London open: FTSE falls, oil prices rise amid escalating US-Iran tensions

(Sharecast News) - London stocks fell in early trade on Monday as oil prices shot up amid escalating tensions between the US and Iran, with Andy Burnham set to become Prime Minister.

At 0830 BST, the FTSE 100 was 0.5% lower at 10,545.75. At the same time, Brent crude was up 3.2% at $90.95 a barrel and West Texas Intermediate was 2.8% higher at $84.79 after US forces attacked Iran for the ninth night and Tehran pledged that not a "single drop" of oil or gas would transit through the Strait of Hormuz if US aggression continues.

Patrick Munnelly at Tickmill Group said: "Markets are starting the week with crude as the macro driver. Brent's break above $90/bbl has turned the US-Iran escalation from a geopolitical tail risk into the dominant macro input again, pressuring bonds, reviving inflation concerns and limiting the comfort investors can take from last week's softer US CPI and PPI prints.

"Equities are trying to stabilise after Friday's tech-led rout, but the message from rates and oil is less forgiving: the disinflation trade now has to survive a fresh energy shock."

Munnelly noted that Iran has said the memorandum of understanding deal is suspended, while traffic through the Strait of Hormuz continues to dry up.

"That keeps the supply-risk premium embedded, even before any full closure scenario is priced," he said. "The scale of the move matters. Brent is now roughly 28.5% above its July low, but still short of the near-$100/bbl midpoint between the immediate pre-crisis level and the late-April peak around $126/bbl. In other words, oil has moved far enough to trouble central banks, but not far enough for markets to treat the shock as fully priced. That is an uncomfortable middle ground."

On home shores, outgoing PM Keir Starmer will tender his official resignation to King Charles, who will then invite Burnham to form a new government. Burnham is due to announce his Cabinet picks following reports that Shabana Mahmood will be made chancellor.

In equity markets, Ryanair was in focus as the budget airline posted a 34% drop in first-quarter profit after tax, missing analysts' expectations, as fuel prices jumped and fares fell due to the conflict in the Middle East and the timing of Easter.

Profit after tax declined to �538m from �820m in the same period a year earlier, as revenue nudged up 1% to �4.38bn. Analysts were expecting PAT of �579m.

Segro lost ground as it rejected a sweetened �13.5bn approach from US logistics giant Prologis. Prologis said its third approach, which consists of 0.089 new Prologis shares for each Segro share, plus a partial cash alternative of up to �2.7bn, had been made and rejected last week.

It urged shareholders to back the proposal, however, arguing that the Segro assessment of its own value was "unrealistic".

Storage specialist Big Yellow was weaker even as it reported a rise in first-quarter sales as cost cutting offset a slight fall in occupancy. Like-for-like revenue rose 2% to �52.m in the three months to 30 June, with occupancy down 0.2 percentage points to 79.2%.

On the upside, Computacenter rallied after an upgrade to 'buy' from 'hold' at Berenberg, while BP and Shell gushed higher in tandem with oil prices.