European Markets Rally as Oil Prices Cool Amid Ongoing Middle East Crisis
European stocks staged a notable recovery on Wednesday, recouping some of the heavy losses incurred over the previous two days. This rebound coincided with a slight easing in oil prices, as investors closely monitored the evolving situation in the Middle East, now entering its fifth day of heightened tensions.
Market Performance and Key Indices
The FTSE 100 index closed up 83.52 points, or 0.8%, at 10,567.65. Similarly, the FTSE 250 advanced by 202.46 points, or 0.9%, to 22,896.67, while the AIM All-Share index rose 8.13 points, or 1.0%, to 794.56. Across Europe, the CAC 40 in Paris gained 0.9%, and the DAX 40 in Frankfurt surged 1.7%.
In the United States, Wall Street also experienced a rally. The Dow Jones Industrial Average increased by 0.5%, the S&P 500 index climbed 0.7%, and the Nasdaq Composite jumped 1.3%.
Oil Prices and Geopolitical Developments
Brent crude oil traded lower at $80.75 per barrel on Wednesday afternoon, down from $83.06 at the same time on Tuesday. This cooling in oil prices provided some relief to markets, with David Morrison of Trade Nation noting, "Oil is arguably the most useful barometer of sentiment currently, given that it plays such a fundamental role in all aspects of the global economy, and that it feeds directly into inflation."
Sentiment was bolstered by a report from the New York Times indicating that Iranian operatives had indirectly reached out to the CIA to discuss terms for ending the conflict. However, US officials remain sceptical about an immediate resolution. Additionally, Qatar's Prime Minister urged an immediate halt to attacks against Gulf states during a call with Iran's foreign minister.
President Donald Trump had previously stated that the US navy is prepared to escort oil tankers through the Strait of Hormuz, a crucial shipping route. Morrison added, "If there is evidence that shipping can get through the Strait safely by the weekend, that should play a major part in reducing tensions all round."
Economic Data and Policy Announcements
In economic news, the US services sector expanded more than expected in February, with the ISM services index rising to 56.1%, its highest reading since mid-2022. ISM survey chairman Steve Miller commented, "The services sector is heating up."
Meanwhile, US Treasury Secretary Scott Bessent indicated that President Trump's proposed 15% global tariff is likely to be implemented this week. This follows a Supreme Court decision last month that struck down previous country-specific tariffs, prompting the administration to pursue alternative legal avenues.
Currency and Bond Markets
The dollar's recent strength stalled, with the pound rising to $1.3365 and the euro advancing to $1.1634. The dollar traded lower against the yen at 157.01 yen. In bond markets, the yield on the US 10-year Treasury held steady at 4.07%, while the 30-year Treasury yield remained at 4.71%.
UK Economic Indicators
In the United Kingdom, the S&P Global UK services PMI activity index posted 53.9 for February, slightly down from January's five-month high of 54.0. Tim Moore, economics director at S&P Global Market Intelligence, noted, "Business activity continued to pick up across the UK service economy in February, with growth holding close to the five-month high seen at the start of 2026." The composite output index registered 53.7, indicating steady growth in the private sector.
Corporate Moves and Analyst Insights
On the FTSE 100, notable gainers included Entain, which rose 4.0% ahead of its full-year results, and Informa, up 4.2%. However, Weir Group slumped 11% after disappointing guidance and weaker orders, with Citi analyst Avinash Mundhra describing the print as "disappointing." JPMorgan viewed the share price weakness as a "buying opportunity," maintaining an overweight rating.
On the FTSE 250, Vistry plunged 25% following news of executive departures and warnings of narrowing profit margins. Jefferies analyst Glynis Johnson remarked, "Medium term we believe Vistry should be well-placed to benefit from government efforts to support affordable housing. However with FY26 guidance again tempering growth expectations... investors may feel there is time to wait before getting involved."
Commodities and Looking Ahead
Gold prices climbed to $5,142.25 per ounce. Looking forward, Thursday's economic calendar features eurozone retail sales, construction PMI data, US jobless claims, and a trade report. Corporate results are expected from companies such as Admiral, Aviva, and Reckitt Benckiser.
Russ Mould, an analyst at AJ Bell, summarised the market sentiment, stating, "More stability on the markets is welcome not only for sentiment but also as it might give certain investors the confidence to go hunting for bargains and drive a new wave of buying."
