London's FTSE 100 fell 0.31% as of 03:15 ET, joining a broadly negative session across European equities as geopolitical risks centered on the Strait of Hormuz overshadowed upbeat UK consumer data. Germany's DAX dropped 0.44% and France's CAC 40 lost 0.38%.
Sterling edged 0.07% higher against the dollar to 1.3367, while oil prices retreated: Brent crude fell 2.1% to $102.62 a barrel and WTI crude dropped 1.8% to $100.10. Gold futures rose 0.72% to $4,431.25 and spot gold gained 1.14% to $4,390.68.
UK retail sales volumes rose 0.5% in August, according to the Office for National Statistics, beating consensus forecasts for a 0.2% decline and reversing July's 0.5% fall. The data provided a positive note for sterling and equity investors, but it was insufficient to counter mounting concern over Middle East shipping disruptions.
Preliminary data showed only four cargo ships transited the Strait of Hormuz on Thursday, down from six the previous day and well below a 10-day average of about 16 vessels. Iran's Revolutionary Guard Corps struck a Togo-flagged tanker attempting passage, underscoring the escalating risk to one of the world's most critical energy chokepoints.
Rania al-Mashat, a senior UN official with the Economic and Social Commission for Western Asia, told an informal Security Council meeting that the conflict had cost Arab economies approximately $150 billion in its first month — roughly 4% of regional GDP. Meanwhile, Saudi Arabia could restore some capacity on its Houthi-damaged East-West pipeline within days and shifted to ship-to-ship transfers off Oman in the interim. China reportedly asked Iran to rein in the Houthis.
On the monetary-policy front, the Bank of England held rates on Thursday and overhauled its quantitative tightening framework, pausing all gilt sales until April 2027 and removing bonds maturing after 2049 — around £120 billion — from active sales. The BoE also explored transferring gilts directly to the UK government treasury to replace long-dated supply with shorter issuance. In Tokyo, the Bank of Japan raised its benchmark rate by 25 basis points in a 7-2 vote, with Governor Kazuo Ueda scheduled to hold a press conference Friday.
At an informational meeting, Italian officials announced Italy would deploy warships to the Bab al-Mandeb strait without waiting for a joint EU decision. US President Donald Trump, speaking to Axios on Thursday, said "Do I want to go in and annihilate them, or do I not?" calling it "a big decision." In a separate ABC 11 interview, Trump added, "We're gonna either make a deal that's good, or we're not gonna make a deal at all," noting Tehran was "not ready" for a deal.
Market strategists remained cautiously constructive. Mohit Kumar, chief economist at Jefferies, said "improving geopolitical tensions should help both the rates and the equities markets" and noted his firm initiated a long position in five-year rates. He maintained a bullish bias on equities and credit, adding: "Our view remains that central banks are not going to deliver on the forwards, and we would be looking at potentially one hike from the Fed and ECB."
