British shares opened under pressure on Wednesday as a combination of escalating conflicts in the Middle East and fresh trade-policy moves from Washington dampened investor appetite.
At 03:25 ET (07:25 GMT), the FTSE 100 was down 0.13% while sterling weakened 0.15% against the U.S. dollar to 1.3449. Across continental Europe, Germany's DAX slipped 0.72% and France's CAC 40 fell 0.34%.
Market participants cited two dominant themes shaping early trade - heightened geopolitical risk in the Gulf and mounting trade anxieties following a U.S. trade office proposal to impose additional duties on a wide range of imports.
The Office of the U.S. Trade Representative put forward a proposal on Tuesday that would add duties of 12.5% on goods from 54 economies, explicitly listing the UK, China, Japan and India among them, after concluding those countries had not fully imposed or effectively enforced prohibitions on imports produced with forced labour. A reduced 10% duty was proposed for six other economies, including the European Union and Canada, which already have prohibitions in place but were judged to have enforced them inadequately.
Ambassador Jamieson Greer characterised trading partners' failure to address goods linked to forced labour as "unacceptable," and said the United States would "no longer tolerate this disparity." The proposal will proceed to public hearings on July 7, with written comments due by July 6.
However, the more immediate market-moving developments were concentrated in the Gulf. Iran launched missile and drone strikes against Kuwait International Airport on Wednesday, inflicting severe damage to Terminal 1, injuring multiple people and prompting Kuwait Airways to suspend operations until further notice, according to Kuwait's civil aviation authority.
Bahrain's military separately reported that its air defences intercepted and destroyed three missiles and several drones it said were launched by Iran and were targeting civilian sites, and it placed all units on their highest state of readiness. U.S. Central Command said all Iranian attacks on U.S. forces failed, rejecting claims from the Islamic Revolutionary Guard Corps.
Diplomatic signals remained mixed. U.S. President Donald Trump insisted on Tuesday that U.S.-Iran contacts had continued on a daily basis, calling reports of a breakdown "false and erroneous." By contrast, Iran's semi-official Tasnim News Agency said Tehran had halted message exchanges with Washington several days earlier. Secretary of State Marco Rubio told Congress that any relief from sanctions would be contingent on major concessions to Iran's nuclear programme, and that easing measures would not be offered "just in exchange for reopening the strait."
Alongside the diplomatic and military activity, Washington tightened economic measures on Tehran. The U.S. Treasury sanctioned four Iranian digital asset exchanges, including Nobitex, which the Treasury said processed more than 50% of Iranian digital asset inflows in 2025.
The U.S. military also reported kinetic action at sea: CENTCOM said U.S. forces fired a Hellfire missile into the engine room of the Botswana-flagged tanker M/T Lexie after it failed to heed repeated warnings while transiting toward Iran's Kharg Island. CENTCOM said the strike brought the tally of vessels disabled under the blockade to six, with 122 vessels redirected.
UK corporate round-up
Amid the wider market backdrop, a number of UK companies issued their own financial updates.
- DiscoverIE posted a record adjusted pre-tax profit of 51.9m for the year to March 2026, with a return to 2% organic growth reversing an 18-month destocking-driven decline.
- B&M recorded a 37.5% plunge in adjusted pre-tax profit to 84m for the year to March 2026, as margin erosion and cost inflation pushed EBITDA down 25.9% to 459m despite group revenue rising 3.6% to 5.78bn.
- Debenhams Group said it returned to sales growth in its first quarter to May 2026, with gross merchandise value up 0.5% and May trading accelerating to around 8%, attributing early improvements to progress in its multi-year restructuring across its fashion brand portfolio.
- Currys appointed Fredrik T nnesen, who more than tripled operating profits as Nordic chief executive, to take over as Group CEO from August 3, replacing Alex Baldock.
These company updates came against a wider backdrop of risk-off trading driven by oil-price moves and the diplomatic and military developments in the Gulf.
What to watch next
- Public hearings and responses to the U.S. trade duty proposal, scheduled for early July, which could shape near-term trade policy uncertainty.
- Further developments in Gulf security conditions, any additional disruptions to civilian aviation or maritime transit, and subsequent market reaction in energy and transport sectors.