London midday: FTSE surges, oil slides on US-Iran ceasefire

(Sharecast News) - London stocks had surged by midday on Wednesday as oil prices tumbled, after the US and Iran agreed a two-week ceasefire that includes the reopening of the vital Strait of Hormuz.

The FTSE 100 was up 2.8% at 10,637.44, extending earlier gains. Brent crude was down 14.3% at $93.69 a barrel and West Texas Intermediate was 16.4% lower at $94.42.

Sentiment got a boost after the US, Iran and Israel agreed a two-week ceasefire following mediation by Parkistan, on the condition that Tehran reopens the Strait of Hormuz. Israel will continue its attack on Lebanon, however.

News of the ceasefire came less than two hours before the 20:00 ET Tuesday deadline Trump had given Iran to reach a deal or face the "decimation" of its energy and transport infrastructure by the US.

Talks between the US and Iran are due to kick off in Islamabad on Friday after Trump said Tehran's 10-point plan for ending the war was "a workable basis on which to negotiate".

The list of 10 points, published by Iranian state media, includes the lifting of all primary and secondary sanctions on Iran; continued Iranian control over the strait of Hormuz; and recognition of Iran's right to enrich uranium.

It also includes US military withdrawal from the Middle East; an end to attacks on Iran and its allies, including Lebanon; payments of compensation to Iran; the release of frozen Iranian assets; and a UN security council resolution making any deal binding.

Iranian Foreign Minister Abbas Araghchi said on Tuesday that "safe passage through the Strait of Hormuz will be possible" via coordination with Iran's Armed Forces. According to reports, Iran and Oman will be able to charge fees for transits through the Strait during the two-week period.

Dan Coatsworth, head of markets at AJ Bell, said: "Investors' wish for a ceasefire has been granted, triggering a rally across financial markets and pulling down the oil price.

"The positive market reaction is understandable as a two-week ceasefire raises hope for a complete end to the conflict. Markets have been clouded by multiple kinds of uncertainty, from fears of higher inflation and rising interest rates to general unease over geopolitical relations. The ceasefire gives the world a moment to breathe and take stock of events. Unfortunately, there is no guarantee that everything will return to normal.

"The 14% decline in the Brent Crude oil price to $94 a barrel puts energy prices in the right direction as far as businesses and consumers are concerned. However, it's impossible to assume they will quickly return to the sub-$70 a barrel level seen before the Iran crisis began in March. There has already been considerable disruption to the flow of supplies and that might remain the case for some time, even if the Strait of Hormuz becomes fully functional again.

"Potential damage to infrastructure and production shutdowns in the oil and gas industry, together with ongoing uncertainty over what happens after the two-week ceasefire ends, suggest oil prices might stay higher for longer.

"Make no mistake - this is a pause in the proceedings and not a full resolution. That means any market rebound could quickly lose momentum unless there is clear progress with US and Iran talks.

"For now, investors are happy to take the glass half full perspective. They're looking to play a shift in market sentiment and buy everything that's been beaten up in recent weeks and sell what's done well. That means oil producers, utility providers and tobacco stocks have been cut loose and housebuilders, airlines and banks have been snapped up.

"Economically sensitive sectors have struggled since March on fears over higher interest rates and a slowdown in business and consumer activity, so it makes sense that investors now see them as more attractive if there is hope for an end to the conflict."

In equity markets, oil giants Shell and BP tumbled in tandem with oil prices. Shell was also in focus as it cut its forecast for integrated gas production, reflecting the impact of the Iran war on Qatari volumes.

Wizz Air, easyJet and BA and Iberia owner IAG were among the top performers, while miners and housebuilders also racked up strong gains.

Close Brothers rocketed as it said the motor finance redress scheme was set to cost it around �320m, but that this would be "comfortably absorbed" by existing capital resources. It was also broadly in line with its existing provision of �294m.

Gamma Communications rallied, having confirmed after the close on Tuesday that it is in preliminary talks with a number of interested parties about a potential offer.

Market Movers

FTSE 100 (UKX) 10,637.44 2.79%

FTSE 250 (MCX) 22,501.39 4.38%

techMARK (TASX) 5,872.59 2.55%

FTSE 100 - Risers

Antofagasta (ANTO) 3,856.50p 12.19%

Anglo American (AAL) 3,622.00p 10.55%

Rolls-Royce Holdings (RR.) 1,259.00p 10.38%

Fresnillo (FRES) 3,715.00p 10.19%

Melrose Industries (MRO) 553.40p 9.23%

International Consolidated Airlines Group SA (CDI) (IAG) 393.80p 9.16%

Persimmon (PSN) 1,180.50p 9.10%

JD Sports Fashion (JD.) 75.16p 9.01%

Barclays (BARC) 440.65p 8.66%

Lion Finance Group (BGEO) 10,660.00p 8.66%

FTSE 100 - Fallers

BP (BP.) 566.30p -5.32%

Shell (SHEL) 3,379.00p -5.24%

Centrica (CNA) 214.30p -2.15%

British American Tobacco (BATS) 4,370.00p -1.33%

Imperial Brands (IMB) 3,110.50p -0.94%

Admiral Group (ADM) 3,215.00p -0.50%

Schroders (SDR) 577.50p -0.09%

RELX FINANCE BV 3.375% GTD NTS 20/03/33 (BW73) 98.64p 0.00%

Beazley (BEZ) 1,271.50p 0.04%

BAE Systems (BA.) 2,280.00p 0.26%

FTSE 250 - Risers

Close Brothers Group (CBG) 453.60p 16.68%

Gamma Communications (GAMA) 831.40p 13.77%

Wizz Air Holdings (WIZZ) 970.50p 13.16%

Vistry Group (VTY) 366.60p 11.76%

easyJet (EZJ) 395.20p 10.75%

Carnival (CCL) 2,066.00p 10.15%

Marshalls (MSLH) 148.60p 10.07%

Bellway (BWY) 2,046.00p 9.82%

TBC Bank Group (TBCG) 4,706.00p 9.09%

Ibstock (IBST) 110.20p 9.00%

FTSE 250 - Fallers

Ithaca Energy (ITH) 238.20p -7.67%

Diversified Energy Company (DI) (DEC) 1,218.00p -6.34%

Harbour Energy (HBR) 273.40p -5.59%

Energean (ENOG) 837.00p -3.72%

AEP Plantations (AEP) 1,888.00p -0.73%

JTC (JTC) 1,306.00p 0.00%

International Personal Finance (IPF) 246.00p 0.00%

Tami Senior Securitisation 2 Ltd Cls A-2 Mb Fxd Rte Nts 31/12/23 (Reg S) (BP00) 0.00p 0.00%

Utilico Emerging Markets Ltd (DI) (UEM) 277.00p 0.00%

Syncona Limited NPV (SYNC) 89.20p 0.11%