FTSE 100 Sees Modest Losses Amid Fraying US-Iran Ceasefire Concerns
The FTSE 100 ended Thursday with slight declines as market sentiment soured over the fragility of the US-Iran ceasefire agreement. Doubts intensified regarding the strength and sustainability of the truce, with geopolitical tensions in the Middle East casting a shadow over investor confidence.
Ceasefire Under Strain from Israel-Lebanon Conflict
The two-week ceasefire between the United States and Iran faced significant uncertainty, largely due to Israel's ongoing military actions against Iran-backed Hezbollah in Lebanon. Iran asserted that Lebanon was included in the truce, but the US contradicted this, stating it was excluded. This discrepancy sparked international calls for the ceasefire to extend to Lebanon, with fears mounting that the fragile peace could collapse.
European Union top diplomat Kaja Kallas warned, "Israeli actions are putting the US-Iran ceasefire under severe strain. The Iran truce should extend to Lebanon." Similarly, France's foreign minister Jean-Noel Barrot condemned the strikes as "unacceptable," while British counterpart Yvette Cooper echoed demands for Lebanon's inclusion.
Market Reactions and Analyst Insights
Dan Coatsworth, head of markets at AJ Bell, commented that the agreement "seems to be fraying at the edges," highlighting a mix of optimism and caution. He noted, "There is still optimism that the fragile peace will hold but also a growing awareness that things won't go back to a pre-war state in a hurry." Coatsworth added that the disruption from recent weeks could take months to resolve, with inflationary pressures from the conflict just beginning to impact the wider economy.
On Thursday, the FTSE 100 closed down 5.40 points, or 0.1%, at 10,603.48, while the FTSE 250 fell 229.19 points, or 1.0%, to 22,205.64. In contrast, the AIM All-Share rose 5.54 points, or 0.7%, to 769.35. European markets mirrored the downturn, with Paris's CAC 40 down 0.2% and Frankfurt's DAX 40 declining 1.1%.
Commodities and Global Equities Performance
Brent crude oil traded higher at $97.36 per barrel on Thursday afternoon, up from $95.20 at the previous close, reflecting heightened geopolitical risks. Across the Atlantic, Wall Street presented a brighter picture: the Dow Jones Industrial Average gained 0.1%, while the S&P 500 and Nasdaq Composite rose 0.3%.
Stephen Innes at SPI Asset Management described Wednesday's market rally as having "all the hallmarks of a powerful short squeeze rather than fresh conviction." He explained, "The ceasefire looks less like a settlement and more like a reset of the deadline with optionality preserved on all sides. The market has effectively been handed a two-week window where escalation risk is deferred but not removed."
Financial Indicators and Corporate Movements
In bond markets, the yield on the US 10-year Treasury widened to 4.30% from 4.27%, and the 30-year yield stretched to 4.89% from 4.86%. Currency markets saw little change, with the pound at $1.3437 against the dollar and €1.1484 against the euro.
On the FTSE 100, oil giants BP and Shell gained 3.2% and 1.4%, respectively, buoyed by rising oil prices. DCC firmed 1.8% after an upgrade by Exane BNP. However, Standard Life fell 3.5% as it traded ex-dividend, and Lloyds Banking Group dropped 1.5%, despite Citigroup upgrading it to 'buy' citing it as "too cheap."
Metlen Energy & Metals declined 0.6% after cutting its dividend, with losses in its M Power Projects sub-sector affecting annual profit. The company delayed its results for audit completion by PricewaterhouseCoopers.
FTSE 250 and Other Market Highlights
On the FTSE 250, Energean rose 2.7% after receiving approval from Israel's Ministry of Energy & Infrastructure to resume operations at its floating production unit, previously suspended in March due to regional escalation. Elsewhere, ITM Power surged 7.1% following a £40 million investment from the UK government's Great British Energy Group, supporting its green hydrogen production systems.
Top risers on the FTSE 100 included BP, United Utilities, GSK, Hiscox, and SSE, while major fallers were Entain, Informa, Compass Group, Standard Life, and Experian.
Upcoming Economic and Corporate Events
Friday's economic calendar features CPI and PPI data from China, followed by US CPI figures, factory orders, and the Michigan consumer sentiment index. Domestically, student accommodation provider Unite Group is set to release a trading update.
