May 5 (Reuters) - The UK's FTSE 100 slid 1% on Tuesday, as traders returned from a bank holiday to witness a rout in financial stocks driven by HSBC's surprise loss and concerns about the U.S.-Iran conflict.
The blue-chip FTSE 100 (.FTSE), fell 1.04% by 1027 GMT, while the midcap FTSE 250 (.FTMC), edged up 0.1% after the early May bank holiday on Monday.
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HSBC's shares (HSBA.L), fell 5.8% after the British bank reported an unexpected $400 million loss linked to a fraud case, raising further questions about lenders' private credit exposure.
The overall bank index (.FTNMX301010), dropped 3.6% to a near one-month low.
The broader market was also responding to growing tensions in the Middle East, with the U.S. and Iran exchanging fire in the Gulf as they wrestle for control of the Strait of Hormuz.
Brent crude futures retreated, but held near $114 a barrel, stoking concerns that elevated energy prices would fuel inflation and force major central banks to maintain a tighter monetary policy.
Traders are pricing in two or possibly three interest rate hikes by the Bank of England by the end of 2026.
Travel-related stocks fell on concerns about higher fuel costs. Cruise operator Carnival (CCL.L), and British Airways operator IAG (ICAG.L), dropped 5.1% and 1%, respectively.
Britain's Intertek (ITRK.L), jumped almost 7% after the company said it was reviewing a revised takeover bid from Swedish private equity group EQT AB (EQTAB.ST), opens new tab.
Britain's largest broadband and mobile provider, BT Group (BT.L), opens new tab, climbed 4% after BofA Global Research upgraded the stock to "buy," citing potential for higher dividend payout.
Vodafone (VOD.L), dipped 0.8% after the telecoms company agreed to buy its partner CK Hutchison's (0001.HK), stake in VodafoneThree for 4.3 billion pounds ($5.8 billion).
Clean energy technology developer Ceres Power Holdings (CWR.L), jumped 8.5% after Goldman Sachs raised its price target to 930 pence from 670 pence.
Reporting by Sruthi Shankar in Bengaluru; Editing by Shinjini Ganguli
