London open: FTSE led lower by AstraZeneca, oil giants

(Sharecast News) - London stocks edged down in early trade on Monday, led lower by AstraZeneca, and with oil giants BP and Shell in the red as oil prices fell on hopes for fresh US-Iran negotiations.

At 0830 BST, the FTSE 100 was 0.1% weaker at 10,858.09, while Brent crude was down 5.2% at $83.39 a barrel and West Texas Intermediate was 6% lower a $79.56.

Prices fell back as Donald Trump said talks with Iran will begin on Monday after the US refrained from carrying out new strikes against Tehran.

The US President said on Truth Social that at the request of Iran and other Middle Eastern countries, he had held off on the biggest attack "since World War II", "subject to being able to rapidly make a deal".

Trump said a deal would include the "immediate, complete, and total opening of the Hormuz Strait, and an end to Iran's nuclear threat".

Speaking to reporters on Air Force One on Sunday, the US President said: "They knew the extent of the attack because they saw it forming.

"We're talking to them in the form of a negotiation. It begins tomorrow afternoon."

Iranian media denied that Tehran had asked for the strikes to be called off.

Patrick Munnelly at Tickmill Group said: "The market reaction is straightforward: less immediate military escalation means a lower probability of a near-term Hormuz disruption, and therefore a smaller geopolitical premium in crude.

"That said, there is still a meaningful gap between talks resuming and the Strait of Hormuz fully reopening. A diplomatic process can reduce tail risk quickly, but it does not guarantee supply normalisation on the same timetable. Another small OPEC supply increase also helps at the margin, but only if barrels can be efficiently distributed. If shipping, insurance or regional security constraints remain elevated, extra supply on paper may not translate cleanly into relief at the pump."

On home shores, EY nudged up its 2026 UK growth forecast but warned of a potential recession if the Strait of Hormuz stays closed until early-mid 2027.

According to its new UK Economic Outlook, the economy is projected to grow by 0.9% in 2026, up a touch on the 0.8% growth forecast in May. EY noted a better-than-expected performance in the second quarter as oil prices returned to pre-conflict levels more quickly than expected.

GDP growth is expected to rise to 1.2% in 2027, in line with the previous forecast.

EY said the recent escalation of Middle East tensions and disruption in the Strait of Hormuz and subsequent impact on energy prices and inflation are set to weigh on growth towards the end of the year, while a prolonged closure could cause the economy to contract next year. Around 20% of the world's oil supplies normally pass through the Strait.

The outlook's baseline forecast assumes the Strait of Hormuz reopens by the end of the third quarter of this year, albeit with subdued levels of tanker traffic. However, should the conflict escalate and the Strait remain closed until early or mid-2027, growth could fall to 0.5% this year and contract 0.2% in 2027.

Peter Arnold, EY UK chief economist, said: "The UK economy has proved more resilient than many expected this year, prompting a modest upgrade to our growth forecast. Oil prices had started to fall back to pre-conflict levels and, while business and consumer confidence have softened, this decline remains less severe than the shock triggered by the 2022 energy crisis. Ongoing disruption to global energy markets will now start to test this economic resilience.

"If the Strait of Hormuz reopens in the coming months, we expect the UK to avoid a more pronounced downturn, but an extended closure into 2027 would raise inflation and could push the economy into contraction next year.

"As growth becomes harder to sustain, the UK is likely to rely increasingly on those sectors that have underpinned economic performance in recent years, particularly technology and high-value business services. At the same time, longstanding pressures in construction remain a concern. Rising project costs, persistent labour shortages and weak productivity growth risk constraining the delivery of major infrastructure projects at a time when demand remains high. Enhancing productivity in the sector will be critical if the UK is to deliver its infrastructure ambitions while supporting broader economic growth."

In equity markets, AstraZeneca tumbled following a report it's in talks to combine with US rival Bristol Myers Squibb in a deal that would create one of the world's biggest pharmaceutical groups, valued at nearly $400bn.

