British stocks fell on Tuesday as surging oil prices and a deepening rift over AI development weighed heavily on investor sentiment across European markets.
The FTSE 100 (^FTSE) dropped 0.60% as of 03:23 ET, while Germany’s DAX fell 0.36% and France’s CAC 40 declined 0.64%, reflecting a broad selloff across the continent.
Sterling weakened 0.21% against the dollar to $1.3472, adding further pressure to an already cautious market mood as traders digested a mixed bag of economic signals from the UK.
UK unemployment held steady at 4.9% in the three months to July, coming in below the 5% forecast, but the headline figure masked continued weakness in the labour market’s underlying data.
Payrolled employees fell 101,000 year-on-year in July, with the steepest declines recorded in retail and hospitality, according to HMRC-based ONS figures.
“The labour market remains broadly stable… however, payrolled employee numbers continue to edge down,” said Liz McKeown, ONS director of economic statistics.
Vacancies fell to 702,000, their lowest level outside the pandemic in over a decade, with McKeown noting that smaller firms cite rising labour costs as a primary concern.
Total pay growth eased to 3.9% from 4.2%, adding to expectations that wage pressures may be gradually cooling even as oil-driven inflation threatens to complicate the outlook.
Oil markets dominated sentiment after Brent crude rose 1.67% to $107.42 a barrel as a Saudi East-West pipeline outage persisted, while WTI gained 1.7% to $103.09.
ING’s Warren Patterson said Brent had traded to an intraday high near $110 on Monday, with prices “likely to remain well supported” until clarity emerges on the pipeline’s damage, reportedly offline for “several weeks.”
Iran’s IRGC claimed it downed a U.S. MQ-1 drone near the Strait of Hormuz, where vessel transits fell sharply to four on Monday from ten, per Kpler data cited by Reuters.
Andrew Barry, chairman of LNG market development at ExxonMobil, said at the Gastech 2026 conference in Bangkok that Middle East LNG disruption would be “short-term,” citing the region’s history of reliability.
Shell, the world’s largest LNG trader, separately estimated that about 36 million tonnes of Middle East LNG supply has been lost this year, underlining the scale of the disruption.
Beyond energy markets, a public disagreement over AI development strategy added a further layer of unease for investors tracking the technology sector.
Anthropic Chief Executive Dario Amodei urged a more cautious approach to developing the most advanced AI models, calling for stronger safeguards such as independent third-party assessments.
Amodei warned that the technology could potentially escape human control and cause catastrophic harm, a position that drew both support and opposition from major industry figures.
OpenAI CEO Sam Altman backed a more measured approach, while Elon Musk also voiced support, but U.S. President Donald Trump opposed slowing development, arguing it could undermine competition with Chinese AI companies.
Gold futures fell 0.52% to $4,328.87 and spot gold eased 0.23% to $4,288.93, with ING noting bullion is “vulnerable” ahead of Wednesday’s Federal Reserve decision amid inflation concerns from the oil spike.
Among UK corporate movers, Wickes Group posted first half adjusted pretax profit up 1.1% to £27.6 million and remains on track for about 10% growth in adjusted pretax profit in 2026, supported by its Design and Installation business.
Trustpilot reported first half revenue up 23% to $151.4 million, with adjusted EBITDA rising 46% to $26.3 million, while Kier Group delivered full year revenue of £4.39 billion and enters fiscal 2027 with a record £11.9 billion order book.