Blue-chip stocks fell in London on Monday as surging oil prices and stalled Middle East peace talks dampened investor sentiment across the session.
The FTSE 100 index closed down 38.59 points, or 0.4%, finishing the day at 10,862.50 after a broad retreat across major sectors.
The FTSE 250 also declined, dropping 110.32 points, or 0.4%, to close at 24,744.54, while the AIM All-Share edged fractionally higher by 0.49 of a point, or 0.1%, to 796.38.
Crude oil prices extended recent gains after Iran’s Revolutionary Guard Corps warned on Sunday that they would not reopen the Strait of Hormuz until Washington complied with demands including compensation for war damage.
Brent oil for October delivery traded higher at 86.35 US dollars a barrel on Monday, up sharply from 83.40 dollars late on Friday.
US President Donald Trump downplayed the prospect of the Strait of Hormuz reopening, with Axios quoting him as saying in a phone call: “We are low-keying it.”
Trump told the news outlet the US was “only semi-negotiating” with Iran, adding: “We are just watching Iran with its huge inflation and the fact they have no money.”
“It will work out. It always works out. It’s like a chess game,” Trump said of the back-and-forth with Iran, according to Axios, which quoted US officials as saying he was focusing on de-escalation.
AJ Bell investment director Russ Mould said the Iran conflict remains a “key source of concern for markets”, with a lasting resolution seeming a distant prospect at this point.
Markets are also keeping a close eye on Wednesday’s US inflation figures, following last week’s surprisingly soft jobs data that caught many analysts off guard.
Friday’s figures confounded widespread expectations for growth and suggested that the US Federal Reserve would hold off on raising borrowing costs to contain stubbornly high inflation.
JPMorgan raised its 2026 S&P 500 price target to 8,000 from 7,800, citing improving demand and order coverage relative to capital expenditure among major technology firms.
The broker noted: “This suggests that monetisation may start ramping faster than spending, which should support stronger future revenue growth and further alleviate concerns about return on invested capital.”
In London, rising oil prices lifted BP (BP.L) and Shell (SHEL.L) by 1.4% and 0.6% respectively, while tobacco stocks fell sharply with British American Tobacco (BATS.L) down 4.4% and Imperial Brands (IMB.L) down 4.6%.
Legal & General (LGEN.L) fell 1.6% after Citigroup downgraded the insurer to “sell” from “neutral”, noting that with shares up 19% year-to-date, the valuation now looks “demanding.”
Rising bond yields put housebuilders under pressure, with Persimmon (PSN.L) down 2.0% and Barratt Redrow (BTRW.L) 2.5% lower, while FTSE 250-listed Vistry (VTY.L) declined 12%.
The Financial Times reported that credit insurer Allianz Trade plans to reduce the amount of cover it provides to suppliers of the Kent-based housebuilder by up to 70%, potentially worsening a squeeze on its cash flow.
On the FTSE 250, Plus500 (PLUS.L) rose 2.1% after the Haifa, Israel-based trading platform operator reported pretax profit of 183.2 million dollars and revenue jumping 12% to 462.9 million dollars, a three-year record high for a six-month period.
Gold traded at 4,350.91 dollars an ounce, with Trade Nation analyst David Morrison noting the metal “has had a decent run since the beginning of this month helped along by dollar weakness.”
Looking ahead, Tuesday’s corporate calendar includes half-year results from InterContinental Hotels Group (IHG.L) and a trading update from housebuilder Bellway (BWY.L), with Australia’s interest rate decision also due overnight.