Portugal Colonial - Stocks tumble as US-Iran impasse fuels inflation fears

Oil prices rose around two percent, with the international benchmark Brent crude contract close to $108 a barrel.

Rising crude futures also pushed up government bond yields, including in Britain, where Prime Minister Keir Starmer faced fresh threats to his leadership.

The yield on 30-year UK government bonds reached 5.817 percent, surpassing Tuesday's mark to hit its highest level since 1998, as investors demanded higher returns to reflect growing inflation risks.

In Japan, the 30-year bond rate hit four percent for the first time since 1999.

The dollar firmed against the British pound and the euro.

The London, Paris and Frankfurt stock markets each shed around 1.5 percent in midday trading.

Investors were left disappointed as highly anticipated talks between US President Donald Trump and Chinese leader Xi Jinping failed to deliver major breakthroughs on the Middle East war or trade relations.

Trump did not spell out the trade agreements he said had been sealed with China, but told Fox News that Beijing had voiced interest in buying US oil and soybeans.

"The meeting... was big on warm words and symbolism but not outcomes," said Susannah Streeter, chief investment strategist at Wealth Club.

"With diplomatic efforts aimed at resolving the Middle East conflict in limbo, fresh uncertainty has flooded in," she added.

The White House said the leaders had "agreed that the Strait of Hormuz must remain open to support the free flow of energy".

But investors had hoped for more progress toward reopening the crucial strait, where oil tanker traffic has ground to a near standstill since the outbreak of the war, sending energy prices soaring.

Trump also told Fox News on Thursday that he was "not going to be much more patient" with Iran.

"Stalled US-Iran diplomacy keeps supply fears firmly in focus," said Matt Britzman, senior equity analyst at Hargreaves Lansdown.

"Even if resolved next month, the oil market could remain undersupplied through October, keeping inflationary pressures high and adding another headache for consumers, central banks, and, eventually, investors," he added.

In Asia, Tokyo stocks closed two percent lower, while Hong Kong and Shanghai fell more than one percent.

Futures contracts indicated a weak opening on Wall Street, a day after the S&P 500 and Nasdaq again reached all-time highs as a tech-fuelled rally rolled on.

"The AI growth outlook -- and optimism that it will accelerate revenue generation -- is outweighing the geopolitical challenges," said Ipek Ozkardeskaya, senior analyst at Swissquote.

- Key figures at around 1050 GMT -

Brent North Sea Crude: UP 1.8 percent at $107.67 a barrel

West Texas Intermediate: UP 2.3 percent at $103.50 a barrel

London - FTSE 100: DOWN 1.3 percent at 10,243.08 points

Paris - CAC 40: DOWN 1.1 percent at 7,990.62

Frankfurt - DAX 30: DOWN 1.3 percent at 24,143.19

Tokyo - Nikkei 225: DOWN 2.0 percent at 61,409.29 (close)

Hong Kong - Hang Seng Index: DOWN 1.6 percent at 25,962.73 (close)

Shanghai - Composite: DOWN 1.0 percent at 4,135.39 (close)

New York - DOW: UP 0.8 percent at 50,063.46 (close)

Pound/dollar: DOWN at 1.3386 from 1.3400

Euro/dollar: DOWN at 1.1651 from $1.1673 on Thursday

Dollar/yen: UP at 158.37 yen from 158.33 yen

Euro/pound: DOWN at 87.05 pence from 87.09 pence

R.J.Fidalgo--PC