The FTSE 100 carved out gains on Tuesday as investors awaited a deadline set by Trump for Iran to strike a deal and reopen the Strait of Hormuz.
The US President said that if Iran did not agree to reopen the Strait of Hormuz by 20.00 EST on Tuesday, the US would target civilian infrastructure, including bridges and power facilities.
London’s leading index initially fell on Tuesday but rebounded as the session progressed. The FTSE 100 was trading up 0.3% at 10,467 at the time of writing.
Trump’s deadline follows an expletive-laden social media post over the weekend aimed at Iran, threatening to destroy bridges and power plants. Although experts have warned that such a move could constitute war crimes, the US and Israel seem unperturbed, raising concerns about what the response from Iran would mean for the global energy markets.
“Markets were steady with investors largely non-committal as they await the apparent cliff-edge deadline imposed by the Trump administration,” said Dan Coatsworth, head of markets at AJ Bell.
“President Trump’s threats of widespread strikes on Iran if the Strait of Hormuz is not reopened by the early hours of tomorrow morning UK time, if taken at face value, create the conditions for a binary set of outcomes.”
If Trump follows through – and that’s a big if – the Strait is unlikely to be reopened, and Iran may well target additional energy facilities in the region. This will only serve to prolong and deepen the energy crisis.
Oil prices have displayed a great degree of caution over the past week as equity markets rebounded and again showed signs of tension on Tuesday, with Brent Crude holding firm within touching distance of $110 per barrel.
BP and Shell crept higher on Tuesday as investors continued to align equity portfolios with higher oil prices. But larger gains were observed in the FTSE 100’s consumer-facing stocks, such as Games Workshop and JD Sports.
Games Workshop was the FTSE 100’s top gainer on Tuesday, adding 3.5%.
Scottish Mortgage Investment Trust was also among the best performers, as it continued to benefit from an adjustment to its net asset value following the announcement of an IPO by Elon Musk’s SpaceX.
SpaceX is reportedly planning for an IPO this year, and Scottish Mortgage is one of the very few ways UK investors can gain early exposure to the space travel firm. Around 20% of the Scottish Mortgage portfolio is allocated to SpaceX.
Babcock was the FTSE 100’s top faller, losing around 2%.
Stocks are likely to remain choppy for the rest of the session as Trump’s deadline approaches. It wouldn’t be surprising to see gains quickly turn to losses, or, indeed, stocks extend gains, should the US President fire up his social media apps as the US market comes online.
Matt Britzman, senior equity analyst, Hargreaves Lansdown, said: “Futures are pointing to a softer open this afternoon, and we expect pressure to build on stocks as the day progresses if we move closer to Trump’s deadline without any sign of a deal or even a temporary ceasefire.”