London open: FTSE rallies, oil slumps on US-Iran peace deal

(Sharecast News) - London stocks rallied in early trade on Monday, while oil prices slid as investors welcomed an agreed peace deal between the US and Iran.

At 0826 BST, the FTSE 100 was 0.9% firmer at 10,564.99, while Brent crude was down 4.6% at $83.28 a barrel and West Texas Intermediate was of 5.3% at $80.41 after the US and Iran agreed to end all fighting and reopen the Strait of Hormuz.

The long-sought peace deal was first announced by Pakistan, which had acted as a mediator between the warring factions. Full details have not been published, but prime minister Shehbaz Sharif confirmed both sides had declared "immediate and permanent termination" of all military operations, including in Lebanon. There was no mention of Israel.

Donald Trump shortly afterwards said the Strait of Hormuz would reopen. Posting on Truth Social, the US president wrote: "I hereby fully authorise the toll free opening of the Strait of Hormuz, and, simultaneously herewith, authorise the immediate removal of the United States Naval blockade.

"Ships of the World, start your engines. Let the oil flow!"

Trump also posted: "This Great Deal will bring Peace and Security to the whole Region. Many presidents have tried to make Peace with Iran, and all have failed before me. The Leaders of the Region have, for the first time, found a President who can help them achieve real Peace."

The Strait of Hormuz is unlikely to immediately reopen, as mines will need to be cleared before ships can safely resume using it. But that did not stop oil from tumbling.

The US and Iran are due to sign a memorandum of understanding on Friday in Switzerland.

Matt Britzman, senior equity analyst at Hargreaves Lansdown, said: "The move has given investors a clear reason to dial back some of the geopolitical risk premium that has hung over markets, especially as the Strait of Hormuz is expected to reopen and oil prices move sharply lower. Energy prices have been one of the clearest transmission channels from Middle East tensions into inflation, bond yields and equity sentiment, and there is likely to be a concerted effort to get prices down even further once this deal is finalised.

"There are still details to be ironed out before markets can fully trust the agreement, but for now the direction of travel is clear: lower oil, calmer nerves and a renewed appetite for risk.

"Oil prices have taken another leg lower, but this hasn't come completely out of the blue. Oil has been sliding for much of the past month, a sign that markets had already started to price in a decent chance of a breakthrough between the US and Iran before President Trump's latest announcement.

"The confirmation of a deal has still added fresh downward pressure, with traders now looking for evidence that the Strait of Hormuz reopens smoothly and energy flows return to something closer to normal."

Berenberg was more sceptical about the deal. "Markets are rallying on the vibe right now but what is actually in the deal will be the critical points - and there is still plenty of fog of war surrounding terms," it said. "The agreement is not really a deal at all, or even a deal to have a deal, but rather a memorandum of understanding staking out a framework to discuss a deal over the next 60 days.

"So, at the risk of being a party pooper, could this be one of those instances of 'buy the rumour, sell the fact'?"

Looking to the rest of the week and central bank policy announcements will be in focus, with the Bank of Japan, the Reserve Bank of Australia, the Federal Reserve, the Swiss National Bank and the Bank of England all due to make decisions.

Matt Britzman said lower oil prices give central banks a little more breathing room, but not enough to change the picture overnight. "Markets are currently pricing in something close to a coin toss on a US rate hike by year-end, while the UK looks more firmly tilted toward a move higher, likely toward the back end of the year if the markets are to be believe," he said.

In equity markets, airlines IAG, Wizz Air and easyJet all flew higher as falling oil prices eased concerns about fuel costs. Engine maker Rolls-Royce also racked up strong gains.

Precious metals miners and miners more generally rose, with Fresnillo, Hochschild and Antofagasta among the best performers.

SSP, which operates food and beverage outlets at airports and train stations, was among the risers, while rate-sensitive housebuilders advanced, with Persimmon, Barratt Redrow, Berkeley and Bellway all up.

Elsewhere, Frasers Group edged higher after saying it had launched a bid to buy Australia's Accent Group for �166m. The company, which already owns a 23% stake in the retailer, is offering 65 Australian cents a share.

Big Yellow gained after selling its industrial estate in Harrow, London, for �38.4m, subject to a �2m retention from the sale price, which will be released on the satisfaction of certain conditions.

On the downside, energy giants Shell and BP slumped in tandem with oil prices, along with Harbour Energy, Diversified Energy and Ithaca.

Defence firm BAE Systems lost ground.

Market Movers

FTSE 100 (UKX) 10,564.99 0.89%

FTSE 250 (MCX) 23,653.78 1.41%

techMARK (TASX) 5,997.74 0.56%

FTSE 100 - Risers

Antofagasta (ANTO) 4,288.00p 6.64%

Rolls-Royce Holdings (RR.) 1,367.40p 6.01%

Fresnillo (FRES) 3,161.00p 4.86%

Smurfit Westrock (DI) (SWR) 3,345.00p 4.72%

Weir Group (WEIR) 2,418.00p 4.60%

International Consolidated Airlines Group SA (CDI) (IAG) 454.20p 4.54%

Halma (HLMA) 4,048.00p 4.26%

Persimmon (PSN) 1,080.50p 4.17%

Barratt Redrow (BTRW) 254.60p 3.81%

Berkeley Group Holdings (The) (BKG) 3,510.00p 3.76%

FTSE 100 - Fallers

Shell (SHEL) 3,095.50p -3.35%

BP (BP.) 512.80p -3.16%

BAE Systems (BA.) 1,878.50p -1.26%

Centrica (CNA) 185.20p -0.48%

BT Group (BT.A) 207.90p -0.33%

Tesco (TSCO) 471.50p -0.15%

Vodafone Group (VOD) 115.05p -0.13%

Intertek Group (ITRK) 5,665.00p -0.09%

GSK (GSK) 1,988.50p -0.08%

AstraZeneca (AZN) 13,480.00p -0.04%

FTSE 250 - Risers

Wizz Air Holdings (WIZZ) 1,143.00p 8.70%

Hochschild Mining (HOC) 569.50p 6.55%

4Imprint Group (FOUR) 3,948.00p 5.96%

Pan African Resources (PAF) 115.40p 5.70%

Dr. Martens (DOCS) 75.70p 5.18%

SSP Group (SSPG) 180.10p 4.95%

Kainos Group (KNOS) 846.50p 4.89%

Ibstock (IBST) 99.55p 4.79%

Endeavour Mining (EDV) 4,007.00p 4.33%

Marshalls (MSLH) 139.90p 4.15%

FTSE 250 - Fallers

Ithaca Energy (ITH) 231.80p -5.80%

Bytes Technology Group (BYIT) 342.40p -4.36%

Harbour Energy (HBR) 249.20p -3.33%

W.A.G Payment Solutions (EWG) 102.60p -2.84%

IP Group (IPO) 63.30p -2.47%

RTW Biotech Opportunities Ltd (RTW) 2.16p -2.26%

Diversified Energy Company (DI) (DEC) 1,008.00p -1.95%

Gamma Communications (GAMA) 911.50p -1.94%

Energean (ENOG) 726.00p -1.69%

Softcat (SCT) 1,776.00p -1.33%