Europe midday: Shares fall, oil jumps as investors mull Trump blockade report

(Sharecast News) - European shares were lower and oil surged on Wednesday as investors eyed a report that the US was mulling an extended blockade of Iran.

The pan-regional Stoxx 600 index was down 0.24% to 605 at 1148 BST with all major bourses lower. Brent crude pushed beyond $114 a barrel, a gain of 2.82%.

US President Donald Trump was reportedly considering an extended blockade of Iranian ports to choke off the country economically rather than resuming his bombing campaign.

In recent meetings, including a Monday discussion in the Situation Room, Trump opted to continue squeezing Iran's economy and oil exports by preventing shipping to and from its ports. He assessed that his other options-resume bombing or walk away from the conflict-carried more risk than maintaining the blockade, the Wall Street Journal cited officials as saying.

"European equities are struggling in early trade, as the resurgence in brent crude sees prices reach a four-year high. UK defence stocks in particular, have drifted lower following President Trump's decision to opt for a prolonged blockade of Iran rather than re-escalating back into a military conflict," said Scope Markets analyst Joshua Mahony.

"While the absence of immediate war is a relief to humanitarian concerns, the 'forever blockade' scenario removes the short-term speculative premium from defence firms."

"The perception that Iran will come to the table as the blockade threatens to shut-in and damage their energy infrastructure means the world finds itself stuck in a game of chicken to see who blinks first. However, a significant structural shift is emerging that could eventually break the price spiral: the UAE's shock decision to exit Opec."

By severing ties with the cartel, the Emirates are positioning themselves to pump unrestricted volumes. With many facilities damaged in the region, the prospect of one nation ramping up output above pre-war levels does raise hope for a swift reversal in energy prices once the war is resolved."

On the economics front, the US Federal Reserve is expected to hold its policy rate at 3.50% - 3.75% at the conclusion of its meeting later in the day. decisions from Bank of England and European Central Bank are scheduled for Thursday.

In a busy morning for equities, UBS shares gained as the bank reported a better than expected $3bn first quarter net profit.

Deutsche Bank fell after the German lender also revealed a �519m credit loss provision, higher than forecast.

Adidas shares were up as the German sportswear giant's first-quarter profits beat forecasts, while French IT group Sopra Steria jumped almost 15% after a first-quarter trading update.

Shares in Thyssenkrupp surged after Finland's Kone agreed to buy TK Elevator for around $23.66bn, in a deal that would create the world's biggest elevator maker by sales. Thyssenkrupp holds a minority stake in the elevator business following its sale in 2020 to a consortium.

Reporting by Frank Prenesti for Sharecast.com