British stocks moved lower on Monday as easing tensions between the United States and Iran failed to improve market sentiment.
Investors were also assessing fresh inflation warnings from the Bank of England and a major regional development plan expected from Labour leadership frontrunner Andy Burnham.
FTSE 100 Slips as European Markets Trade Mixed
The FTSE 100 fell by around 0.20% in early trading.
Elsewhere in Europe, Germany’s DAX gained 0.18%, while France’s CAC 40 declined by 0.16%.
The British pound strengthened by 0.13% against the US dollar to trade near $1.3220 as of 03:23 ET, or 07:23 GMT.
Bank of England Warns Over Persistent Inflation
Bank of England Chief Economist Huw Pill warned policymakers against becoming complacent about inflation.
UK Consumer Price Index inflation remained above the Bank’s 2% target in May, reaching 2.8%.
Pill said the current inflation rate should still be viewed as a problem because the Bank of England’s mandate requires inflation to remain at 2%.
He also warned that the previous surge in inflation to 11% should not make inflation of around 3% appear acceptable.
Huw Pill Says Monetary Policy May Not Be Restrictive Enough
Pill was one of two Bank of England policymakers who voted to raise interest rates during the latest Monetary Policy Committee meeting.
The committee voted by a margin of 7-2 to keep borrowing costs unchanged.
According to Pill, UK monetary policy may not have been restrictive enough over the past several years.
His remarks could strengthen expectations that the Bank will remain cautious about cutting interest rates while inflation continues to exceed its target.
Andy Burnham to Announce Major Devolution Plan
Andy Burnham is expected to deliver a speech in Manchester outlining plans to transfer more power from central government to local authorities.
The proposals form part of what Burnham has described as a 10-year mission to improve living standards.
His strategy is expected to focus on reindustrialisation, housing development and infrastructure investment.
The plan could also include reforms to public procurement aimed at supporting British jobs, alongside new measures to reduce youth unemployment.
US and Iran Agree to Stand Down for Now
Markets were also monitoring developments in the Middle East after a US official said Washington and Tehran had agreed to stand down temporarily.
The announcement followed renewed exchanges of fire near the Strait of Hormuz, which tested an interim agreement reached earlier in the month.
The US official said vessels could continue moving through the region while technical discussions over the memorandum of understanding remained on track.
Weekend Attacks Test the Iran Ceasefire
The temporary stand-down followed another escalation over the weekend.
US Central Command attacked Iranian military targets on Sunday after accusing Tehran of failing to respect the ceasefire agreement.
The strikes came after Iran was accused of targeting a tanker that was attempting to use an alternative shipping route near the coast of Oman.
Iran’s Revolutionary Guard Corps responded by attacking US bases in Kuwait and Bahrain. It claimed that eight facilities had been hit.
Iran also warned that further violations of the ceasefire could bring ongoing diplomatic efforts to a complete halt.
Trump Issues Fresh Warning to Iran
US President Donald Trump warned that the American military would finish the operation if Iran failed to comply with the agreement.
In a post on Truth Social, Trump also issued a severe warning about the consequences Iran could face if hostilities continued.
Despite the temporary stand-down, the dispute over control of the Strait of Hormuz remains unresolved.
Strait of Hormuz Shipping Dispute Continues
Iranian Foreign Minister Abbas Araghchi warned that attempts to bypass Iran’s preferred shipping route could increase regional tensions.
Iran’s Revolutionary Guards said they were taking steps to control traffic through the Strait of Hormuz.
They also warned that vessels failing to comply with the new arrangements could face a stronger response.
Three separate shipping routes have reportedly emerged through the waterway, with different authorities attempting to organise maritime traffic.
Oil Prices Rise While Gold Retreats
Oil prices recorded modest gains as traders balanced the temporary stand-down against the continuing uncertainty surrounding the Strait of Hormuz.
Brent crude rose by approximately 0.73%, while West Texas Intermediate gained around 0.98%.
Gold prices moved lower as demand for safe-haven assets eased.
Gold futures declined by around 0.53% to $4,074.47, while spot gold dropped by approximately 0.71% to $4,060.21.
BT and Verizon Form International Joint Venture
BT announced an agreement with US telecommunications company Verizon to combine their international enterprise operations.
The combined business is expected to generate approximately $4 billion in revenue.
Verizon will pay BT $625 million as an equalisation payment to create a jointly owned 50:50 venture.
Following the agreement, BT raised its earnings and revenue guidance after excluding its international operations from future forecasts.
Haleon Pursues US Supplements Expansion
Haleon has reportedly submitted a bid for US supplements company Thorne.
The British consumer healthcare group is seeking to expand its presence in the US supplements market, which is estimated to be worth around $70 billion.
Thorne was acquired by LVMH-backed private equity group L Catterton for $680 million in 2023.
The company has since been exploring a potential sale and has reportedly attracted interest from several strategic buyers.
AstraZeneca Drug Moves Closer to EU Approval
AstraZeneca and its partner Daiichi Sankyo received a recommendation for European approval of their cancer treatment Datroway.
The drug was recommended as a first-line standalone treatment for triple-negative breast cancer.
A Phase III clinical trial showed that Datroway improved median overall survival by five months compared with chemotherapy.
