London close: oil price rally tips stocks into the red

(Sharecast News) - London stocks finished on the back foot on Wednesday, as a renewed rally in the oil price reversed earlier modest gains.

The FTSE 100 closed down 0.03% at 10,705.26, while benchmark Brent crude was up nearly 4% at $102.74 a barrel and West Texas Intermediate was 2% higher at $92.68.

Earlier in the session both Brent and WTI had fallen on news that US and Iranian officials have held their first talks in months, through mediators, while at the UN Summit. US President Trump had previously said that Iranian officials held "very good" three-hour talks with US special envoy Steve Witkoff on the sidelines of the assembly and that there would be another meeting in the "very near future".

In his comments to delegates, Trump also said he was faced with a choice of making a deal with Iran that would let the country rebuild or "annihilate" it if no deal is reached. "Do I drive them into hell with no chance of survival and no hope of future greatness or generations?" he said.

"There are two options; one could be a very bad thing, and the other could lead to greatness and progress for this country. Therefore, I think they want to do this."

However, much of the oil market's optimism was pared back after Iranian president delivered his own speech. Masoud Pezeshkian confirmed Iran was prepared to negotiate with the US - but warned it would not accept "bullying" by Trump. "We will not accept the language of force," he told delegates, holding up pictures of what he said were Iranian victims of the war with America. The US delegation walked out shortly after he began his address.

Chris Beauchamp, chief market analyst at IG, said: "After the risk-on start to the week, renewed gains for oil prices and yields have weighed on indices. An absence of positive peace talk news has provided the foundation for rising oil prices, which seem to have halted their falls after a week of losses.

"So much of what happens in stock markets is now dependent entirely on oil prices, and a failure to agree to any reopening of the Hormuz revives the morbid fear that the world faces a major energy crisis."

Closer to home, and a key survey showed the pace of private sector growth slowed in September, while inflationary pressures continued to mount.

The flash S&P Global UK PMI composite output index came in at 51.7, down on August's 52.5 and below consensus expectations of 52.0.

Within that, the services PMI business activity index slipped to a three-month low of 51.7, while the manufacturing output index fell to 51.4, the lowest print for six months. Only the manufacturing PMI showed an increase, rising to 52.0 from 51.7.

A reading above the neutral 50.0 benchmark indicates growth, while one below it suggests contraction.

The rate of input price inflation, meanwhile, accelerated for the second month in a row and now stands at the highest point since June. Respondents pointed to price hikes across energy, fuel and raw materials.

Chris Williamson, chief business economist at S&P Global Market Intelligence, said: "September is seeing a worrying combination of disappointingly sluggish economic growth and intensifying inflationary pressures, with subdued business confidence and high costs continuing to discourage hiring.

"While the upturn in the survey's price gauges suggests the Bank of England looks likely to keep a hawkish bias, the worryingly lacklustre pace of business growth underscores the risk to the economy from higher borrowing costs."

However, investors were also mulling an upgrade to the OECD's UK growth forecast for this year, and a downgrade to its projection for next year. The Paris-based organisation now expects the economy to grow 1.1% in 2026, up from a forecast of 0.9% growth in June. For 2027, however, it expects growth of 1%, down from 1.1% previously.

But the OECD also argued that that the Bank of England did not need to raise interest rates, in contrast to a number of other major economies.

On the corporate front, energy majors BP and Shell both closed higher on the back of higher oil prices, with BP topping the FTSE 100 leaders' board. Rentokil was also a top performer, after Investec upgraded the stock to 'buy' from 'hold'.

Pollen Street surged as it confirmed it is considering a potential sale, having begun an assessment of the strategic options available to it "with a view to delivering greater value for shareholders". Responding to press speculation, the asset manager said it has initiated preliminary discussions with a limited number of third parties to establish their suitability as a strategic partner and whether they might be interested in making a possible offer for the company.

Specialist engineer Renishaw rallied as it posted a 27% rise in annual profit driven by accelerating demand in several markets, including the semiconductor and aerospace and defence sectors. Pre-tax profit for the 12 months to 30 June came in at £150m, while revenue rose 14% to £816m. Renishaw said the current year had started strongly on increased demand for semiconductor manufacturing equipment.

