London close: Stocks sink, oil jumps as Iran suspends peace deal talks

(Sharecast News) - A breakdown in talks between the US and Iran poured cold water on stocks on Monday afternoon, with blue chips in London sinking firmly into the red by the close of play as oil prices surged.

The FTSE 100, which had been registering flat to slightly lower most of the session, dropped sharply late on, finishing down 0.7% at 10,338.95.

It was the third straight losing session for the Footsie, which has now lost 1.6 since settling at a five-week high of 10,505.01 last Wednesday.

Oil prices were up 5.8% at $96.40 a barrel by the close in London, having jumped as high as $97.79, up from Friday's settlement price of $91.12, following a report that Iran has suspended peace talks with the US until Israel ends its operations in Lebanon.

According to Iranian news agency Tasmin, Iran has suspended the talks in protest at Israel's offensives in Lebanon and Gaza.

Tasnim said the suspension would remain in place until "the positions of Iran and its allied proxy forces are taken into account", adding that Iran will move to fully close the Strait of Hormuz.

Oil prices were already trading higher after Iran and the US continued to trade blows over the weekend, dampening hopes for an imminent peace deal.

On home shores, a survey showed the manufacturing sector grew in May at the fastest pace in four years. The S&P Global manufacturing purchasing managers' index rose to 53.9 from 53.7 in April, with all five of the PMI sub-components - new orders, output, employment, suppliers' delivery times and stocks of purchases - at showing improvements for the first time since May 2022.

Investors were also mulling industry data showing that house prices fell for the first time this year in May, as weakening consumer sentiment and rising costs weighed on the market.

easyJet ascends on M&A hopes

Budget airline easyJet surged 9% after US investment firm Castlelake said it was in the early stages of considering a possible offer. The carrier said on Monday that it is not in talks with Castlelake and that any bid would be "highly opportunistic", given the fact that its share price is "temporarily depressed" due to the current situation in the Middle East and its impact on customer confidence and jet fuel prices.

Housebuilders Persimmon, Barratt Redrow and Taylor Wimpey dropped after disappointing housing market data, while defence companies slumped, with BAE Systems, Babcock and Rolls-Royce also provided a drag.

Software stocks were among the top performers on the FTSE 100, with Sage Group, Relx and Experian all up as positive sentiment continued to lift the sector after well-received results last week from US cloud-based data platform Snowflake.

Oil giants BP and Shell gushed higher, along with FTSE 250 peers Ithaca and Harbour Energy as oil prices extended gains following a report that Iran has suspended peace talks with the US until Israel ends its operations in Lebanon.

Bluefield Solar Income Fund was a high riser on the second-tier index after agreeing to be bought by Drax in a cash deal worth about £548m, while Applied Nutrition shot higher as it lifted its revenue expectations for the year.