FTSE 100 Declines as US-Iran Tensions Reignite Market Fears
The FTSE 100 started the week on a downward trajectory, closing 58.55 points lower at 10,609.08, a decline of 0.6%. This drop came as hopes for a Middle East peace deal were once again thrown into doubt, with Iran closing the Strait of Hormuz after a brief reopening. The move reversed Friday's optimism, sparking renewed fears of resumed hostilities in the region.
Market Mood Shifts Sharply from Friday's Optimism
Kathleen Brooks, research director at XTB, noted that "the market mood is very different at the start of the week compared to Friday." This sentiment was echoed by Tom Stevenson, investment director at Fidelity International, who remarked, "Just when you think it is safe to go back in the water, the alarm is sounded again." The FTSE 250 also suffered, ending 265.71 points lower at 22,940.21, a fall of 1.2%, while the AIM All-Share dropped 1.77 points to 808.34, down 0.2%.
Oil Prices Volatile as Geopolitical Tensions Flare
The price of crude oil experienced significant volatility. After plunging on Friday when Iran reopened the Strait of Hormuz, prices rose again on Monday as Iran closed the waterway, citing a US blockade and seizure of an Iranian cargo ship as a breach of the two-week ceasefire. Brent oil traded at $94.45 per barrel on Monday afternoon, up from $89.15 at the close of London equities on Friday. Ms Brooks highlighted that the jump in oil prices and pull-back in stocks serve as a reminder that the current ceasefire, set to expire on Wednesday, is "fragile."
Global Equities and Currency Movements Reflect Uncertainty
European markets mirrored the downturn, with the CAC 40 in Paris falling 1.1% and the DAX 40 in Frankfurt declining 1.2%. In New York, the Dow Jones Industrial Average was down 0.1%, the S&P 500 dropped 0.3%, and the Nasdaq Composite fell 0.5%. On the currency front, the pound eased to $1.3535 from $1.3556, while the euro traded lower against the dollar at $1.1786 from $1.1805. The dollar strengthened against the yen, trading at 158.58 yen compared to 158.08 yen.
Notable Stock Movements and Corporate Updates
On the FTSE 100, oil majors BP and Shell benefited from rising oil prices, gaining 2.9% and 2.5% respectively, recouping some of Friday's losses. In contrast, British Airways owner IAG fell 2.2%. The FTSE 250 saw Renishaw lead risers, up 6.2%, after raising its full-year guidance due to buoyant demand. Plus500 gained 3.8% as it reported a five-year record high in customer income for Q1 2026. Bid interest drove shares higher for Evoke, which jumped 4.1% amid takeover talks, and Advanced Medical Solutions, which rose 16% after confirming discussions with a potential buyer.
Analysts Remain Cautiously Optimistic Despite Market Jitters
Strategists at HSBC and UBS maintained a bullish stance on equity markets despite the recent unease. Mark Haefele at UBS stated, "Our view remains that we have passed peak geopolitical risk. Both sides have a strong incentive to find a deal. That said, we have been urging investors to expect a bumpy road to a lasting peace." Max Kettner at HSBC added, "Despite the recent rally across the risk asset spectrum our sentiment and positioning framework still sends a buy signal. In short: be quick."
Looking Ahead: Economic Data and Corporate Results
Tuesday's economic calendar includes UK unemployment and average earnings data at 7am, followed by US retail sales figures. On the corporate front, Rio Tinto is set to release a trading statement, while Primark owner Associated British Foods will announce half-year results. These updates may provide further direction for markets amid ongoing geopolitical tensions.
