Britain's blue-chip benchmark opened lower on Thursday, with the FTSE 100 down 0.8% at 10,388.84 by 10:40 a.m. GMT and the midcap FTSE 250 slipping 1.1% as market participants reacted to higher oil prices and a dimming prospect of renewed U.S.-Iran peace talks.
Brent crude futures pushed above $100 a barrel after reports that Iran had tightened its grip on the Strait of Hormuz and said it would not allow the waterway to reopen until the United States removed what Tehran called its naval blockade. The jump in crude weighed most heavily on travel-related equities and other sectors sensitive to energy costs.
Travel and leisure equities were notably weaker, with Wizz Air down about 3% and Carnival off 2.4%. Travel retailer WH Smith suffered a sharp drop of 10.6% after the company cut its annual profit forecast and announced a suspension of its dividend, amplifying sector pressure.
Major banks also retreated, with Barclays down 2.1% and HSBC falling 0.9%. Among mining stocks, Fresnillo led declines with a 6.9% fall and Rio Tinto lost 2.1%, tracking moves in precious and base metals.
A separate survey showed the share of British firms reporting higher costs rose to a record level this month, a sign of elevated input costs and rising inflation, with respondents and markets citing the fallout from the Iran war as a factor weighing on the economy.
Interest-rate expectations shifted sharply in response to the deteriorating data and market moves. LSEG data showed traders were pricing in about a 70% probability of a Bank of England rate hike in June, up from roughly 40% a week earlier.
For the week to date, the FTSE 100 was down around 2.7% and on course to reverse nearly all of the recent gains that had followed hopes of a U.S.-Iran ceasefire announced earlier in the month.
Retailers also faced renewed scrutiny: supermarket group Sainsbury fell 5.2% after warning that the Iran war could cloud its outlook, echoing concerns Tesco expressed earlier in the week. Tesco's shares were down roughly 3% on Thursday.
Not all large-cap names were weaker. The London Stock Exchange Group rose 1.9% after saying it expects annual revenue growth at the upper end of its guided range. Business services and information company Relx was down 1.3% after reaffirming its full-year outlook.
Overall, the market reaction combined an oil-driven hit to energy-sensitive sectors, company-specific profit warnings and dividend suspensions, and a reassessment of near-term monetary policy expectations.