Oil prices fell back and stock markets rallied on Monday after Iran announced the end of its military operations against Israel, easing fears of a broader conflict. Brent crude, which had surged to $98 a barrel earlier in the day, dropped back to around $94.58, up just 1.75%. European shares also recovered, with the pan-European Stoxx 600 index turning slightly higher, while London's FTSE 100 closed up 5 points at 10,373.
The reprieve came after Iran's military command said it was halting offensive operations following an exchange of fire with Israel. The development followed a call from former US President Donald Trump for both sides to 'immediately stop shooting'. Government bond prices also recovered, pulling down yields on UK, US and eurozone debt.
Despite the recovery, Asian markets had a turbulent session. South Korea's KOSPI index slumped by 8%, reflecting ongoing concerns about tech valuations. In the US, the S&P 500 rose 0.8%, with some investors 'buying the dip' after Friday's sell-off, according to Joe Mazzola of Charles Schwab. Mike Bell of RBC BlueBay noted that investors have been conditioned to buy dips over the past 15 years.
However, housebuilders' shares in London fell on worries that the Middle East conflict could keep borrowing costs elevated. Meanwhile, a New York Fed survey showed US household sentiment deteriorating, with 13.3% of Americans saying their financial situation is 'much worse' than a year ago, the highest since July 2022.
In other news, the Financial Conduct Authority (FCA) has begun civil proceedings against fund manager Neil Woodford, accusing him of providing unauthorised investment advice through his subscription-based platform. The FCA is seeking an injunction to stop the activities, which it says breach the Financial Services and Markets Act 2000.
