(Sharecast News) - London stocks tumbled in early trade on Monday and the FTSE 100 entered correction territory as the war in the Middle East escalated after the US and Iran exchanged fresh threats over the weekend.
At 0825 GMT, the top-flight index was down 1.5%. At the same time, Brent crude was up 1% at $113.26 a barrel and West Texas Intermediate was 2.1% higher at $100.32.
Gold futures on Comex were down 7.4% at $4,234.70 an ounce, while silver was 7.2% lower at $64.73.
Richard Hunter, head of markets at Interactive Investor, said: "Having been a beacon of light amid the turmoil, the FTSE 100 has now turned negative for the year and is now 1130 points, or 10% lower than the record high set as recently as at the end of February, dragging it technically into correction territory.
"It also places the main index down by 1.6% down in the year to date. Any strength in the oil majors has been insufficient to offset losses elsewhere, while even the strength of the dollar - traditionally a boon to an index packed with companies exposed to overseas earnings - has been swept aside."
A correction is defined as a drop of between 10% and 20% from a recent peak.
Investors were reacting to developments over the weekend. Iran threatened on Sunday to "irreversibly destroy" energy infrastructure across the Middle East after Donald Trump said the US would "obliterate" the country's power plants if it did not reopen the Strait of Hormuz within 48 hours.
In a Truth Social post late on Saturday night, Trump said the US would destroy Iran's "various POWER PLANTS, STARTING WITH THE BIGGEST ONE FIRST!". The US president's threat came just a day after he said he was considering "winding down" the war.
Iran's Revolutionary Guards threatened to completely close the Strait of Hormuz if Trump follows through on his threat.
The Iranian president's speak, Mohammad Bagher Ghalibaf, said on Sunday: "Immediately after power plants and infrastructure in our country are targeted, vital infrastructure as well as energy and oil infrastructure across the entire region will be considered legitimate targets and will be irreversibly destroyed."
The vital Strait of Hormuz, through which around 20% of the world's oil supply is normally transported, is now deemed too difficult to pass, leaving numerous tankers stranded at sea.
Neil Wilson, UK investor strategist at Saxo Markets, said developments over the weekend "mean we are entering a new and very dangerous phase for financial markets". He also said the odds of a US attack on Kharg Island - Iran's vital oil hub - are "shortening by the hour".
On Friday, Axios reported that the Trump administration is considering plans to occupy or blockade Kharg Island to pressure Iran into reopening the Strait of Hormuz.
"This is an escalatory doom loop - or 'escalation trap' with currently no realistic off-ramp," Wilson said. "Neither side has an incentive to back down as the costs of doing so are increasing day by day. Each side thinks pushing harder will force the other to back down."
In equity markets, engine maker Rolls-Royce, BA and Iberia owner IAG and budget airline easyJet were all sharply lower.
Precious metals miner Fresnillo and gold miners Hochschild and Endeavour also slumped as gold and silver prices retreated.
Spire Healthcare tanked after private equity firms Bridgepoint and Triton both said after the close on Friday that they did not plan on making an offer the private hospital operator.
Spire said talks with others parties about a potential sale are ongoing and that it is also considering other "appropriate actions to drive long-term, sustainable shareholder value".
On the upside, Croda was the standout gainer on the FTSE 100 after an upgrade to 'buy' at Goldman Sachs.
Market Movers
FTSE 100 (UKX) 9,774.59 -1.45%
FTSE 250 (MCX) 20,913.77 -2.01%
techMARK (TASX) 5,558.20 -1.50%
FTSE 100 - Risers
Croda International (CRDA) 2,577.00p 1.37%
Pearson (PSON) 956.80p 0.31%
Schroders (SDR) 572.50p 0.17%
Intertek Group (ITRK) 3,530.00p 0.17%
BP (BP.) 563.20p 0.07%
Autotrader Group (AUTO) 471.20p 0.00%
Coca-Cola Europacific Partners (DI) (CCEP) 6,910.00p 0.00%
Berkeley Group Holdings (The) (BKG) 3,414.00p 0.00%
Diageo (DGE) 1,371.00p 0.00%
Weir Group (WEIR) 2,618.00p 0.00%
FTSE 100 - Fallers
Rolls-Royce Holdings (RR.) 1,112.00p -3.92%
3i Group (III) 2,644.00p -3.36%
Antofagasta (ANTO) 3,045.00p -3.12%
International Consolidated Airlines Group SA (CDI) (IAG) 334.20p -3.04%
Metlen Energy & Metals (MTLN) 34.22p -3.04%
BT Group (BT.A) 206.60p -2.97%
easyJet (EZJ) 343.40p -2.88%
Diploma (DPLM) 5,555.00p -2.88%
Standard Life (SDLF) 643.50p -2.87%
Persimmon (PSN) 1,080.00p -2.69%
FTSE 250 - Risers
Morgan Sindall Group (MGNS) 4,340.00p 3.09%
Renishaw (RSW) 3,665.00p 2.02%
SDCL Efficiency Income Trust (SEIT) 42.00p 1.20%
Bluefield Solar Income Fund Limited (BSIF) 85.00p 0.59%
Energean (ENOG) 862.00p 0.47%
BlackRock Smaller Companies Trust (BRSC) 1,196.00p 0.17%
Ruffer Investment Company Ltd Red PTG Pref Shares (RICA) 311.50p 0.16%
JTC (JTC) 1,302.00p 0.15%
Edinburgh Worldwide Inv Trust (EWI) 206.50p 0.00%
Savills (SVS) 828.00p 0.00%
FTSE 250 - Fallers
Spire Healthcare Group (SPI) 150.40p -20.84%
Pan African Resources (PAF) 116.60p -9.16%
Hochschild Mining (HOC) 515.50p -5.24%
Oxford Nanopore Technologies (ONT) 114.90p -4.88%
W.A.G Payment Solutions (EWG) 95.20p -4.61%
BlackRock World Mining Trust (BRWM) 781.00p -4.51%
RHI Magnesita N.V. (DI) (RHIM) 2,270.00p -4.50%
Endeavour Mining (EDV) 3,824.00p -4.50%
Ocado Group (OCDO) 183.15p -3.99%
JPMorgan Japanese Inv Trust (JFJ) 708.00p -3.6
229.84 (2.32%)
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