London pre-open: FTSE seen flat, Brent breaches $80 as US reinstates Iranian port blockade

(Sharecast News) - London stocks were set for a flat open on Tuesday as Brent breached $80 a barrel after Donald Trump said the US had reinstated the naval blockade on the Strait of Hormuz and that all commercial vessels would be charged "at the rate of 20%" on all cargo shipped.

The FTSE 100 was called to open unchanged at 10,498. At 0720 BST, Brent crude was up 1.7% at $84.70 a barrel and West Texas Intermediate was 1.9% higher at $79.60.

In a post on Truth Social on Monday, the US president wrote: "The Hormuz Strait is OPEN, and will remain OPEN, with or without Iran. We are reinstating the IRANIAN BLOCKADE, so named because it is only stopping Iran's ships or customers from entering or leaving."

Trump said all other countries will have "fair and open" use of the Strait, through which around 20% of the world's oil supply is normally transported.

"The U.S.A. will be, from this point forward, known as 'THE GUARDIAN OF THE HORMUZ STRAIT,' but as such, and as a matter of FAIRNESS, will be reimbursed, at the rate of 20% on all cargo shipped, for any and all costs necessary to do the job of providing safety and security to this very volatile section of the World."

Ipek Ozkardeskaya, senior analyst at Swissquote, said: "That's bad news, as such a fee would push transit costs far beyond the roughly $2 million per ship that Iran had proposed charging. If you do the maths, a fully loaded oil tanker is worth around $150-170 million, meaning a 20% fee would amount to roughly $30-34 million per cargo. Bloomberg reports that such a measure would likely be illegal under international law. I would simply say that some people at the helm of the US appear to be losing their minds."

She added: "Overall, rising oil prices are fuelling global inflation expectations once again. Higher inflation expectations are pushing yields higher, and higher yields are weighing on equity appetite."

Investors will also be mulling another round of military strikes by the US against Iran, confirmed by the US Central Command.

Centcom said that during a five-hour mission, US forces struck military targets across Iran including Bushehr, Chah Bahar, Jask, Konarak, Abu Musa, and Bandar Abbas.

In UK corporate news, BP confirmed that upstream production was set to fall in the second quarter, on the back of seasonal maintenance and ongoing disruption in the Middle East.

It now expects oil production and operations to come in between 1.42m to 1.45m barrels of oil equivalent per day, down from the first quarter's 1.54m boe/d. Gas and low carbon energy forecasts were cut to 750m to 770m boe/d, down from 798m boe/d.

Watches of Switzerland hailed record full-year profit and revenue, ahead of its previous guidance and market expectations.

In the 53 weeks to 3 May, statutory pre-tax profit rose 76% to �133m on revenue of �1.8bn, up 11%.

"This performance reflects the strength of our business model, the quality of our brand partnerships and consistent execution across our strategic growth pillars," it said.

Animal genetics company Genus said it expected annual earnings to be moderately above expectations after a strong second half in Asia and Latin America that more than offset weaker conditions in North America.

The group now expects adjusted profit before tax of about �98m helped by a �5.6m milestone payment from its Chinese partner Beijing Capital Agribusiness. Genus also reported solid cash conversion in the second half, driving significant growth in free cash flow.