FTSE 100 Plunges 1.7% on July 8 as Trump Ends Iran Deal

London’s FTSE 100 index fell 1.7% to 10,489.04 points on Wednesday, marking its worst day since May 15, after U.S. President Donald Trump declared the ceasefire framework with Iran was finished. The move reignited fears of Middle East supply disruptions, sending Brent crude up 5.4% to above $80 a barrel. Energy stocks rallied while miners and most other sectors tumbled as investors reassessed inflation risks and interest rate expectations.

Why Trump’s Iran statement triggered the selloff

Trump said during the NATO summit in Ankara that the Islamabad Memorandum of Understanding, which had underpinned a 60-day ceasefire agreed in June, was “over.” He accused Iran of misrepresenting the deal publicly. The statement immediately weakened expectations of a diplomatic resolution, prompting a broad risk-off move across European equities. The pan-European STOXX 600 index extended losses to 1.7% by day’s end.

Energy stocks surge while miners collapse

Oil and gas companies bucked the broader decline. BP rose 3.5% and Shell climbed 2.3%, benefiting from Brent crude’s jump to its highest level since the ceasefire was agreed. Industrial metal miners were the biggest drag on the index, falling 7% as gold prices dropped more than 1% amid renewed inflation concerns. More than 80% of FTSE 100 components closed in the red. The midcap FTSE 250 slipped 1.5%, its worst day since mid-March.

Tanker attacks and supply fears return

Iran launched attacks on at least three tankers in the Strait of Hormuz within 48 hours, including a vessel carrying liquified natural gas. At least four oil and gas tankers have turned back from transiting the strait, hampering efforts to normalise energy flows after months of disruption. Jorge León, head of geopolitical analysis at Rystad Energy, said tanker traffic through the strait “has essentially stopped,” signalling heightened risk perception. Oil markets recorded their sharpest price rise in nearly two months on the escalation.

Interest rate expectations shift on inflation fears

UK short-dated bonds suffered their worst day since the end of March as inflation concerns mounted. The yield on two-year gilts rose 15 basis points to 4.35%, with markets pricing in a Bank of England rate rise in November as fully certain and a 50% chance of another in December. Rising energy costs threaten to reignite inflationary pressures, delaying expectations of future interest rate cuts. Investors increasingly concerned that more expensive energy could delay monetary easing across Europe.

Final Thoughts

The FTSE 100’s 1.7% drop reflects a sharp repricing of geopolitical and inflation risks. With Meyka grading the index a C+ and forecasting 10,951 points over the next month, the data suggests limited near-term recovery without a diplomatic breakthrough in the Middle East.

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