Clean energy specialist Ceres Power rose as it reiterated its outlook despite a fall in half-year gross profits.

Diageo shares were little changed as the drinks business said that Joanne Wilson will join the group as chief financial officer in 2027, succeeding Nik Jhangiani. Wilson, who currently serves as CFO of WPP, has previously held senior financial and commercial roles at Britvic, data science firm Dunnhumby, Tesco and KPMG.

On the downside, JD Sports Fashion was the biggest blue chip faller after it posted a slide in half-year earnings as it warned that the tough conditions seen in the first half were set to continue. The retailer reported a 0.7%decline in sales to £5.9bn in the 26 weeks to 1 August, with like-for-like sale down 2.8%. Operating profits were 20.5% lower at £294m.

The group called it a "resilient" performance amid a challenging backdrop, including cost-of-living pressures, footwear product cycle headwinds and widespread promotional activity. But it acknowledged that a number of these conditions were likely to persist into the second half.

Elsewhere, shares of online marketplaces and telecoms operators were under the cosh amid worries about the threat from new agentic AI tools. Autotrader, Mony Group, Rightmove, Baltic Classifieds and Auction Technology all fell.

Market Movers

FTSE 100 (UKX) 10,705.26 -0.03%

FTSE 250 (MCX) 24,361.58 -0.67%

techMARK (TASX) 6,150.67 -0.36%

FTSE 100 - Risers

BP (BP.) 557.20p 2.75%

Relx plc (REL) 2,511.00p 2.49%

Rentokil Initial (RTO) 323.10p 2.05%

Babcock International Group (BAB) 995.80p 2.03%

Shell (SHEL) 3,580.00p 1.99%

Ithaca Energy (ITH) 290.20p 1.97%

London Stock Exchange Group (LSEG) 8,294.00p 1.72%

InterContinental Hotels Group (IHG) 156.45p 1.52%

BAE Systems (BA.) 2,023.00p 1.51%

Rolls-Royce Holdings (RR.) 1,503.20p 1.44%

FTSE 100 - Fallers

JD Sports Fashion (JD.) 74.22p -5.72%

Fresnillo (FRES) 2,889.00p -3.51%

Autotrader Group (AUTO) 468.10p -3.31%

IG Group Holdings (IGG) 1,320.00p -3.15%

Spirax Group (SPX) 7,110.00p -2.67%

Antofagasta (ANTO) 3,746.00p -2.52%

Tesco (TSCO) 471.10p -2.26%

Smith & Nephew (SN.) 1,007.50p -2.23%

Games Workshop Group (GAW) 17,730.00p -2.10%

Severn Trent (SVT) 3,044.00p -2.06%

FTSE 250 - Risers

Pollen Street Group Limited (POLN) 917.00p 12.52%

Raspberry PI Holdings (RPI) 631.50p 5.12%

NCC Group (NCC) 138.80p 3.58%

AEP Plantations (AEP) 208.50p 2.71%

RHI Magnesita N.V. (DI) (RHIM) 2,905.00p 2.29%

Hays (HAS) 64.40p 2.22%

Energean (ENOG) 771.00p 2.05%

QinetiQ Group (QQ.) 498.20p 1.88%

Chemring Group (CHG) 545.50p 1.68%

Syncona Limited NPV (SYNC) 117.80p 1.55%

FTSE 250 - Fallers

Mony Group (MONY) 177.30p -7.85%

Baltic Classifieds Group (BCG) 2.14p -5.47%

HGCapital Trust (HGT) 384.00p -3.76%

Softcat (SCT) 1,847.00p -3.60%

WH Smith (SMWH) 370.20p -3.59%

Entain (ENT) 459.60p -3.59%

Domino's Pizza Group (DOM) 205.20p -3.57%

Telecom Plus (TEP) 790.00p -3.54%

Rank Group (RNK) 79.10p -3.54%

Rightmove (RMV) 468.00p -3.43%