According to the Financial Times, citing people familiar with the matter, the companies have held discussions about a tie-up in recent months. It was understood the talks could yield a deal in the near future but may be delayed or fall apart.

The FT said the exact structure of any deal could not immediately be determined, but would probably require both cash and shares.

BP and Shell gushed lower in tandem with oil prices.

On the upside, takeover target easyJet flew higher after saying it had extended the 'put up or shut up' deadline for both competing offers from private equity firms Castlelake and Apollo to 7 August.

Castlelake had originally been set a deadline of 3 August, but as easyJet had been providing due diligence to both parties it had decided to align the dates. The low-cost carrier originally accepted a �5.5bn offer from Castlelake before switching to approval for a �5.7bn pitch from Apollo.

More broadly, airlines were higher amid the prospect of lower fuel costs, with IAG and Wizz Air both up.

Shipping services group Clarksons surged after saying it expects full-year results "materially ahead" of market forecasts following a record first-half profit as it benefited from the volatility caused by disruptions in the Strait of Hormuz.

Engineering and manufacturing firm Senior nudged higher as it hailed a "strong" performance in the six months ended 30 June.

Market Movers

FTSE 100 (UKX) 10,858.09 -0.09%

FTSE 250 (MCX) 24,175.45 0.84%

techMARK (TASX) 6,036.35 -0.03%

FTSE 100 - Risers

Persimmon (PSN) 1,150.50p 3.93%

Barratt Redrow (BTRW) 304.30p 3.75%

Melrose Industries (MRO) 468.80p 3.35%

Rolls-Royce Holdings (RR.) 1,517.60p 3.22%

Fresnillo (FRES) 2,533.00p 2.75%

International Consolidated Airlines Group SA (CDI) (IAG) 442.80p 2.71%

Pershing Square Holdings Ltd NPV (PSH) 3,908.00p 2.63%

InterContinental Hotels Group (IHG) 164.85p 2.49%

Metlen Energy & Metals (MTLN) 46.85p 2.47%

Smith & Nephew (SN.) 1,187.50p 2.33%

FTSE 100 - Fallers

AstraZeneca (AZN) 11,746.00p -6.13%

Pearson (PSON) 1,228.50p -2.15%

BP (BP.) 539.40p -2.14%

Rentokil Initial (RTO) 337.90p -1.86%

Shell (SHEL) 3,328.00p -1.46%

British American Tobacco (BATS) 4,483.00p -1.42%

Sainsbury (J) (SBRY) 355.70p -0.64%

Imperial Brands (IMB) 2,795.00p -0.57%

Coca-Cola HBC AG (CDI) (CCH) 4,976.00p -0.56%

IG Group Holdings (IGG) 1,416.00p -0.55%

FTSE 250 - Risers

Clarkson (CKN) 5,390.00p 14.80%

Vistry Group (VTY) 309.40p 6.03%

Aston Martin Lagonda Global Holdings (AML) 37.00p 5.77%

Wizz Air Holdings (WIZZ) 1,106.00p 4.52%

Taylor Wimpey (TW.) 80.60p 3.33%

Shawbrook Group (SHAW) 338.50p 3.20%

Hochschild Mining (HOC) 441.20p 3.06%

Vesuvius (VSVS) 377.20p 3.02%

Bellway (BWY) 2,046.00p 3.02%

Travis Perkins (TPK) 571.00p 2.98%

FTSE 250 - Fallers

Ithaca Energy (ITH) 232.50p -3.92%

Hansa Investment Company Limited (DI) (HAN) 324.00p -3.57%

Energean (ENOG) 744.50p -2.42%

SDCL Efficiency Income Trust (SEIT) 38.00p -1.94%

Ruffer Investment Company Ltd Red PTG Pref Shares (RICA) 291.00p -1.85%

ITV (ITV) 73.10p -1.75%

Utilico Emerging Markets Ltd (DI) (UEM) 283.00p -1.39%

Harbour Energy (HBR) 236.40p -1.25%

Jpmorgan European Growth & Income (JEGI) 145.20p -1.09%

Oxford Nanopore Technologies (ONT) 112.20p -1.06%