London open: Stocks slide, oil rises as US-Iran exchange military strikes

(Sharecast News) - London stocks slid in early trade on Thursday, while oil prices rose after the US and Iran exchanged military strikes.

At 0835 BST, the FTSE 100 was down 1.1% at 10,393.43, while Brent crude was up 2.7% at $96.85 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 (IRGC) said it had retaliated by targeting a US air base in Kuwait.

Meanwhile, 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 said he wasn't concerned about the potential political impact of the conflict with Iran.

"They thought they were going to outwait me," Trump said, referring to Iran's leadership. "You know, 'We'll outwait ​him. He's got the midterms.' I don't care about the midterms."

Susannah Streeter, chief investment strategist at Wealth Club: "As the standoff in the Middle East grinds on, with fresh attacks reported once again, it's acting as a drag on indices. The FTSE 100 is in the red in early trade and Wall Street is also set to waver. The US has struck the port city of Bandar again, after tankers were reportedly stopped from passing through the Strait of Hormuz.

"There have also been reports of retaliatory drone attacks on a US base in Kuwait. For now, the fragile ceasefire appears to be holding, but hopes for a breakthrough in talks have been dented.

"Control over the Strait of Iran appears to be at the centre of the tensions. Iran has now wielded such power over the key waterway that it may not want to give up control, which the US is deeming unacceptable. The Trump administration has placed sanctions on the newly formed Persian Gulf Strait Authority, which is attempting to impose a new maritime regime in the waters. It won't let ships pass without permission, but if ships deal with the Iranians they could be breaching these new sanctions.

"So, another impasse has developed and, if it isn't fully resolved, could remain a source of friction and trigger supply chain snarl ups in the future."

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.

Kathleen Brooks, research director at XTB, said: "Core PCE is expected to increase to 3.3% from 3.2% last month, headline PCE is expected to surge to 3.8% from 3.5% in March. A rise in the PCE rate is expected after the CPI rate surged to 3.8% for April. This is well above the Fed's 2% inflation target, and it should justify a shift in the Fed's stance from dovish to neutral/hawkish.

"Today's data could derail the stock market rally, particularly in the US and parts of Asia like South Korea, as it reminds the market that the war in the Middle East is causing real economic damage through higher interest rates. We could see yields pop higher later today, after a strong rally in global sovereign bonds over the last month."

In equity markets, Johnson Matthey fell as it announced the acquisition of Cormetech, a US manufacturer of selective catalytic reduction catalysts, for an enterprise value of $360m. The deal was announced alongside full-year results, which showed that operating profit was in line with previously upgraded guidance.

Molten metal flow engineer Vesuvius was under the cosh as it said revenue and trading profit over the first four months of the year were slightly ahead of last year on a constant currency basis, and backed its expectations for the full year.

The losses were likely due to the fact it was trading ex-dividend, along with a host of other stocks including Kingfisher, National Grid, Severn Trent, AB Foods, Hilton Foods and Breedon.

On the upside, Aviva gained after an initiation at 'buy' by Berenberg.

PPHE Hotel surged after saying it had received a £22 per share takeover proposal from Israel's Fattal Hotel Group which it deems to represent fair value.

Computacenter rose after saying it had bought Government Acquisitions (GAI), a value-added reseller focused on the US federal government market, for up to $92m.

Utilities provider SSE nudged higher as it reported a small decline in annual profits but adjusted earnings at the upper end of guidance, delivering an upbeat outlook following a record year for capital investment.