Oil and Gas stocks rise amid Iranian nuclear warning

• European stocks hit by tariff concerns.
• Oil and Gas stocks rise amid Iranian nuclear warning.
• UK GDP tumbles in April.

Mainland European markets are being hit hard today, with the DAX currently trading 1.3% lower amid growing concerns that we could soon see the trade war break out once again. Despite Bessent’s prediction that many of the reciprocal tariff delays will be extended on 9 July, President Trump subsequently announced plans to send letters setting out unilateral tariff rates to key trading partners. The decision on whether nations will be granted an extended reprieve comes down to the perception over whether they appear to be approaching trade talks in good faith. For EU nations this is a concern given the tumultuous relationship they have had with Trump since he took office for the second time.

The FTSE 100 has held up relatively well despite the losses seen throughout mainland Europe, with the oil & gas majors providing one particular bright spot. That comes as fears around a breakdown in relations between the US and Iran brought higher likeliness of additional export restrictions on Iranian crude exports. Meanwhile, today has seen the IAEA announce that Iran has failed to meet its non-proliferation obligations for the first time in 20 years. With Trump having staved off Israeli plans to attack Iranian nuclear facilities, the breakdown in talks and an international recognition that they are aiming to build out a nuclear weapon could heighten the risk of a military conflict.

UK GDP came in at a worrying -0.3% for the month of April, with declines for industrial production (-0.6%) also building on the concerning rise in unemployment and claimants seen earlier in the week. For the pound we are seeing EURGBP extend higher as the prospect of an August rate cut from the BoE grows increasingly likely (now priced at 65%). However, the concerning degree of contraction seen for the month should be taken in a wider context, with tariff concerns seen in April balancing off against a March boost as businesses front-loaded their purchases. Stripping out the monthly volatility, the three-month growth rate of 0.7% highlights that despite tariff and tax hurdles faced by the economy in April, the trajectory remains healthy for the time being.