(Sharecast News) - London stocks fell in early trade on Tuesday following fresh strikes between the US and Iran, as traders returned to their desks after the Bank Holiday weekend.
At 0827 BST, the FTSE 100 was down 0.4% at 10,777.52, while Brent crude and West Texas Intermediate were both up 1.1%, at $91.46 and $86.74 a barrel, respectively, after the US and Iran exchanged fresh strikes for the first time since July over the weekend.
Kathleen Brooks, research director at XTB, said: "For now, we think that the resumption of the bombing will be short lived. Although President Trump said that he would continue to strike Iran, Tehran authorities said that their attacks on US airbases in Jordan would be limited and contained. US Treasury Secretary Scott Bessent also said that the US would win the war through economic sanctions, as he talked down the possibility of prolonged military conflict.
"We are now just two months away from the US Mid-Term elections, and President Trump shows no sign of scaling back the war in Iran to win votes, even though the conflict is not popular at home. This could trigger volatility in the coming weeks, as investors fret that elevated oil prices could be here to stay.
"Overall, as long as the oil price remains below $100 per barrel, and for as long as oil supplies are plentiful, as they are now, we think that the economy can withstand the pain from a prolonged conflict between Iran and the US."
On home shores, data released by Nationwide showed that house prices returned to growth in August but remained subdued.
House prices ticked up 0.2% on the month, following a revised 0.1% decline in July. On the year, house prices rose 1.6% in August following growth of 1.4% the month before. The average price of a home was £275,465 last month.
Nationwide chief economist Robert Gardner said: "Market activity and house prices have remained subdued in recent months, in part reflecting the uncertain economic backdrop. Geopolitical tensions remain high, with the conflict in the Middle East exerting upward pressure on energy prices and market interest rates.
"Market expectations of the future path of Bank Rate have been volatile. While the latest energy price shock poses inflation risks, there have been encouraging signs that it is not feeding through to underlying price pressures. Indeed, private sector wage growth has eased further in recent months, which should give policymakers breathing space to assess the extent to which tighter policy is necessary to ensure inflation returns sustainably to target.
"Underlying affordability is improving, as house price growth remains well below earnings growth. although some of these gains have been offset by higher mortgage rates. Nevertheless, this suggests that activity should regain momentum in the quarters ahead providing the energy shock wanes and confidence returns, especially if market interest rates fall back towards pre-conflict levels."
Elsewhere, figures showed that shop price inflation hit a two-year high in August amid higher energy prices.
In equity markets, Reckitt Benckiser surged to the top of the FTSE 100 after an Illinois court ruled in favour of its Mead Johnson unit in a trial alleging that its baby formula was linked to deadly bowel disease.
Bunzl rose after it lifted its full-year margin as it reported a rise in first-half profit and revenue, with underlying growth in all regions, and announced a new £500m share buyback. It now expects group operating margin to be broadly flat year-on-year, having previously guided to a modest decline.
Energy giants BP and Shell gushed higher in tandem with oil prices.
Bodycote jumped as it agreed to be taken over by US private equity firm Veritas Capital in a £1.65bn deal. Under the terms of the acquisition, Veritas - through its special purpose vehicle Vulcan Alpha Bidco - will pay 940p per share for Bodycote. This comprises 932.8p in cash and the FY26 interim dividend of 7.2p per share.
Market Movers
FTSE 100 (UKX) 10,777.52 -0.43%
FTSE 250 (MCX) 24,815.64 -0.49%
techMARK (TASX) 6,146.07 -0.55%
FTSE 100 - Risers
Reckitt Benckiser Group (RKT) 5,390.00p 5.26%
Bunzl (BNZL) 2,854.00p 3.68%
BP (BP.) 531.30p 3.01%
Entain (ENT) 521.20p 2.30%
Shell (SHEL) 3,406.00p 1.88%
Centrica (CNA) 157.05p 1.61%
Unilever (ULVR) 4,805.00p 1.44%
Vodafone Group (VOD) 120.10p 1.01%
Glencore (GLEN) 605.50p 0.99%
Coca-Cola Europacific Partners (DI) (CCEP) 8,005.00p 0.88%
FTSE 100 - Fallers
Melrose Industries (MRO) 501.20p -2.97%
InterContinental Hotels Group (IHG) 156.85p -2.91%
Fresnillo (FRES) 3,089.00p -2.90%
ICG (ICG) 1,937.00p -2.88%
Rolls-Royce Holdings (RR.) 1,481.60p -2.88%
Barclays (BARC) 486.15p -2.82%
Autotrader Group (AUTO) 515.40p -2.50%
International Consolidated Airlines Group SA (CDI) (IAG) 425.40p -2.49%
Computacenter (CCC) 5,545.00p -2.47%
Abrdn (ABDN) 246.40p -2.30%
FTSE 250 - Risers
Drax Group (DRX) 815.00p 4.77%
Bodycote (BOY) 949.50p 3.67%
Ithaca Energy (ITH) 285.60p 3.49%
Oxford Instruments (OXIG) 2,804.00p 3.17%
Harbour Energy (HBR) 259.00p 2.87%
Energean (ENOG) 755.00p 2.46%
Patria Private Equity Trust (PPET) 612.00p 2.34%
Aston Martin Lagonda Global Holdings (AML) 34.38p 2.27%
Discoverie Group (DSCV) 831.00p 2.21%
Rank Group (RNK) 105.00p 1.74%
FTSE 250 - Fallers
Endeavour Mining (EDV) 4,525.00p -4.34%
IP Group (IPO) 70.00p -3.58%
Avon Technologies (AVON) 1,790.00p -3.45%
Ceres Power Holdings (CWR) 376.40p -3.00%
AEP Plantations (AEP) 197.00p -2.93%
Oxford Nanopore Technologies (ONT) 170.70p -2.90%
Hochschild Mining (HOC) 652.50p -2.85%
Jupiter Fund Management (JUP) 165.20p -2.70%
XPS Pensions Group (XPS) 305.00p -2.70%
Hays (HAS) 75.60p -2.59%
113.21 (1.05%)
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