Stock markets have bounced after the oil price slid on the back of a two-week ceasefire in the Iran war.
The deal is set to lead to the reopening of the critical Strait of Hormuz waterway, which handles about one-fifth of global oil and gas shipments.
The FTSE 100 index rallied 2.5%, including a big jump for British Airways owner IAG after the price of Brent crude slumped 14%.
FTSE 100 Live Wednesday
- Oil prices slide
- House market weakens
- Air fares warning
Market update: FTSE 100 up 2.4%, airlines and housebuilders rebound
10:06 , Graeme EvansRolls-Royce, BA owner IAG and housebuilder Persimmon today surged by 8% or more as a relief rally on much cheaper oil prices lifted the FTSE 100 index by 2.4%.
London top flight rose 261.66 points to 10,610.45, although 7% falls for the shares of Shell and BP limited the upside compared with 4% gains for European benchmarks and the mid-cap FTSE 250 index.
Brent Crude stood at $94.51 a barrel, a decline of 13.5% after a two-week ceasefire between the US, Israel and Iran included the re-opening of the Strait of Hormuz.
However, the damage to energy facilities and production shutdowns linked to storage constraints mean traders are braced for a prolonged period of high oil prices.
Wall Street futures trading suggests that the S&P 500 index and Dow Jones Industrial Average will open about 2.5% higher.
Dan Coatsworth, head of markets at AJ Bell, said: “Make no mistake – this is a pause in the proceedings and not a full resolution. That means any market rebound could quickly lose momentum unless there is clear progress with US and Iran talks.
“For now, investors are happy to take the glass half full perspective. They’re looking to play a shift in market sentiment and buy everything that’s been beaten up in recent weeks and sell what’s done well.
“That means oil producers, utility providers and tobacco stocks have been cut loose and housebuilders, airlines and banks have been snapped up.”
The cheaper oil price helped British Airways owner IAG to surge by 8% or 30.1p to 390.3p, although the carrier is still 8% cheaper than before the war started.
Engine maker Rolls-Royce also resumed its ascent with a gain of 10% or 111.8p to 1254.4p, while lenders Barclays and Lloyds Banking Group put on 7% amid hopes the UK economy can avoid recession.
Transatlantic retailer JD Sports Fashion bounced 8% or 5.8p to 74.8p and luxury goods group Burberry rallied 84.8p to 1154.6p.
A fall in the UK’s ten-year gilt yield boosted Persimmon and Barratt Redrow, having been among the worst hit of the FTSE 100 stocks since the start of the war.
Their shares rallied by 8% - up 92.5p to 1174.5p and 21.3p to 272.4p - even though Halifax today reported a 0.5% fall in March house prices. The lender said mortgage affordability issues impacted confidence at the start of the spring selling season.
Mining stocks led the FTSE 100 after the gold price rose 2% on renewed hopes for lower US interest rates and other commodities including copper rallied on an improved demand outlook.
Antofagasta led with an advance of 12% or 426p to 3864p, while Anglo American jumped 10% and Fresnillo put on 9% or 306p to 3673p.
European benchmarks up 4%, Wall Street set for strong start
09:05 , Graeme EvansThe ceasefire today helped benchmarks in Paris and Frankfurt to bounce by 4%, which contrasts with 2.3% for the FTSE 100 index after falls for London-listed energy stocks.
Wall Street futures trading suggests that the S&P 500 index and Dow Jones Industrial Average will open about 2.5% higher.
Quilter investment strategist Lindsay James said: “For now, markets will rejoice that far from a civilisation being ended, a dangerous and ill-planned war seems to be over, for now at least.
“Yet events of the last month lay stark the multi-polar world we now live in; one where shocks to the global system are becoming increasingly frequent, and where legislative oversight is becoming weakened.
“Undoubtedly, the US has been weakened by this excursion, and the ramifications will be long-lasting.”
UK bond yields fall but economic outlook still uncertain
08:59 , Graeme EvansThe UK’s 10-year gilt yield is down by about 0.2% to 4.65% after the two-week ceasefire eased City fears that interest rates might have to rise.
The Middle East agreement also appears to have boosted hopes that the UK can avoid recession.
However, City bank Peel Hunt warned: “Even if this truce marks the genuine end of fighting, some economic damage is already baked in – expect higher inflation in the second half of the year and slower growth for major parts of the global economy compared to the pre-war outlook.
“Significant damage to regional infrastructure as well as energy production and manufacturing capacity means some lasting supply-side damage that will only be gradually recovered.”
Brent crude down 13% but oil prices set to stay elevated
08:47 , Graeme EvansThe price of Brent crude today settled 13% lower at $94.98 a barrel after last night’s two-week ceasefire agreement included the opening of the Strait of Hormuz.
However, the steep drop in prices is not repeated further out on the forward curve as Brent is still expected to remain above $70 a barrel through 2027.
Damage to Persian Gulf energy facilities combined with production shutdowns due to storage issues means that supply could remain constrained for several months.
Shore Capital said: “Even if this ceasefire becomes a more lasting peace agreement, we do not expect oil and gas prices to return to their pre-conflict levels as it will take time for industry operations in the Persian Gulf to normalise."
