with the EU while stressing the importance of maintaining credibility with financial markets.

Her speech comes ahead of UK gross domestic product data due on Thursday, with economists expecting flat growth in May.

In Asia on Tuesday, the Nikkei 225 index in Tokyo ended up 0.7%. In China, the Shanghai Composite closed up 1.4%, while the Hang Seng index in Hong Kong ended 0.6% higher. The S&P/ASX 200 in Sydney closed flat.

In the US on Monday, Wall Street ended lower, with the Dow Jones Industrial Average down 0.3%, the S&P 500 down 0.8% and the Nasdaq Composite down 1.6%.

The yield on the US 10-year Treasury was quoted at 4.63%, widening from 4.60%. The yield on the US 30-year Treasury was quoted at 5.11%, widening from 5.09%.

Economic data from Germany showed wholesale price inflation eased in June, although elevated energy and raw material costs linked to the conflict in Iran continued to keep prices high.

According to the Federal Statistical Office, wholesale prices rose 4.9% on an annual basis in June, slowing from increases of 5.9% in May and 6.3% in April. On the month, wholesale prices fell 0.7%, a steeper decline than May's 0.6% fall and against expectations for a 0.2% increase.

Destatis said the annual rise remained largely attributable to higher wholesale prices for energy products and raw materials, driven by tensions in Iran and the wider Middle East.

Gold was quoted at USD4,018.40 an ounce early Tuesday, slightly higher than USD4,015.30 on Monday.

Still to come on Tuesday's economic calendar, Bank of England Governor Andrew Bailey is due to speak.

In the US, consumer price inflation data and the Redbook index are scheduled.

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