London open: Stocks fall, oil rises as Trump speech rattles markets

(Sharecast News) - London stocks fell in early trade on Thursday as oil prices jumped after Donald Trump said in his first national address since the start of the war that the US would hit Iran "extremely hard" in the coming weeks.

At 0825 BST, the FTSE 100 was down 0.6% at 10,306.63. Brent crude was up 6.5% at $107.71 a barrel, while West Texas Intermediate was 6% higher at $106.13.

In his speech, which lasted just under 20 minutes, the US President said the war with Iran was "nearing completion" but that the US would hit the country "extremely hard" over the next two to three weeks.

"We are on track to complete all of America's military objectives shortly, very shortly," he said.

Trump said negotiations between the US and Iran are "ongoing". However, if no deal is struck, the US will "hit each and every one of their electric generating plants very hard, and probably simultaneously," he said.

The US president also urged countries that get their oil through the Strait of Hormuz to "build up some delayed courage" and get involved to ensure it reopens. "The United States imports almost no oil through the Hormuz Strait and won't be taking any in the future. We don't need it," he said.

"We haven't needed it, and we don't need it." Trump said the US would be "helpful" but that other countries should take the lead in protecting the oil "that they so desperately depend on".

"Tonight, every American can look forward to a day when we are finally free from the wickedness of Iranian aggression and the spectre of nuclear blackmail because of the actions we have taken," he said. "We are on the cusp of ending Iran's sinister threat to America and the world."

Richard Hunter, head of markets at Interactive Investor, said: "Investors had the wind taken out of their sails as the latest US Presidential address pointed to a continuation of the conflict.

"The speech contained little to reassure investors, with an aggressive two to three weeks of military activity likely to follow. Nor were there any timelines given to the reopening of the Strait of Hormuz, with the President simply suggesting that the other allies make their own arrangements in claiming the area.

"With supply disruptions firmly back on the agenda, and with oil traders struggling to estimate how long until supplies are fully restored 0 even if hostilities were to end imminently - the oil price surged once more during the speech, adding another 6% to stand currently at around $107 per barrel.

"The lack of a clear resolution came after what had been another optimistic session in the US, with each of the main indices adding to strong gains made the day previously. However, volatility remains central to market movements currently, and the resumption of hostilities will add to economic concerns globally, alongside the possibility of a growth shock and even stagflation, where low growth and high inflation provide a toxic mix."

In equity markets, Lloyds Banking Group fell after saying it would stick with its �1.95bn compensation provision for the motor finance miss-selling scandal after assessing the regulator's final ruling.

However, the lender warned there was still a number of uncertainties, including response rates, operational costs and any litigation.

"The ultimate outcome may also differ dependent upon potential actions by various parties, including legal proceedings and complaints. The group remains committed to ensuring customers receive appropriate and timely redress," it added.

The banking sector more broadly was under the cosh as sentiment soured, with HSBC and Barclays also weaker.

Airlines were in the red amid concerns about higher fuel costs, with BA owner IAG, easyJet and Wizz all down.

On the upside, BP and Shell gushed higher, surging to the top of the FTSE 100 amid firmer oil prices.

Defensives were also in the black, with British American Tobacco and Imperial Brands among the gainers.

Energy firm SSE nudged higher after a trading update.