FTSE 100 up 2.5%, IAG and Rolls-Royce up 10%
08:23 , Graeme EvansThe FTSE 100 index has jumped 2.5% or 257.41 points to 10,606.20.
The ceasefire helped British Airways owner IAG to surge by 10% or 37.05p to 397.25p, while engine maker Rolls-Royce put on 11% or 120p to 1262.7p.
The boost to the economic outlook after the oil price fell sharply meant Barclays lifted 8% or 31.6p to 437.4p and Lloyds Banking Group rallied 7% or 7p to 102.7p.
Housebuilding stocks also advanced strongly as the outlook for interest rate cuts improved on the back of the ceasefire. Barratt Redrow and Persimmon - two of the worst performing stocks since the start of the war - rose by about 9%.
Lower oil prices mean BP and Shell shares are down 8% and 7% respectively.
The UK-focused FTSE 250 index jumped 3.75% or 809.01 points to 22,366.57, with low-cost carrier easyJet up 11% and Wizz Air 15% higher.
Richard Hunter, head of markets at Interactive Investor, said: “A global wave of relief washed over markets as the announcement of a two-week ceasefire brought hope of a permanent end to the conflict.”
Shell gas volumes impacted by Qatar disruption
08:00 , Graeme EvansShell today reported lower gas production in the first quarter of 2026 after disruption to its operations in Qatar offset the windfall from higher energy prices.
Integrated gas production is seen at between 880,000 to 920,000 barrels of oil equivalent a day, down from 948,000 in the final quarter of last year.
LNG production is in the range of 7.6-8 million metric tons, compared with the previous quarter’s 7.8 million after Shell was impacted by Australia weather constraints and Qatar LNG outages.
The company expects stronger earnings in marketing and trading, but also highlighted increased uncertainty and significant working capital outflows due to commodity price volatility.
Air fares warning as carriers deal with war impact
07:43 , Graeme EvansAirlines are warning holidaymakers, business executives and other travellers of rises in ticket prices as they are caught in the economic fallout from the Iran war.
Low-cost airline easyJet, Ryanair, Air France-KLM, Delta Air Lines and India’s biggest airline IndiGo are among companies increasing fares.
The rises will push up the cost of flying to and from London airports including Heathrow, Gatwick, Stansted and Luton.
They come as passengers are already being warned that their flights to destinations around the world could be delayed or cancelled due to the impact of the US/Israeli war on Iran.
House prices fall amid higher mortgage costs
07:25 , Graeme EvansHouse prices fell 0.5% in March as figures published today by lender Halifax showed the impact of the Middle East conflict on property market confidence.
The pace of annual growth also eased, slowing to 0.8% from 1.2% the previous month as the market lost momentum at the start of the key spring selling season.
The average property price recorded by Halifax is now £299,677.
Amanda Bryden, Halifax head of mortgages, said: “The recent slowdown in the housing market reflects the wide uncertainty regarding the conflict in the Middle East.
“Concerns about higher energy prices have pushed up inflation expectations, which in turn led to a rise in mortgage rates, reducing confidence that interest rates will be cut this year and dampening the initial momentum in the market seen at the start of the year.”
Moneyfacts last night recorded an average mortgage rate of 5.76%, which compares with 4.89% at the start of March.
Oil price falls 14% on Strait of Hormuz reopening
07:17 , Graeme EvansThe price of Brent crude has fallen 14% to $93.93 a barrel after Iran agreed to reopen the Strait of Hormuz as part of a two-week ceasefire agreement with the US.
The closure of the strait has cut about 20% from global oil and LNG supplies, causing the price of Brent crude to surge from near $70 prior to the start of the war.
Capital Economics said: “There’s still a lot of uncertainty: the pause is contingent on Iran re-opening the Strait of Hormuz, but what form this takes (e.g., whether it will levy tolls) is unclear.
“That, in turn, will affect how much further energy prices fall (if at all). And it remains to be seen whether this is a genuine step towards lasting peace. But, the announcement is the clearest sign yet that the end of the conflict, and of the associated economic disruptions, is in sight.
“We’ve argued that energy prices could remain above pre-war levels for some time even once it ends – a consequence of the disruption to shipping and infrastructure – which, in turn, could prevent other markets from fully recovering.”
FTSE 100 seen 3% higher, oil below $100 a barrel
07:03 , Graeme EvansThe FTSE 100 index is set to surge by 3% after last night’s US-Iran ceasefire agreement caused the price of Brent crude to slide by 14%.
At $93.85 a barrel, the oil benchmark is still much higher than before the closure of the Strait of Hormuz cut 20% from global oil and LNG supplies.
Asia markets bounced on the developments in the Middle East, with the Nikkei 225 up by 5% and the Hang Seng index 3% higher.
Gold rose 3% to $4835 an ounce and the dollar index dropped 1% as traders revisited expectations for higher US interest rates.
The performance is in contrast to yesterday’s cautious session after the FTSE 100 index closed 0.8% lower at 10,348.79 and the Dow Jones Industrial Average dropped 0.2%.
