Introduction: Asian stocks decline as US and Iran trade strikes

Asian equities declined markedly following the most significant exchange of hostilities between Iran and the United States since the April truce.

The United States carried out strikes on Iran after Donald Trump accused Tehran of bringing down a US military helicopter close to the Strait of Hormuz.

The moves prompted retaliatory actions from Iran on Wednesday morning, with Tehran stating it had struck targets in Kuwait, Bahrain and Jordan.

Japan's Nikkei fell 2 percent while South Korea's tech-focused Kospi dropped around 6 percent, though the index remains more than 70 percent higher for the year so far.

Oil prices eased slightly, with Brent crude off 0.2 percent at 91.28 dollars per barrel.

Jim Reid at Deutsche Bank noted that while attention centers on Middle East tensions, markets also oscillate between 1999-style AI optimism and 2000-style tech selloff concerns.

Brent briefly dipped below 90 dollars for the first time since April 17 before recovering after Trump pledged a response to the helicopter incident. Meanwhile the Philadelphia Semiconductor Index dropped as much as 8.62 percent intraday before closing down 1.93 percent.

European markets appear set for a subdued open, with FTSE 100 futures indicating a 0.1 percent dip and EuroStoxx 50 futures also down 0.1 percent.

Separate data from China showed factory gate prices rising at the quickest pace in four years amid higher energy costs linked to the Iran conflict.

The producer price index climbed 3.9 percent in May from a year earlier, above the 3.8 percent Reuters poll forecast and the 2.8 percent April reading.

This marked the third straight monthly increase and the strongest growth since July 2022.

Economists at Pantheon Macroeconomics described the rebound as largely cost-driven rather than demand-led.

The agenda

9am BST: CMA and Ofcom deadline to report to government on the Telegraph and Mail transaction
1.30pm BST: US inflation figures for May, expected to rise to 4.2 percent
2.15pm BST: Treasury Committee session on student loans

Key events

1h ago European markets open largely flat
1h ago Fuller Smith and Turner pubs declare readiness for World Cup
2h ago WH Smith seeks investor funds after Middle East conflict reduces earnings
2h ago Introduction: Asian stocks decline as US and Iran trade strikes

Metlen Energy and Metals leads FTSE 100 risers with a 3.6 percent gain, followed by Associated British Foods up 2.2 percent and Tesco up 1.8 percent.

Endeavour Mining, Relx and Experian lag, each down about 2.3 percent.

European markets open largely flat

European equities started the session broadly unchanged as investors await key US inflation data due later today.

The FTSE 100 edged up 0.1 percent while the German Dax and French Cac 40 each rose 0.1 percent. The Stoxx Europe 600 gained 0.07 percent.

Nicholas Hyett at Hargreaves Lansdown commented that May US inflation is expected to show both core and headline rates increasing, with consensus pointing to 4.2 percent headline CPI, the highest since April 2023.

Strong jobs data alongside this reading would add pressure on the Fed to consider rate hikes. The central bank faces conflicting signals, with the president likely opposing increases yet higher oil prices feeding through to broader costs. WTI holds near 88 dollars a barrel despite overnight exchanges, sitting at the lower end of the range seen since the Iran conflict began.

Fuller Smith and Turner pubs ready for World Cup season

Fuller Smith and Turner reported it is prepared for summer trading and the football World Cup, with strong advance bookings and robust staycation interest especially in the Cotswolds.

Shares rose about 7 percent after revenue reached 398 million pounds and profit 29.5 million pounds, both ahead of expectations.

Executive chair Simon Emeny stated that like-for-like sales in the first 10 weeks rose 4.4 percent and profitability continues to improve.

WH Smith shares fell 16 percent after the retailer announced plans to raise around 100 million pounds.

Richard Hunter at Interactive Investor said the situation is worsening for the group, with the fundraising testing investor patience amid weaker passenger spending and reduced US flight capacity.

WH Smith seeks funds as Middle East conflict cuts profit

WH Smith intends to raise about 100 million pounds through a placing of up to 26 million shares, roughly 20 percent of its capital, plus a retail offer.

The company lowered its full-year pre-tax profit guidance to 75-90 million pounds from 90-105 million pounds, citing lower passenger numbers and softer demand. It also flagged a 150 million pound writedown tied to its North American InMotion business and restructuring.

Executive chair Leo Quinn said the core business remains strong but requires greater capital discipline and a focus on returns to support profitable growth.

Susannah Streeter at Wealth Club observed that fresh Middle East conflict has reduced market optimism, with today's focus likely on US inflation data due this afternoon.

The CPI reading is expected to show headline inflation rising to 4.2 percent year-on-year, driven by elevated energy costs spreading through the economy. The latest attacks suggest the conflict remains entrenched.