The FTSE 100 closed sharply lower on Monday after Iranian news agency Tasnim reported Tehran had suspended dialogue with mediators over Israel’s Lebanon offensive.
The FTSE 100 finished down 70.33 points, or 0.7%, at 10,338.95, while the FTSE 250 fell 179.99 points, or 0.8%, to close at 23,245.78.
The AIM All-Share also declined, dropping 2.01 points, or 0.2%, to settle at 819.24 at the close of trading.
Tasnim reported that “the Iranian negotiating team is suspending dialogues and exchange of texts through mediators”, with Israel’s actions in Lebanon cited as the reason.
Any resumption in talks was said to be contingent on Israel ending military operations in Gaza and Lebanon and the “complete withdrawal from the areas occupied by the Zionists in Lebanon”.
Iran also indicated it would continue to block the Strait of Hormuz and “activate other fronts, including the Bab al-Mandab Strait” at the entrance of the Red Sea.
The suspension of talks came hours after Iran and US forces exchanged strikes, despite a weeks-long ceasefire that had been in place between the two sides.
Brent Crude for August delivery jumped to 97.22 dollars a barrel on Monday, rising sharply from 91.62 dollars at the London equities close on Friday.
On the FTSE 100, oil price gains lifted shares in BP and Shell, which rose 2.7% and 2.5% respectively on the back of the surge in crude prices.
In European markets, the CAC 40 in Paris ended 0.5% lower and the DAX 40 in Frankfurt closed down 0.4%, as sentiment was broadly negative across the continent.
In New York, the Dow Jones Industrial Average fell 0.3%, the S&P 500 was flat, and the Nasdaq Composite edged up 0.2% by comparison.
Fresh survey data offered some relief, with S&P Global reporting UK manufacturing activity expanded at its fastest pace in four years in May, though cost pressures and supply chain disruptions persisted.
The S&P Global UK manufacturing purchasing managers’ index rose to 53.9 points in May from 53.7 in April, its highest level since 2022 and above the 50-point growth threshold.
On the FTSE 250, Bluefield Solar Income Fund surged 16% after agreeing a £548 million cash offer from Drax, implying an enterprise value of £1.08 billion.
Applied Nutrition climbed 12% after raising full-year revenue guidance to around £148 million, above market expectations of £140.3 million, and announcing a tie-up with Mondelez International alongside a US acquisition.
The Merseyside-based wellness brand also confirmed it is paying 16 million dollars cash for US-based manufacturer Nutrablend, which includes a manufacturing facility in Buffalo, New York.
EasyJet rose 10% after Minneapolis-based asset manager Castlelake confirmed it was considering a possible offer for the airline at no less than 403.23 pence per share.
Responding to the approach, easyJet said it has “not had any discussions with, nor received any approach or proposal from Castlelake”, and called the timing “highly opportunistic”.
JPMorgan analyst Harry Gowers said Castlelake’s interest is “credible” given its history in the European airline sector and specialism in asset-based investing, including aviation, and its financing of Virgin Atlantic.
ME Group International plunged 27% after warning of a “more cautious” full-year outlook, with softer trading in its French photobooth and laundry businesses driven by lower consumer confidence linked to the Middle East war.
The Epsom-based company now expects full-year 2026 pre-tax profit between £69 million and £74 million, down from £78.2 million in the financial year to October 2025.
Gold traded at 4,472.82 dollars an ounce on Monday, down from 4,584.74 dollars on Friday, while the pound fell to 1.3447 dollars from 1.3479 on Friday.
Tuesday’s economic calendar includes eurozone inflation figures and UK money supply data, while British American Tobacco and water utility Pennon are both due to report.