The FTSE 100 (^FTSE) and European stocks headed lower on Thursday morning as hopes of a peace deal in the Middle East faded.
It comes as the White House has insisted that talks with Iran are ongoing, while Tehran has publicly rejected US overtures and issued fresh conditions of its own.
Donald Trump claimed on Wednesday night that Iran was desperate to make a deal to end the nearly month-long hostilities. “They want to make a deal so badly, but they’re afraid to say it,” Trump told congressional Republicans in Washington.
“The United States has been engaged over the last three days in productive conversations,” White House press secretary Karoline Leavitt told reporters earlier in the day. “You’re beginning to see the regime look for an exit ramp.”
Meanwhile, Israel’s military also said on Thursday that it had completed a wide-scale wave of strikes targeting key infrastructure across several areas in Iran.
Earlier this week, Washington presented a 15-point plan to end the war, including Iran giving up its enriched uranium and opening up the waterway, while Tehran’s state-run TV reported officials had put forward their own five conditions for hostilities to end.
Trump on Wednesday threatened to “unleash hell” if Iran did not strike a deal, but foreign minister Abbas Araghchi said his country does not intend to negotiate.
Ipek Ozkardeskaya, senior analyst at Swissquote, said it was too early for investors to “price out” the Iranian war, given the continuing risks.
He said: “Donald Trump insists that peace negotiations are ongoing, describing developments in the Middle East as ‘big’, but he is no longer controlling the narrative. One of Iran’s senior military figures mocked the US, saying: ‘Has the level of your inner struggle reached the stage of you negotiating with yourself?’ This reflects where we stand in negotiations.”
Jim Reid, market strategist at Deutsche Bank, said: “For markets, the issue is there’s still plenty of doubt about whether a US-Iran deal can be reached, given how Iran have publicly rejected the US on several occasions. So that’s seen markets become increasingly sceptical about positive headlines from the US side, because we haven’t seen similar noises from Iran.”
Elsewhere, new data has shown that UK consumer confidence has collapsed as the Middle East conflict continues.
The British Retail Consortium (BRC) survey by Opinium, taken between 10 March and 13 March, shows consumer expectations of the economy over the next three months fell to its lowest level on record, plunging to -53 from -30 in February.