(Sharecast News) - London stocks fell in early trade on Tuesday as Brent crude breached $80 a barrel after Donald Trump said the US had reinstated the naval blockade on the Strait of Hormuz and announced a 20% toll on commercial shipping.
At 0835 BST, the FTSE 100 was down 0.4% at 10,453.85, while Brent crude was up 3% at $85.80 a barrel and West Texas Intermediate was 2.7% higher at $80.26.
In a post on Truth Social on Monday, the US president wrote: "The Hormuz Strait is OPEN, and will remain OPEN, with or without Iran. We are reinstating the IRANIAN BLOCKADE, so named because it is only stopping Iran's ships or customers from entering or leaving."
Trump said all other countries will have "fair and open" use of the Strait, through which around 20% of the world's oil supply is normally transported.
"The U.S.A. will be, from this point forward, known as 'THE GUARDIAN OF THE HORMUZ STRAIT,' but as such, and as a matter of FAIRNESS, will be reimbursed, at the rate of 20% on all cargo shipped, for any and all costs necessary to do the job of providing safety and security to this very volatile section of the World."
Investors were also mulling another round of military strikes by the US against Iran, confirmed by the US Central Command. Centcom said that during a five-hour mission, US forces struck military targets across Iran including Bushehr, Chah Bahar, Jask, Konarak, Abu Musa, and Bandar Abbas.
Looking ahead to the rest of the day, US earnings season kicks off in earnest with quarterly results from banking giants JPMorgan, Bank of America, Goldman Sachs, Citigroup and Wells Fargo. Market participants will also eye new Federal Reserve chair Kevin Warsh's testimony to Congress and the US consumer price index for June.
Patrick Munnelly at Tickmill Group said: "Markets came in looking for CPI. They got Hormuz. Brent's spike above $85/bbl after Trump revived the blockade on Iranian vessels has bulldozed last week's stabilisation story and dragged the tape back into inflation-shock territory.
"A soft CPI may now be shrugged off as yesterday's news; a hot one lands like petrol on the Fed-hike fire. Warsh's testimony still matters, but the macro day starts with crude, not core."
In equity markets, BP and Shell were among the top performers on the FTSE 100 as oil prices rose. BP was also in focus as it confirmed that higher commodity prices were set to boost second-quarter earnings, despite a fall in upstream production.
Genus surged as the animal genetics company said it expects annual earnings to be moderately above expectations after a strong second half in Asia and Latin America that more than offset weaker conditions in North America.
Rank Group was also sharply higher as it hailed "strong" full-year underlying operating profit, ahead of expectations.
Watches of Switzerland edged lower despite posting record full-year profit and revenue, ahead of its previous guidance and market expectations. The shares surged on Monday following a Reuters report the company has held talks in recent months over potential offers to take the luxury watch retailer private.
Airlines were under the cosh amid the prospect of higher fuel costs, with BA and Iberia owner IAG and Wizz Air both lower.