FTSE 100 Slumps as US-Iran Ceasefire Deadline Sparks Market Jitters
The FTSE 100 index closed significantly lower on Tuesday, surrendering early gains as investor caution intensified ahead of the imminent expiration of the ceasefire between the United States and Iran. The blue-chip index finished down 110.99 points, or 1.1%, settling at 10,498.09.
Geopolitical Tensions Weigh on Investor Sentiment
US President Donald Trump stated in a CNBC interview that he believes the US will "end up with a great deal" with Iran to conclude the conflict. However, he notably added that he does not anticipate extending the current ceasefire, which is scheduled to lapse on Wednesday. "I think they have no choice," Trump remarked, citing military actions against Iran's navy, air force, and leadership.
Despite the White House announcing that Vice President JD Vance is prepared to return to Pakistan for fresh negotiations with Iran, Tehran's position remains precarious. Iran has accused Washington of violating the fragile truce through a blockade of its ports and the seizure of a vessel.
Commodity and Global Market Reactions
Brent crude oil traded higher at $98.03 per barrel on Tuesday afternoon, up from $94.45 at Monday's London equities close. Shore Capital analyst James Hosie suggested that a continuation of the current tenuous ceasefire is the most probable immediate outcome. Yet, he warned that the market is "under-estimating" the impact of continued disruption to global oil supplies.
"In our view, this should at least keep spot Brent prices in the $90-100 per barrel range until a robust peace deal is achieved, with any military escalation likely to drive a further price spike," Hosie elaborated.
European equity markets mirrored the downturn, with Paris's CAC 40 ending down 1.1% and Frankfurt's DAX 40 falling 0.6%. In New York, the Dow Jones Industrial Average declined 0.2%, the S&P 500 dropped 0.3%, and the Nasdaq Composite decreased 0.1%.
UK Economic Data and Corporate Developments
UK unemployment data provided a surprise, with the rate dropping to 4.9% for the three months ending in February, down from 5.2% in the prior three-month period. Analysts had anticipated it would remain unchanged. Average earnings excluding bonuses increased by 3.6% in the three months to February, slowing from 3.8% previously but surpassing the consensus estimate of 3.5%.
JPMorgan analyst Allan Monks noted that the lower-than-expected unemployment rate indicates "a little less vulnerability ahead of the energy shock than had previously appeared to be the case." Conversely, Deutsche Bank chief UK economist Sanjay Raja highlighted "underlying weakness persists" and cautioned that the "unfolding energy shock will also revive fears of higher unemployment in the near-term."
On the corporate front, aerospace firms Rolls-Royce and Melrose Industries fell 6.5% and 4.2% respectively, continuing their volatile performance amid Middle East tensions. AB Foods declined 2.7% after confirming plans to demerge its Primark retail business, a move overshadowed by weaker-than-expected half-year results and soft guidance for its Sugar division.
Housebuilder Crest Nicholson plunged 35% after lowering sales and profit expectations for the current financial year and warning of higher debt than forecast, citing reduced inquiries and cautious buyer sentiment linked to the Middle East crisis.
Currency and Bond Market Movements
The pound eased to $1.3507 from $1.3535, while firming against the euro to €1.1498 from €1.1486. The euro traded lower against the US dollar, falling to $1.1747 from $1.1786. In bond markets, the yield on the US 10-year Treasury stretched to 4.30% from 4.26%, and the 30-year yield widened to 4.91% from 4.89%.
Notable Stock Performances and Outlook
Gold traded at $4,744.11 an ounce, down from $4,806.14. The biggest risers on the FTSE 100 included Compass Group, Relx, SSE, London Stock Exchange Group, and Experian. The largest fallers were Rolls-Royce, Melrose Industries, BAE Systems, Endeavour Mining, and Coca-Cola HBC.
Looking ahead, Wednesday's economic calendar features UK inflation figures and eurozone consumer confidence data, with corporate updates expected from Reckitt Benckiser, Bunzl, and Aberdeen.
