British shares retreated on Tuesday after renewed military action in the Gulf and sharp gains in energy benchmarks damped risk appetite across Europe. At 03:20 ET (07:20 GMT) the FTSE 100 was 0.21% lower, Germany's DAX had shed 0.36%, and France's CAC 40 was down 0.62%. Sterling firmed slightly, rising 0.03% against the dollar to $1.3352.
The market move followed a third consecutive night of U.S. strikes on Iran. U.S. Central Command said the operations targeted missile and drone facilities, including sites at the ports of Bandar Abbas and Bushehr. Iran had earlier launched retaliatory strikes on Bahrain and Jordan, and the UAE reported that Iranian missiles struck two oil tankers in the Strait of Hormuz, killing one crew member and injuring eight.
President Donald Trump said Washington would reimpose a naval blockade on Iranian ports from Tuesday and proposed a 20% fee on cargo transiting the Strait of Hormuz. Iran's foreign minister described such a toll as "too much," while the International Maritime Organization said there was "no legal basis" for levying such charges.
The spike in regional tensions follows a formal notification to Congress, in a letter dated July 10 reported by CBS News, in which President Trump indicated that hostilities with Iran resumed on July 7 after a ceasefire reached in April had collapsed.
Commodities responded to the escalation. Brent crude extended Monday's gains, trading 2.94% higher at $85.75 a barrel, while West Texas Intermediate rose 2.83% to $80.36. Gold futures climbed 0.68% to $4,032.72 an ounce and spot gold increased 0.66% to $4,027.42, as investors sought safety amid the deepening Gulf conflict.
On the domestic economic front, UK retail sales growth cooled in June, according to joint data from the British Retail Consortium and KPMG. Total sales were up 1.9% year-on-year, down from May's 3.7% increase and below the 3.1% pace recorded in June 2025. In-store non-food sales fell 1.1%, a deterioration from May's 0.4% decline, while online non-food sales rose 5.1%, easing from a strong 11% surge the previous month. The groups highlighted a consumer shift toward online spending during the recent heatwave.
UK corporate updates in Tuesday's round-up included a mix of profit pressures and stronger inflows. Recruitment firm Robert Walters reported first-half net fee income down 3.9%, with second-quarter net fees falling 4.5%. Asset manager Ashmore exceeded net inflow expectations, driven by robust demand for emerging market assets and stronger client inflows. Watches of Switzerland said solid U.S. demand persisted into its new financial year and noted early signs of recovery in the UK market.
Retailer Debenhams said trading momentum continued into June and July, crediting its marketplace model with supporting gross merchandise volume growth and margin improvement. In healthcare, Spire Healthcare appointed Debbie White as chair, succeeding Ian Cheshire, with takeover talks involving Toscafund ongoing.
Market snapshot indicators embedded in trading screens reflected the day's volatility and sector mix: energy benchmarks rose sharply, precious metals strengthened, and select UK-listed stocks reported mixed operational updates.
Investors and market participants will be watching how the security situation in the Gulf evolves and whether further actions - diplomatic or military - follow. Movements in oil and safe-haven assets are likely to remain sensitive to developments, while UK consumer spending patterns will be monitored for signs of sustained change following the June retail data.