Lunchtime market roundup: Stocks fall as US-Iran ceasefire "over"

Stock prices were lower on Wednesday midday in London, Paris and Frankfurt after US President Donald Trump said the US-Iran ceasefire was "over" with the price of oil rising sharply, while travel stocks were hit particularly hard.

The FTSE 100 index was down 150.99 points, 1.4%, at 10,515.58. The FTSE 250 was down 445.92 points, 1.9%, at 22,932.90, and the AIM all-share was down 10.31 points, 1.3%, at 758.87.

The Cboe UK 100 was down 1.6% at 1,043.23, the Cboe UK 250 was down 2.2% at 19,717.76, and the Cboe small companies was down 0.5 at 18,323.73.

In European equities on Wednesday, the CAC 40 in Paris was down 2.2%, while the DAX 40 in Frankfurt was down 2.3%.

Sentiment deteriorated after US President Donald Trump declared the ceasefire with Iran was "over", following a fresh escalation in hostilities sparked by Iranian attacks on ships in the strategically important Strait of Hormuz.

The waterway has once again become the focal point of the conflict, which began in late February with large-scale US-Israeli strikes on Iran. Tehran insists it has the right to control shipping through the strait, saying vessels must follow authorised routes and warning it will target those that do not.

Iranian forces have struck at least three commercial vessels in recent days, prompting extensive US strikes against Iranian military targets on Tuesday and retaliatory attacks by Iran against Gulf countries.

"As far as I'm concerned, it's over," Trump told reporters at the NATO summit in Turkey when asked about the ceasefire, adding: "It's just a waste of time dealing with them."

The US president nevertheless said he would let "the negotiators keep talking if they want".

Oil prices jumped sharply on fears of renewed supply disruption. Brent crude traded at USD78.25 a barrel at midday on Wednesday, up from USD73.88 late Tuesday, while US benchmark West Texas Intermediate climbed 5.4% to USD74.23 a barrel.

Kathleen Brooks, research director at XTB said: "Oil prices rise as Trump says Iran ceasefire is over, but is it really?

"It is worth noting, that the president did not explicitly state that the war is back on, and he backtracked slightly by saying that he will let his negotiators deal with it. However, today's events suggest that the diplomatic path to ending this war is not easy.

"For now, this latest flare up seems contained, although risk sentiment has taken a knock and oil prices have had a substantial jump, this is not a rout. The prevailing view is that this is short term issue that will get ironed out, and it will not trigger a broader conflict. The Iranian regime and President Trump are both volatile and can pivot on their positions quickly. Stock market bulls will be hoping that they do that in the next few days."

The spike in crude prices boosted energy stocks. BP led the FTSE 100, rising 3.4%, while Shell added 1.9%.

Airline stocks, however, came under pressure as investors worried about higher fuel costs and the potential for further disruption to Middle East air travel.

British Airways owner IAG fell 4.0%. On the FTSE 250, Wizz Air lost 5.0%, while easyJet declined 1.3%. In Dublin, Ryanair fell 2.5%, also weighed down after its legal challenge against Italy's Covid-19 airline support measures failed.

The pound was quoted at USD1.3354 at midday Wednesday, lower compared with USD1.3376 at the London equities close on Tuesday. Against the euro, sterling fell to EUR1.1695 from EUR1.1704. The euro stood at USD1.1412, lower against USD1.1427, while the dollar strengthened to JPY162.41 from JPY162.22.

Government bond yields also climbed sharply across the UK and Europe as traders increased expectations for further interest rate hikes. The yield on the UK's benchmark 10-year gilt rose around 10 basis points, marking its biggest one-day increase since mid-May.

Back in London, Segro fell 1.8% after the warehouse landlord outlined new long-term financial ambitions as it sought to demonstrate its growth potential while fending off takeover interest from San Francisco-based Prologis.

Segro highlighted substantial embedded value within its industrial and logistics development pipeline, which it said could generate an additional £429 million of future headline rent.

The company also pointed to Europe's expanding data centre market, where it has a pipeline of near- to medium-term opportunities with the potential to generate a further £460 million of income.

"Segro has the capabilities and balance sheet to unlock this compelling income and value creation opportunity," the company said.

On the FTSE 250, RIT Capital Partners rose 4.2% after announcing a tender offer to repurchase up to £300 million of shares at a 15% discount to net asset value.

Among smaller-cap stocks, Contango Holdings climbed 19% after strategic investors subscribed for £5 million of new shares.

Victoria advanced 18% after agreeing a refinancing package and reducing its senior secured debt.

At the other end of the market, Boku plunged 33% after warning annual results would come in below market consensus.

Quadrise dropped 28% after launching a retail share offer.

Stocks in New York were called lower. The Dow Jones Industrial Average was called down 1.3%, the S&P 500 index down 1.0%, and the Nasdaq Composite down 1.4%.

The yield on the US 10-year Treasury was quoted at 4.58%, widening from 4.52%. The yield on the US 30-year Treasury rose to 5.07% from 5.03%.

Investors will also monitor US wholesale inventories data at 1400 GMT, with economists expecting a 0.3% monthly increase, unchanged from April.

Gold was quoted at USD4,053.50 an ounce at midday Wednesday, down sharply from USD4,144.14 on Tuesday.

Still to come on Wednesday's economic calendar are US wholesale inventories, EIA crude oil stocks and the minutes from the Federal Open Market Committee's latest meeting.

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