Europe open: Shares slump on UK political turmoil, Trump Iran comments

(Sharecast News) - European shares opened sharply lower as uncertainty over the future of UK Prime Minister Keir Starmer and Donald Trump's rejection of Iran's peace proposals both hit sentiment.

The pan-regional Stoxx 600 index was down almost 1% at 606 by 0825 BST. Britain's FTSE 100 fell 0.9% with the pound down and government bond yields higher as traders fear a rise in public spending should Starmer be replaced.

The prime minister has reportedly faced calls to step down from senior cabinet ministers including the Foreign Secretary Yvette Cooper after the ruling Labour Party was battered in last week's local council elections and a series of serious policy missteps that have eroded his popularity despite a massive parliamentary majority.

"UK assets face a separate political stress test. Press reports suggest today's cabinet meeting could become a direct challenge to Starmer, with some ministers reportedly joining backbench calls for him to stand down. Prediction markets now price an 87% probability that he is out by year-end, and Sterling has already slipped roughly a cent against the Dollar to around 1.3573," said Patrick Munnelly at Tickmill Group.

Meanwhile, the hopes the Iran war could be ended any time soon were soon dashed by Trump, who typically reverted to insults, calling Tehran's latest offer "stupid".

"I would say the ceasefire is on massive life support, where the doctor walks in and says: 'Sir, your loved one has approximately a 1% chance of living.'," he said on Monday.

The response pushed oil prices even higher, with Brent crude beyond $106 and West Texas Intermediate hitting $100 a barrel.

In equity news, shares in UK bakery chain Greggs jumped on an upbeat trading update, while German chemicals giant Bayer was also up on results.

Reporting by Frank Prenesti for Sharecast.com