Global stock markets started the week under pressure as renewed fighting between the US and Iran pushed oil prices higher, increased inflation concerns and weighed on technology shares, with investors also preparing for key economic data and the start of the earnings season.
In the US, the Dow Jones Industrial Average fell 0.3%, while the S&P 500 declined 0.8% and the Nasdaq Composite dropped 1.6% after both indexes recorded modest gains last week.
Semiconductor stocks were among the weakest performers, led by memory chip maker SK Hynix as investors reduced exposure to parts of the artificial intelligence sector.
Market sentiment weakened after the US carried out further strikes near the Strait of Hormuz over the weekend, followed by Iranian attacks on US allies including Kuwait, Jordan and Qatar.
The escalation raised doubts over efforts to secure a ceasefire, although President Donald Trump said discussions with Iran were continuing while also stating that he considered the truce to be “over”.
Oil prices responded sharply to the increased tensions, with Brent crude rising above $82 a barrel after Trump said the US planned to reinstate a blockade of the Strait of Hormuz and introduce a 20% charge on cargo moving through the vital shipping route.
The renewed pressure on energy prices comes ahead of two closely watched US inflation reports this week, with the Consumer Price Index due on Tuesday followed by the Producer Price Index on Wednesday. The figures will provide investors with further guidance on whether the Federal Reserve may need to raise interest rates later this year.
In London, the FTSE 100 struggled to find direction, closing virtually unchanged after ending the previous session just one point higher, while the FTSE 250 gained 0.1% as investors assessed developments in the Middle East and company updates.
Energy stocks benefited from the rise in crude prices, with BP climbing 4.6% and Shell gaining 2.3%. Shell also announced the $1.8 billion sale of Solenergi Power, which includes the Sprng Energy group of companies, to Aditya Birla Renewables.
Housebuilders also performed strongly despite rising bond yields, supported by reports that incoming prime minister Andy Burnham is considering bringing back the Help to Buy scheme after taking office. Persimmon rose 2.9%, Barratt Redrow increased 1.5% and Taylor Wimpey gained 2.1% as investors assessed the potential impact of renewed government support for housing demand.
Mining and technology stocks faced greater pressure, with weaker gold prices dragging Fresnillo down 2.9% and Endeavour Mining lower by 2.2%. Technology-focused funds also declined, with Polar Capital Technology Trust falling 1.8% and Scottish Mortgage Investment Trust dropping 2.6%.
Recruitment companies were among the strongest performers on the FTSE 250 after positive trading updates improved sentiment towards the sector. PageGroup surged 20% after reporting stronger-than-expected second-quarter performance, supported by growth in Asia Pacific and the Americas. Gross profit reached £197.6 million, up 1.3% year-on-year, while analysts said the results compared favourably with expectations of a decline.
Hays followed with a 14% rise after its recent update, while Watches Of Switzerland Group advanced 4.2% ahead of its trading statement following reports of possible takeover discussions.
ME Group International gained 9.3% after saying trading conditions returned to more normal seasonal patterns in May and June, while Oxford Nanopore fell 3.6% after warning that first-half revenue would miss forecasts.
Elsewhere in Europe, France’s CAC 40 rose 0.3% and Germany’s DAX 40 gained 0.2%, as investors balanced geopolitical risks against company earnings and upcoming economic data.
