FTSE 100 climbs after US-Iran ceasefire lifts Global markets

UK large-cap and mid-cap shares jumped on Wednesday after a breakthrough agreement between the United States and Iran on a temporary ceasefire lifted investor sentiment globally.

The development triggered a broad-based rally in equities while sharply reducing oil prices.

The benchmark FTSE 100 rose 3.09%, reaching its highest level since March 3.

Meanwhile, the mid-cap FTSE 250 outperformed, surging 4.86% to touch levels last seen on March 10.

The rally followed an announcement by US President Donald Trump late Tuesday confirming a two-week ceasefire agreement with Iran.

The deal came just two hours before a deadline set by Trump for Iran to reopen the blockaded Strait of Hormuz or face severe consequences.

Trump had earlier warned of the destruction of Iran’s “whole civilisation” if the deadline was not met.

Oil prices slide, energy stocks under pressure

The last-minute diplomatic breakthrough significantly improved market sentiment, as traders anticipated a resumption of shipping through the Strait of Hormuz.

The critical passage handles roughly one-fifth of global oil and liquefied natural gas shipments, making it central to global energy flows.

As a result, crude oil prices plunged nearly 15%, exerting downward pressure on energy stocks.

Heavyweight oil companies BP and Shell both declined more than 5%, tracking the sharp fall in oil prices.

Shell also provided an early update on its operational outlook, cutting its first-quarter gas production forecast while signalling a surge in oil trading profits.

However, the company highlighted a potential dent to short-term liquidity, reflecting the volatile impact of the Middle East conflict on earnings.

Broad-based gains across sectors

Despite weakness in oil majors, the broader UK market saw gains across nearly all FTSE 350 subsectors.

As reported by Reuters, rate-sensitive sectors led the rally, with homebuilders, banks, and travel companies posting strong advances.

The improved geopolitical outlook also influenced monetary policy expectations.

Investors reduced their projections for interest rate hikes by the Bank of England this year, now pricing in around 35 basis points of increases compared to 63 basis points a day earlier.

This shift suggests expectations of either one or two quarter-point rate hikes.

Housing data reflects economic uncertainty

Economic uncertainty tied to the Iran conflict continued to weigh on domestic indicators.

Data from mortgage lender Halifax showed that British house prices unexpectedly declined last month, reflecting subdued buyer demand amid geopolitical tensions.

Political developments and corporate activity

On the political front, British Prime Minister Keir Starmer is set to travel to the Gulf to hold discussions with regional leaders.

According to his office, the talks aim to ensure the permanent reopening of the Strait of Hormuz following the ceasefire agreement.

In corporate developments, Gamma Communications emerged as one of the top performers on the FTSE, with its shares jumping nearly 18%.

The telecom firm said it is in preliminary discussions with multiple parties regarding a potential sale, boosting investor interest.

Overall, the easing of geopolitical tensions provided a strong catalyst for equities, even as volatility in energy markets highlighted ongoing uncertainties.