London open: Stocks edge lower, oil rises as Israel and Iran exchange strikes

(Sharecast News) - London stocks edged lower in early trade on Monday, while oil prices shot up after Israel and Iran exchanged strikes, threatening the ceasefire between the two.

At 0822 BST, the FTSE 100 was down 0.2% at 10,347.07, while Brent crude was up 5% at $97.72 a barrel.

Investors were mulling the latest developments in the Middle East conflict as Israel launched airstrikes on central and western Iran on Monday after Tehran fired ballistic missiles at northern Israel on Sunday. Iran's attack followed Israeli strikes on Beirut, and this marked the first exchange of fire between the two since the ceasefire in April.

Susannah Streeter, chief investment strategist at Wealth Club, said: ''The spectre of high interest rates has seen investors finally take fright, and the slide is being exacerbated by renewed Middle East conflict. While markets had been surprisingly stoic through the Iran war and a painful energy crunch, sentiment is now more fragile. Iran has fired missiles at Israel, sparking fresh worries about the inflationary impact of the war.

"Brent crude has risen sharply, up 4%, trading above $97 a barrel as supplies in the region stay stranded. The prospect of borrowing costs staying higher for longer, if the prices stay elevated, has shattered the optimism which had pushed indices to record highs.

"There had been hopes that the US economy might stay in Goldilocks territory - not too hot and not too cold - but inflation concerns have reared up again, and the bears are back on the prowl.

"Friday's US jobs report sparked a firestorm of selling, with big tech bearing the brunt of the wobble in confidence. Indices in Asia have been hit by the contagion of pessimism, with semiconductor stocks falling sharply. South Korea's Kospi plunged more than 8%, triggering a market-wide circuit breaker. The slide looks set to continue, with Wall Street bracing for another sell-off."

In equity markets, Rolls-Royce slumped after the chief executive of United Airlines criticised the engine maker for what he called a lack of support over a delayed order for Airbus planes.

Airlines were under the cosh as rising oil prices sparked worries about fuel costs, with BA and Iberia owner IAG, easyJet and Wizz all down.

Polar Capital Technology Trust also suffered heavy losses due to its exposure to the tech sector.

On the upside, Tate & Lyle surged after agreeing to be taken over by US peer Ingredion in a �2.7bn deal. The ingredients firm is being acquired for 595p per share in cash and dividends of up to 20p share. The deal values the business at �2.7bn, with an implied enterprise value of �3.7bn.

Tate & Lyle said it would create a business with "even greater potential, greater scale and increased investment in innovation".

Energy giants BP and Shell gushed higher in tandem with oil prices, along with Ithaca Energy.