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UK Stocks Slip Amid Prolonged US-Iran Conflict, Subdued Consumption

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British equities traded lower on Tuesday, ending 0.10% in the red, as oil prices climbed on rising hostilities between the US and Iran while UK consumer activity remained subdued.

After the US and Iran traded retaliatory strikes over the weekend, Saudi Arabia's Ministry of Energy confirmed several energy facilities in the country's southern region were struck by attacks on Tuesday. "While the Strait of Hormuz remains effectively shut to shipping, a prolonged full closure isn't in the interests of either the US or Iran. Hence, we expect informal arrangements over the coming months to allow more ships to pass through the Strait than has recently been the case, even if conflict continues," Oxford Economics said.

At home, annual retail sales growth eased to 0.5% on a like-for-like basis in August 2026, from 1% in the previous month, according to data from the British Retail Consortium. The reading missed the expected 1.2% gain and marked the softest rise since October 2024.

"August was a disappointing month for retail sales. Despite pockets of growth, particularly in some food categories, overall performance was below the average for the past year. With the cost of households bills rising, and set to rise further, many shoppers have clearly been tightening their belts," said BRC's lead economist, Harvir Dhillon.

In corporate news, Computacenter (CCC.L) booked a yearly rise in attributable profit and revenue for the first half and updated its adjusted pretax profit guidance for 2026 so that it is "significantly" ahead of analysts' expectation of 340.9 million pounds sterling, from previous guidance for it to be "comfortably" ahead of market estimates. Shares lost 8.39%, making the technology and services company the worst performer on the blue-chip index at closing.

Dunelm Group (DNLM.L) plunged 13.82% as profit attributable to equity holders for the 52 weeks ended June 27 slipped year over year to 155.5 million pounds from 156.3 million pounds. The home furnishings retailer also proposed to remove 100 million pounds of unproductive costs from its fiscal 2026 base through fiscal 2029 as part of a three-year strategic growth plan.

"Dunelm has released its FY26 results and a strategic update this morning with FY26 PBT a touch ahead of consensus expectations, but Dunelm has highlighted a tough start to FY27, given recent hot weather, and thus it is guiding below consensus expectations. In terms of the strategy update, sales expectations are higher than we are modelling but the PBT margin is lower. We think Dunelm is now looking to prioritise growth more, and as such it is also guiding to higher capex over the next three years," RBC Capital Markets said.

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