Markets are on edge after President Trump threatened to take out Iran "in one night" if it fails to reopen the Strait of Hormuz before tonight’s deadline.
The FTSE 100 index has struggled for direction while the Brent crude oil price moved above $110 a barrel.
Meanwhile, Universal Music Group is in the spotlight after billionaire Bill Ackman’s Pershing Square investment vehicle offered to buy the studios giant.
Fears of an escalation of the Middle East conflict if Iran fails to reopen the Strait of Hormuz today kept traders on the sidelines during a nervy FTSE 100 session.
London’s top flight stood 31.26 points higher at 10,467.55, having earlier dipped to 10,400 as President Trump’s 1am deadline for a deal loomed into view.
Dan Coatsworth, AJ Bell head of markets, said traders were largely non-committal given the apparent cliff-edge deadline imposed by the Trump administration.
He said: “Either there is a climbdown on the part of Washington or Tehran, which could prompt a major rally in equities and easing of energy prices, or a major escalation with all the implications that might have for financial markets.
“An alternative scenario is that the deadline is extended, and the markets face another uneasy period of trying to gauge the latest mood music in the US and Iran.”
BP and Shell shares rose by another 1% as the price of Brent crude pushed above $111 a barrel before the benchmark later settled at $109.62.
Among the other risers, Barclays lifted 5.1p to 413.85p and Guinness owner Diageo improved 18.1p to 1409.6p. Scottish Mortgage Investment Trust led the FTSE 100 with a gain of 3% or 40.5p to 1308.5p.
Utility focused stocks dominated the fallers board as SSE dipped 30p to 2698p and Severn Trent lost 27p to 3150p. GSK also fell 16p to 2128p and AstraZeneca eased 122p to 15,194p.
Billionaire unveils Universal Music bid
08:35 , Graeme EvansBill Ackman’s Pershing Square investment vehicle has offered to buy music studios giant Universal Music Group.
The US billionaire’s firm has proposed a cash and stock deal to take control of the Dutch-US business, which runs Abbey Road studios and labels including EMI and Island Records.
Universal is the world’s largest music company and owns extensive music catalogues from artists including The Beatles, Queen, Adele, Taylor Swift and Kendrick Lamar.
It is estimated that the deal would value Universal at around 55 billion euros (£48 billion).
FTSE 100 higher, IAG and AstraZeneca under pressure
08:32 , Graeme EvansBP and Shell shares have risen 1% - up 7p to 598.2p and 32.5p to 3576p respectively - after the price of Brent crude lifted above $110 a barrel.
Other movers include NatWest after a rise 4.6p to 580p, while Vodafone is up 0.9p to 115.9p and Unilever ahead 32p to 4204.5p.
British Airways owner IAG has fallen 3.9p to 363.3p and AstraZeneca by 96p to 15,200p.
The FTSE 100 index is 13.30 points higher at 10,449.59, while the UK-focused FTSE 250 index has risen 0.3% or 68.81 points to 21,711.11.
FTSE 100 makes steady start, US futures lower
08:06 , Graeme EvansThe FTSE 100 index has opened 7.97 points higher at 10,444.26.
Hargreaves Lansdown analyst Matt Britzman said: “Global markets are bracing for a critical day as President Trump’s looming deadline keeps investors on edge, with sentiment holding up better than you might expect given the risk of escalation.
US futures are pointing to a dip, but today’s modest moves suggest investors are positioning carefully rather than fully pricing in a worst-case scenario.
Britzman added “Either way, today has the potential to be one of the most volatile trading sessions since the conflict began, with any headlines likely to drive meaningful swings across global markets.”
Week ahead: Shell update and US inflation figures due
07:52 , Graeme EvansTomorrow’s quarterly trading update by Shell is set to be one of the key events of an otherwise quiet week for corporate reporting.
The statement will include the energy giant’s expectations for production in its integrated gas and upstream operations over the first three months of the year.
During the period, Iranian strikes at Qatar's main gas hub resulted in damage to Shell’s Pearl gas-to-liquids plant.
In the US, investors will be looking to Wednesday’s release of Delta Air Lines results for commentary on the impact of the Middle East conflict on air travel.
US inflation figures on Friday are set to show a big jump in the annual rate from 2.4% to about 3.3%, driven by a spike in gas prices. The minutes of the most recent Federal Reserve policy meeting are also scheduled for tomorrow evening.
Brent crude tops $110 a barrel, FTSE 100 seen lower
07:13 , Graeme EvansThe price of Brent crude oil has risen 1% to more than $111 a barrel as traders focus on tonight’s US deadline for a deal to fully reopen the Strait of Hormuz.
The FTSE 100 index is also seen opening about 0.2% lower after Asia markets traded in negative territory this morning.
In its final session before the weekend, London’s top flight closed 0.7% or 71.50 points higher at 10,436.29 but had been as low as 10,287.90.
The Dow Jones Industrial Average and the S&P 500 index last night rose 0.4% and the Nasdaq Composite lifted 0.5%.
President Trump’s threat to escalate strikes if there’s no agreement with Iran today left the US crude oil benchmark 2.5% higher at $115 a barrel.
