Europe open: US strikes on Iran weigh on sentiment

(Sharecast News) - European shares edged lower and oil prices jumped on Tuesday as renewed fighting between the US Iran clouded the outlook for peace.

The pan-regional Stoxx 600 index was down 0.20% to 630 by 1204 BST with most major markets lower except for the UK's mining heavy FTSE 100, which rose 0.70%.

US forces fired on Iranian vessels on Monday, claiming they were laying mines in the vital Strait of Hormuz, despite assertions from President Donald Trump that talks with Tehran were making progress.

Brent crude rose 2.35% to $98.40 a barrel on the news.

An Iranian foreign ministry spokesperson contradicted Trump's claims, saying "no one can claim we are close to reaching an agreement" until there was clarity around Tehran's nuclear programme.

Geopolitical tensions also rose as Russia told the US to evacuate its diplomats and citizens from Kyiv, amid a wave of drone and missile strike on civilians in the capital.

"Markets are digesting mixed messages coming out of the White House regarding the war in Iran. Over the weekend, hopes were high that a deal between the US and Iran could be agreed in the short term. This caused a 6% decline in the price of oil on Monday, and a broad rally in stock and bonds," said XTB research director Kathleen Brooks.

"The problem for investors is that the alternative, a prolonged war with no sign of the Strait of Hormuz reopening, could trigger long term economic damage to the global economy. The world cannot keep running down oil inventories, at some point, Middle East oil will be required to sustain economic growth, even if the global economy has been resilient so far."

"If we reach this point, this is when stock market will react, until then we could see a further grind higher in US stocks, with European and Asian indices more vulnerable to moves in the oil price."

In equity news, shares in Ferrari fell 6% as the sports car brand launched its first electric vehicle.

Kingfisher shares were up as the DIY chain owner held guidance despite a fall in first quarter sales.

Reporting by Frank Prenesti for Sharecast.com