UK equities moved higher on Monday as weaker-than-expected U.S. retail sales reduced expectations for further near-term monetary tightening by the Federal Reserve, allowing London’s blue-chip index to recover some ground after falling 1.4% last week.
The FTSE 100 gained 0.26% as of 03:25 ET (07:25 GMT). Elsewhere in Europe, Germany’s DAX slipped 0.03%, while France’s CAC 40 edged 0.05% lower. Sterling strengthened 0.22% against the dollar to $1.3562.
Sentiment received support from U.S. retail sales data showing a 0.6% month-on-month decline in July. Economists had expected an increase of 0.1%, while the contraction was the steepest monthly fall since May 2025.
The disappointing figures pushed U.S. Treasury yields and the dollar lower on Friday as investors scaled back expectations for tighter Federal Reserve policy, providing a more supportive backdrop for equities at the beginning of the new week.
U.S.-Iran tensions keep Hormuz risks in focus
Geopolitical uncertainty remained a significant consideration for markets. Speaking at Market Regulation Headquarters on Sunday evening, Iran’s vice president said Tehran would be successful in its “economic warfare” as Washington prepared to announce another round of sanctions this week.
Shipping activity through the Strait of Hormuz remained severely restricted. Ship-tracking company Kpler recorded no commodity vessel crossings on Sunday and only five on Saturday, compared with 31 during the previous weekend.
The 60-day memorandum of understanding between the U.S. and Iran, agreed in June to halt hostilities, expired on Monday without discussions taking place over an extension. Tehran has maintained that Washington must first meet its obligations under the original agreement.
Regional security arrangements have also moved into focus. Saudi Arabia, Turkiye and Pakistan signed the Mecca Joint Defence Agreement on Aug. 7, establishing collective-defence provisions. Washington welcomed the agreement, while Turkish President Erdogan said the pact had “sent an important message to the world” and described Egyptian participation as “possible.”
Jefferies analysts said on Monday that they saw no simple route towards resolving the confrontation, characterising the current situation as “no war and no peace” while the Strait of Hormuz remains closed.
“The only possibility remains a fudge or look the other way arrangement by which some traffic can start to flow through the Strait while the US and Iran try to negotiate a deal,” strategist Mohit Kumar wrote in a morning note.
Jefferies said the fragile truce could potentially survive until the U.S. mid-term elections before the threat of renewed escalation increases. From a market perspective, the broker said a crucial question is how far oil prices could rise before Washington becomes willing to make concessions.
The firm also noted that Europe and Asia are more vulnerable than the United States to an extended disruption in the Strait because of their greater dependence on imported energy supplies.
UK housing market remains under pressure
Domestic housing figures added to the cautious UK economic backdrop. Asking prices fell 2% month-on-month in August to an average of £364,999, according to a media report citing Rightmove data.
The decline was the largest recorded for August since 2018. Prices were also 1% lower year-on-year, representing the steepest annual decline since December 2023, while the number of homes available for sale reached a 12-year seasonal high.
Rightmove lowered its forecast for house prices across the whole of 2026 to a range of 0% to minus 2%, compared with its previous expectation for growth of 2%.
“The mini Burnham bounce and some renewed general optimism have brought a degree of improvement,” Rightmove’s Colleen Babcock was quoted as saying, “but whether that develops into a more sustained recovery will likely depend on confidence, mortgage rates and the new chancellor’s first budget this Autumn.”
Oil slips while gold moves higher
Energy prices edged lower as investors continued to assess the geopolitical outlook. Brent crude fell 0.30% to $88.26 a barrel, while WTI declined 0.70% to $80.90.
Precious metals moved in the opposite direction. Gold futures advanced 0.36% to $4,453.35 an ounce, while spot gold gained 0.46% to $4,397.18.
UK round up
AstraZeneca (LSE:AZN) discontinued its Phase III eVOLVE-Lung02 study after an independent review concluded that the combination of volrustomig and chemotherapy was unlikely to achieve its progression-free survival or overall survival endpoints when compared with pembrolizumab plus chemotherapy.
The trial enrolled 895 patients and identified no new safety signals. AstraZeneca said its other Phase III studies evaluating volrustomig will continue as planned.
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