The FTSE 100 slipped as an intensifying U.S.-Iran confrontation in the Persian Gulf and the Strait of Hormuz rattled risk appetite across European markets. U.S. forces sank an Iranian tanker after Tehran fired missiles at two Navy vessels, and Iran is now threatening to restrict Gulf shipping. Oil climbed on the escalation while traders also weighed a strong U.S. jobs report ahead of this week's inflation data and the ECB's rate decision.
The FTSE 100 fell 0.13% as of 03:25 ET on Monday. Germany's DAX slipped a matching 0.13%, and Paris's CAC 40 eased 0.07%, while sterling firmed against the dollar, with GBP/USD up 0.077% at 1.3525.
U.S. strikes sink Iranian tankers in the Gulf
U.S. Central Command released footage showing the Iranian tanker M/T Kylo, also known as the "Noxen," sinking in the Gulf of Oman after U.S. strikes, part of a wider operation that also disabled the M/T Downy near Kharg Island and the M/T Stark 1 near Jask. CENTCOM said the strikes followed Iranian Revolutionary Guard Corps missile launches at two U.S. Navy vessels, which it said were evaded without American casualties.
Iran threatens the Strait of Hormuz
Iran plans to declare a new restricted zone in the Gulf and approve maps for a shipping corridor through the Strait of Hormuz, and Tehran has warned it will keep the waterway open only if the United States ends its attacks and threats against Iran. The moves come as the six-month U.S.-Israeli conflict with Iran remains at a stalemate, with a June ceasefire having unravelled and renewed strikes disrupting shipping.
According to CENTCOM commander Adm. Brad Cooper: "an even higher economic cost" awaits Iran for further attacks, while Iran's Foreign Ministry condemned the strikes as a breach of the UN Charter.
Oil climbs as Fed bets firm
ING commodities strategists said Monday that Iran's plan to enforce the new restricted zone could put additional vessels at risk in the Gulf of Oman. Even so, oil kept flowing: the U.S. energy secretary cited throughput of a little more than 9m b/d via Hormuz under Navy escort, while speculators lifted their net long position in ICE Brent by 37,837 lots to 261,435 as of last Tuesday.
Brent crude rose 0.95% to $97.19 a barrel, with WTI up 0.66% at $92.09. Gold slipped, with December futures down 0.74% at $4,443.59 and spot gold off 0.73% at $4,398.04.
Jefferies' Mohit Kumar said rates rose and risky assets weakened Friday after U.S. payrolls beat expectations. That pushed September Fed rate hike odds to near 60%, he said, flagging this week's U.S. CPI print and Wednesday's ECB decision as the next catalysts, alongside continued Gulf risk.
Britain's Energy Secretary Ed Miliband discussed de-escalation with Saudi Foreign Minister Prince Faisal bin Farhan by phone, the Saudi foreign ministry said, citing efforts to enhance the security and safety of international waterways.
Source: Investing.com
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