Next’s shares have jumped by over 6% at the start of trading, despite its warning that three months of disruption from the Middle East conflict would cost it £15m.

Investors are impressed that Next has lifted its pre-tax profit guidance for the year to January 2027 by 4.5% to £1.21bn.

The company also reported a 14.5% increase in profit in the last financial year, to £1.158bn.

European stock markets have opened lower, as hopes of a peace talk breakthrough in the Middle East fade.

In London, the FTSE 100 share index has dropped by 64 points, or 0.63%, in early trading, to 10,042 points. Mining companies, a gauge of economic growth prospects, are among the top fallers on the index with copper producer Antofagasta down 3.9%.

Jim Reid, market strategist at Deutsche Bank, says:

For markets, the issue is there’s still plenty of doubt about whether a US-Iran deal can be reached, given how Iran have publicly rejected the US on several occasions. So that’s seen markets become increasingly sceptical about positive headlines from the US side, because we haven’t seen similar noises from Iran.

Germany’s DAX dropped by 0.9% at the open in Frankfurt, with France’s CAC 40 down 0.65% in Paris.

National Savings and Investments (NS&I) is under rising pressure today after being accused of losing track of investments, delaying payouts and withholding premium bond prizes owed to bereaved families.

NS&I has apologised anyone who has not received the customer service “they should expect” following a bereavement.

This follows reports that some families have incurred thousands of pounds in additional costs trying to recover their money from NS&I, or even paid fines to HM Revenue and Customs after receiving duff information from the UK’s savings bank.

The Daily Telegraph has reported that some bereaved family members have received letters incorrectly addressed to their dead relatives, creating more stress and grief.

An NS&I spokesperson said:

“We recognise that dealing with bereavement can be challenging and would like to apologise to anyone who has not received the customer service from NS&I that they should expect, particularly at such a sensitive time.”

According to the BBC, NS&I is expected to pay hundreds of millions of pounds in compensation for mis-managing customers’ money, with pensions minister Torsten Bell expected to address the issue in a statement in the House of Commons as soon as today.

The oil price is rising this morning, after Iran rejected a US ceasefire proposal last night.

Tehran rebuffed Donald Trump’s 15-point plan to end the war, calling it “extremely unreasonable”.

Trump has hit back, insisting Iran is still interested in a deal, and claimed Iranian negotiators feared being killed by their own side.

Brent crude is up 2.7% at $104.97 a barrel,

Ipek Ozkardeskaya, senior analyst at Swissquote, says it is too early for investors to ‘price out’ the Iranian war, given the risk that the conflict continues.

Donald Trump insists that peace negotiations are ongoing, describing developments in the Middle East as “big”, but he is no longer controlling the narrative. One of Iran’s senior military figures mocked the US, saying: “Has the level of your inner struggle reached the stage of you negotiating with yourself?” This reflects where we stand in negotiations.

In the short term, Next says the £15m of additional costs if the Middle East crisis lasts three months have been offset by savings elsewhere, so they do not affect its guidance.

However, if those costs persist beyond the next three months, the company will begin to pass costs through as higher pricing.

Today, that is “a contingency not a plan”, but it’s a sign that the economic damage from the conflict will increase, the longer it goes on.

£15m isn’t a massive hit for Next, which expects to make pre-tax profits of £1.21bn this financial year.

The Middle East crisis is expected to cost UK retail chain Next millions of pounds, and could hurt its sales the longer the conflict continues.

Next has told the City this morning that it has accounted for £15m of additional costs that are likely to arise from the conflict, such as fuel and air freight, on the assumption that the disruption lasts for three months.

The company also warns that if the conflict persists, the costs are likely to be reflected in higher prices to consumers and disruption to its supply chain, which will both hurt its sales.

Next says the conflict may restrain growth in the Middle East, which makes up around 6% of its total turnover. It is also likely to have “knock-on effects on costs, selling prices and consumer demand in the rest of the business”, Next points out, adding:

At this point, the longer term implications of the conflict are uncertain, and NEXT is not well placed to make predictions.

As yet, we have no feel for the medium-term effects on supply chain resilience, freight rates, factory gate prices and consumer demand. Much will depend on how long the conflict persists, and how much permanent damage is done to the world’s energy infrastructure.

Consumer confidence in the UK has “collapsed” since the start of the Iran war, according to new research from the British Retail Consortium.

The sharp rise in energy prices caused by the effective closure of the strait of Hormuz and attacks on infrastructure in the region has led to fears of higher inflation and weaker growth across oil-importing countries.

Asked about the state of the UK economy over the next three months, 64% of respondents told a survey they expected it to get worse. Just 11% thought it would get better. The resulting balance of -53% was sharply lower than the -20% reading a month earlier.

Good morning and welcome to our rolling coverage of business, the financial markets and the world economy.

The UK’s cost of living squeeze is tightening by the day, as the Iran war sends inflationary pressures rippling through the global economy.

The average UK mortgage rate has now hit 5.50%, data from Moneyfacts shows. That’s the highest rate since August 2024, as lenders have scrambled to reprice mortgage products as hopes of UK interest rate cuts this year have faded.

This means the typical annual cost of borrowing £250,000 over 25 years has risen by more than £1,075 per year – anyone looking to buy or remortgage this year needs to prepare for substantially higher costs than previously expected.

Adam French, head of consumer finance at Moneyfactscompare.co.uk, explains:

“The Moneyfacts Average Mortgage Rate has hit 5.50% - heights last seen more than 18 months ago, marking another unwelcome milestone for borrowers this month. These rising costs are in direct response to the conflict in the Middle East which has dramatically shifted market expectations around inflation and future interest rates, with lenders scrambling to keep up with rising funding costs.

“Moneyfacts’ analysis of more than 30 years of historic rates data shows mortgage rates have historically averaged around 1.5-1.75 percentage points above Base Rate. If a couple of rate rises materialise as markets are currently predicting, this could see the overall average mortgage rate stabilise at around 5.75%-6.00%. This would leave borrowers paying £1,500-£2,000 more per year on a typical mortgage compared to just a few weeks ago. However, given the volatility of events this is subject to change in either direction.

Unusually yesterday, UK mortgage rates ‘inverted’. The average rate on two-year fixed rate mortgages overtook the equivalent five-year product – which would usually be more expensive.

Here’s the details:

• Average 2-year fix rose from 4.83% at the start of March to 5.56%, the highest since September 2024.

• Average 5-year fix rose from 4.95% at the start of March to 5.54%, the highest since January 2024.

The agenda

• 7am GMT: GFK’s Consumer Confidence survey for Germany

• 9.30am GMT: ONS: housing affordability in England and Wales in 2025

• 10am GMT: OECD Interim Economic Outlook Report

• 1.30pm GMT: US weekly jobless data