Europe open: Stocks drop as oil rises on US-Iran hostilities

(Sharecast News) - European stocks fell on Thursday morning while oil prices jumped as a step-up in hostilities between the US and Iran hit market sentiment, with all major equity indices across the continent in the red early on.

The benchmark Stoxx 600 index was down 0.63% at 624.22, with heavy falls on London's FTSE 100 (-1.0%) tempered by milder losses in Frankfurt, Paris and Milan.

After hitting a five-week low on Wednesday, Brent crude bounced 2.5% to $94.52 a barrel after the US carried out fresh strikes on Iran, targeting a military cite in the port city of Bandar Abbas and shooting down four Iranian one-way attack drones. Iran's Islamic Revolutionary Guard Corps said it had retaliated by targeting a US air base in Kuwait.

Donald Trump said he wouldn't be rushed into a peace deal with Iran. At a White House cabinet meeting on Wednesday, the US President also said he wasn't concerned about the potential political impact of the conflict with Iran.

"The narrative has shifted for financial markets in the last 12 hours, after Iran launched an attack on a US airbase in Kuwait, and the US carried out strikes against Iran. These events have led to fears that the ceasefire is in jeopardy, and have dashed hopes for an imminent peace deal that reopens the Strait of Hormuz," said Kathleen Brooks, research director at XTB.

Looking ahead to the rest of the day, attention will turn to US inflation data for April, with the PCE - the Federal Reserve's preferred measure of inflation - due at 1330 BST.

In equity news, shares in Soitec jumped 16% in Paris after the semiconductor-materials firm said it swung to positive free cash flow over its most recent fiscal year and pointed to 15% sales growth in its first quarter.

UK stock markets were being weighed down by a host of blue chips going ex-dividend, including Kingfisher, National Grid, Severn Trent, AB Foods, Hilton Foods and Breedon.