UK equities fell sharply on Wednesday after President Donald Trump declared the ceasefire with Iran “over,” triggering a broad sell-off across European markets.
The FTSE 100 dropped 1.61% by 09:14 GMT, while Germany’s DAX fell 2.54% and France’s CAC 40 lost 2.23% as geopolitical risk gripped global markets.
Sterling reversed earlier gains, falling 0.22% against the U.S. dollar to trade at $1.3324 as investors sought safer assets amid escalating Middle East tensions.
Speaking on the sidelines of the NATO summit in Ankara, Turkey, Trump described Iran’s leadership as “sick” and said dealing with the country was “a waste of time,” following overnight U.S. strikes on more than 80 Iranian targets.
Bahrain activated missile warning sirens for a third time on Wednesday after Iran and Kuwait exchanged fire, with Iran’s Revolutionary Guard claiming it had targeted U.S. military facilities in both countries.
Kuwait’s military said its air defence systems were “confronting hostile missile and drone attacks,” while Iranian state media reported explosions near the port city of Bushehr, home to Iran’s only civilian nuclear power plant.
The latest escalation followed accusations that Iran was responsible for attacks on three commercial vessels transiting the Strait of Hormuz, a critical global oil shipping route.
“U.S. Central Command forces have begun launching a series of powerful strikes against Iran to impose heavy costs,” CENTCOM said in a statement.
Washington also revoked a sanctions waiver that had allowed Iran to export oil, prompting Iran’s foreign ministry to describe the move as a “clear violation” of last month’s memorandum.
Iranian Parliament Speaker Mohammad Bagher Qalibaf responded defiantly, saying: “The era of bullying and extortion is over. It leads nowhere. We don’t fold.”
Brent crude climbed 6.27% to $78.78 a barrel and West Texas Intermediate rose 6.42% to $74.99 as investors priced in significant supply disruption risks from the region.
ING analysts noted that the front end of the Brent futures curve had returned to backwardation, while American Petroleum Institute data showed U.S. crude inventories declined by 400,000 barrels last week.
Additional pressure on energy markets came from increased Ukrainian drone attacks on Russian refineries, lifting the ICE gasoil crack spread above $50 a barrel and pushing European TTF natural gas futures more than 4% higher to above €48/MWh.
Gold moved in the opposite direction, with gold futures falling 2.27% to $4,063.70 an ounce and spot gold declining 1.26% to $4,054.66 as oil dominated safe-haven flows.
ING analysts noted that China’s central bank extended its gold-buying programme for a 20th consecutive month in June, offering longer-term price support even as short-term sentiment shifted.
Among UK corporate news, Unite Group (LSE:UTG) said reservations for the 2026/27 academic year had reached 86% of available beds, supported by strong direct-let demand, while maintaining its full-year earnings guidance.
Jet2 (LSE:JET2) reported summer passenger bookings running 7.1% higher than a year earlier, with improving booking trends supported by easing geopolitical tensions in key holiday destinations.
IG Group (LSE:IGG) announced plans to establish a Jersey-based holding company as part of a broader strategic review designed to enhance shareholder value, adding to a busy day for corporate news.
Ofcom fined Virgin Media £28 million after finding the company repeatedly made it difficult for customers to cancel contracts between 2022 and 2024.
Severn Trent Water (LSE:SVT) was found by Ofwat to have breached wastewater obligations, though the regulator chose not to impose a financial penalty after considering the company’s remedial actions.
Vistry (LSE:VTY) warned it expects to report a first-half pre-tax loss of around £30 million and confirmed that Chief Financial Officer Tim Lawlor will step down from the business.