Stocks surge and oil tumbles amid US-Iran ceasefire

Stocks in London soared on Wednesday, as oil prices fell back sharply after the US and Iran struck a two-week ceasefire.

The FTSE 100 closed up 260.09 points, 2.5%, at 10,608.88. The FTSE 250 ended up 878.38 points, 4.1%, at 22,434.83, and the AIM All-Share rose 25.38 points, 3.4%, to 763.81.

The “risk-on” move came after the US and Iran agreed a two-week ceasefire, although Tehran warned the war was not over until formal terms were negotiated.

Tehran and Washington both claimed to have won the war. US president Donald Trump told AFP the deal was a “total and complete victory”.

Iran also hailed it as a win, but warned it would enter talks with the US on Friday in Pakistan with “complete distrust”.

Iran also agreed to temporarily reopen the Strait of Hormuz, sending oil prices tumbling on Wednesday.

Brent oil traded lower at 95.20 dollars a barrel on Wednesday afternoon, down from 110.24 at the time of the equities close in London on Tuesday.

“A two-week ceasefire has pulled price action back from the edge and replaced immediacy with a defined window, and in this market, time is the most valuable currency,” observed Stephen Innes, of SPI Asset Management.

“The reopening signal in the Strait of Hormuz shifts the market from a trading blockage to tracking flows, and that transition is driving this broad risk repricing,” he explained.

In European equities on Wednesday, the Cac 40 in Paris closed up 4.5%, while the Dax 40 in Frankfurt jumped 5.1%.

Stocks in New York were also higher. The Dow Jones Industrial Average was up 2.3%, the S&P 500 index rose 2.1%, while the Nasdaq Composite was 2.6% higher.

The yield on the US 10-year Treasury narrowed to 4.27% on Wednesday from 4.37% on Tuesday. The yield on the US 30-year Treasury fell to 4.86% from 4.95%.

But David Morrison, senior market analyst at Trade Nation, cautioned: “Whether these early ‘risk-on’ moves are sustainable or not is another matter entirely.”

He added: “All eyes now turn to the Strait of Hormuz. If shipping starts to move through it again, and there’s strong evidence that things can return to pre-war normality, then that will embolden investors.

“But given the complexity of the issues around this, a two-week ceasefire is unlikely to be sufficient to convince investors that it’s safe to go back in the water.”

Mr Innes, at SPI Asset Management, agreed.

“This is not a resolution; it is a test phase. The next two weeks will be telling. Markets are now moving from pricing outcomes to pricing probabilities around a fragile negotiation framework,” he said.

Maritime monitor Marine Traffic said that two ships have passed through the Strait of Hormuz since Iran agreed to reopen the waterway.

But Iranian foreign minister Abbas Araghchi raised “ceasefire violations” by Israel with Pakistani mediators, an Iranian ministry statement said, and warned that Tehran could pull out of the ceasefire.

Sir Keir Starmer welcomed the ceasefire agreement, calling it an opportunity to secure a long-term solution for shipping through the Strait.

Sir Keir is travelling to the Middle East, where he is expected to discuss diplomatic efforts to support and uphold the pause in fighting with leaders of Gulf allies.

He said there was still work to do to ensure “this ceasefire should be not a temporary ceasefire but a permanent ceasefire”.

The pound rose to 1.3438 dollars on Wednesday afternoon from 1.3248 on Tuesday. Against the euro, sterling climbed to 1.1495 from 1.1447.

Figures showed that the UK construction sector remained in negative territory last month, driven by a drop in housing activity, though the pace of decline eased.

The S&P Global construction purchasing managers’ index rose to 45.6 in March from 44.5 in February. The PMI moved closer to the 50-point neutral mark, suggesting the sector’s decline had abated.

“March data indicated a solid reduction in UK construction output, albeit at a slightly less marked pace than in the previous month. Residential work remained by far the weakest-performing category.

“The latest survey also suggested that operating margins were under considerable pressure from a rapid acceleration in input cost inflation. Construction companies widely noted that the war in the Middle East had pushed up fuel, transportation and raw material prices,” S&P Global said.

On the FTSE 100, the oil price plunge knocked Shell and BP down 4.7% and 5.8% respectively.

Shell also delivered a mixed first-quarter trading update, with higher refining margins reflecting the oil price surge, but lower production amid disruption from the Middle East crisis.

Other oil and gas stocks on the wane included Ithaca Energy, down 6.2%, Harbour Energy, down 6.1%, and Tullow Oil, down 3.7%.

But rising copper prices boosted Antofagasta, up 9.9%, while an uplift in the price of gold aided Fresnillo, up 7.6%.

Gold traded at 4,753.65 dollars an ounce on Wednesday, up from 4,645.77 at the same time on Tuesday.

Elsewhere, aerospace stocks Rolls-Royce and Melrose Industries rallied 12% and 8.1% respectively, rate-sensitive housebuilder Persimmon leapt 8.6%, while British Airways owner International Consolidated Airlines Group jumped 8.1% and budget airline easyJet soared 10%.

Banks were also in favour with Lloyds Banking Group up 6.7% and Barclays up 7.4%.

Elsewhere, Gamma Communications climbed 17%, after it confirmed that it is in early-stage talks with “potential offerors”, while London-based merchant bank Close Brothers jumped 13%, as it announced that it doesn’t plan to up its motor finance provision.

The biggest risers on the FTSE 100 were Rolls-Royce, up 135.40p at 1,278.00p, Lion Finance, up 970.00p at 10,790.00p, Antofagasta, up 339.00p at 3,777.00p, Standard Chartered, up 151.60p at 1,725.00p, and Persimmon, up 93.00p at 1,175.00p.

The biggest fallers on the FTSE 100 were BP, down 34.80p at 562.70p, Shell, down 167.00p at 3,401.00p, Centrica, down 5.30p at 213.40p, Pearson, down 3.50p at 1,009.00p and Admiral Group, down 8.00p at 3,223.00p.

Thursday’s global economic calendar includes US GDP and personal consumption expenditures data, as well as trade and industrial production figures in Germany.

Thursday’s domestic corporate calendar has full-year results from Metlen Energy & Metals.