European stocks retreated on Tuesday as investors took to the side-lines ahead of the latest deadline in the Iran war.

The FTSE 100 closed down 87.50 points, 0.8%, at 10,348.79.

The FTSE 250 ended down 85.85 points, 0.4%, at 21,556.45, while the Aim All-Share rose 3.82 points, 0.5%, to 738.43.

US President Donald Trump warned “a whole civilisation will die” in Iran if the country does not heed his midnight (UK time) cut-off to open the Strait of Hormuz, as Tehran reported US-Israeli attacks on its infrastructure were already under way.

Iranian officials reported damage to at least two bridges, railway infrastructure and a key highway as part of a wave US-Israeli airstrikes.

The White House was forced to deny that remarks by vice president JD Vance about military operations in Iran had contained any suggestion of a US nuclear strike against Iran.

Speaking in Budapest, Mr Vance said the US has “tools in our toolkit that we so far haven’t decided to use” against Iran, without explaining further.

Dan Coatsworth, head of markets at AJ Bell, said Mr Trump’s threats, if taken at face value, create the conditions for a binary set of outcomes.

“Either there is a climbdown on the part of Washington or Tehran, which could prompt a major rally in equities and easing of energy prices, or a major escalation with all the implications that might have for financial markets,” he said.

“An alternative scenario is that the deadline is extended, and the markets face another uneasy period of trying to gauge the latest mood music in the US and Iran,” he added.

Brent oil traded higher at 110.24 dollars a barrel on Tuesday afternoon, up from 106.75 dollars at the time of the equities close in London on Thursday.

Joshua Mahony at Scope Markets said that for traders “it is a case of weighing up whether we will see more of the same from the president or an escalation that could have catastrophic consequences”.

“For energy markets, there is a feeling that oil prices have thus far failed to reflect the full implications of the war, although that may change as the final tankers arrive at their destinations with none to follow.

“Meanwhile, the buffer provided by strategic stockpiles releases will only last so long, with the chance of a near-term resolution in the Straits of Hormuz looking unconvincing given the wide gap between US and Iranian demands,” he added.

In European equities on Tuesday, the Cac 40 in Paris closed down 0.7%, while the Dax 40 in Frankfurt fell 1.1%.

Stocks in New York were lower.

The Dow Jones Industrial Average was down 0.8%, as was the S&P 500 index, while the Nasdaq Composite was 1.2% lower.

The yield on the US 10-year Treasury stretched to 4.37% on Tuesday from 4.30% on Thursday.

The yield on the US 30-year Treasury widened to 4.95% from 4.89%.

The pound edged up to 1.3248 dollars on Tuesday afternoon from 1.3238 dollars on Thursday.

Against the euro, sterling eased to 1.1447 euros from 1.1463 euros.

The euro stood higher against the greenback at 1.1573 dollars from 1.1548 dollars.

Against the yen, the dollar was trading higher at 159.91 yen compared to 159.31 yen.

On a quiet day for corporate news, Senior rose 0.5% after it accepted a 300 pence per share offer from a consortium led by private equity investors Tinicum and Blackstone.

The Hertfordshire-based engineering and manufacturing company said the offer values the firm at £1.28 billion on a fully diluted basis, and implies an enterprise value of £1.40 billion.

Under the agreement, shareholders will receive 297.85p in cash and a final dividend of 2.15p per share for every share in Senior held.

Senior chairman Ian King said the board believes the offer recognises the “attractiveness of Senior and represents an opportunity for Senior shareholders to realise an immediate cash value at an attractive enterprise valuation”.

But Ninety One slumped 11%, as Bank of America downgraded it to “neutral” from “buy”.

Elsewhere, Volex rose 0.7%.

It launched a £40 million share buyback programme and confirmed it plans to move to the London Main Market from Aim.

The Hampshire-based maker of power and data transmission products said it intends to apply for the move, after it said it was considering it last month.

It is targeting admission before August 4, meaning it would meet the 20-day minimum trading requirement to be eligible for inclusion in the following FTSE Russell index review.

With a market capitalisation of £915.8 million, it would be a contender for FTSE 250 entry.

Gold traded at 4,645.77 dollars an ounce on Tuesday, down from 4,663.40 dollars at the same time on Thursday.

The biggest risers on the FTSE 100 were Imperial Brands, up 62.0p at 3,139.0p, Games Workshop, up 350.0p at 18,000.0p, Metlen Energy & Metals, up 0.6p at 34.0p, Scottish Mortgage Investment Trust, up 17.5p at 1,285.5p and Berkeley Group, up 42.0p at 3,210.0p.

The biggest fallers on the FTSE 100 were Melrose Industries, down 22.8p at 507.2p, Rolls-Royce, down 45.9p at 1,142.6p, Marks & Spencer, down 12.2p at 341.7p, Barratt Redrow, down 8.5p at 251.1p and 3i Group, down 86.0p at 2,601.0p.

Wednesday’s global economic calendar has the UK construction PMI at 9.30am BST, eurozone retail sales and PPI figures, plus the minutes of March’s Federal Open Market Committee meeting.

– Contributed by Alliance News