(Sharecast News) - London stocks rallied in early trade on Wednesday as oil prices slumped amid signs the US is making efforts to de-escalate the conflict with Iran, and as investors digested the latest UK inflation reading.
At 0840 GMT, the FTSE 100 was up 1% at 10,064.70. Brent crude was down 6.3% at $97.93 a barrel and West Texas Intermediate was 5.8% lower at $87.02.
Speaking at the Oval Office on Tuesday, Donald Trump said the US and Iran were "in negotiations right now".
"They're talking to us, and they're talking sense," Trump said.
Also on Tuesday, it was reported that the US had sent a 15-point plan to Iran as it looks to resolve the conflict in the Middle East.
According to The New York Times, citing two officials briefed on the diplomacy, the plan was delivered via Pakistan.
Israel's Channel 12 was the first to report the plan, saying that a one-month ceasefire would be announced according to a mechanism being worked on by US Middle East envoys Steve Witkoff and Jared Kushner.
According to N12, the 15-point plan includes the dismantling of Iran's existing nuclear capabilities, a commitment from Iran to never pursue nuclear weapons and no uranium enrichment on Iranian soil.
It also includes the transfer of all enriched material under an agreed schedule, the decommissioning of nuclear facilities at Natanz, Isfahan and Fordow, and full access for international atomic inspectors to all information.
Under the plan, Iran would end its proxy strategy in the region, stop funding and arming proxy groups, and keep the Strait of Hormuz open as a free maritime zone. The plan also includes restricting missile use to self-defence purposes.
In return, all sanctions on Iran would be lifted. Iran would also receive support for a civilian nuclear program in Bushehr.
Matt Britzman, senior equity analyst at Hargreaves Lansdown, said: "Global equity markets are pointing higher this morning after optimism grew around a potential resolution to the Middle East conflict, following reports that the US is pursuing talks with Iran.
"Reports suggest that Washington has sent Tehran a 15-point proposal aimed at resolving tensions, while Israeli media indicate that the US is pushing for a one-month ceasefire to allow negotiations to take place. Oil prices have moved lower on the developments, offering some relief to equities that had been weighed down by worries over inflation and the knock-on impact for interest rates. It's still a highly fluid situation, trying to call how the rest of the week plays out would be unwise, but there are now clearer signs that we are on a path toward deescalation"
On home shores, figures from the Office for National Statistics showed that inflation was unchanged in February, in line with forecasts.
The consumer prices index in the 12 months to February showed no change on January, at 3%.
The largest upward driver was the price of clothing, which jumped 0.9% compared to no change a month earlier. But that was offset by falls in the cost of petrol ahead of war starting in the Middle East.
Grant Fitzner, chief economist at the ONS, added: "A fall in the cost of alcoholic drinks due to promotional activity, compared with a rise last year, was also a downward driver, while little change in food prices - again compared with a small rise this time last year - added further downward pressure."
However, core CPI, which strips out the more volatile prices of energy, food, alcohol and tobacco, edged up to 3.2% from 3.1%.
The data predates the US attacks on Iran at the end of February, which sent global energy prices soaring as the conflict spread through the region and the Strait of Hormuz, a vital shipping route, ground to a virtual halt.
In equity markets, Croda was the top gainer on the FTSE 100 after an upgrade to 'overweight' from 'equalweight' at Morgan Stanley.
Precious metals miner Fresnillo and gold miners Endeavour and Hochschild all shone as gold and silver prices rose.
Diageo rose after saying it had sold the Royal Challengers Bengaluru cricket team for 1.3bn to a consortium including Blackstone and US sports investor David Blitzer.
United Utilities gained after saying full-year underlying earnings per share were expected to be in line with previous guidance of roughly 100p.
Freight and road payments processor Eurowag shot up as it forecast further growth, after annual earnings motored ahead.
On the downside, Shell and BP gushed lower as oil prices retreated.
RS Group tumbled after saying it expects a 0.6% fall in like-for-like annual revenue due to "difficult markets", although annual adjusted pre-tax profit would come in marginally ahead of expectations of 241m.
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