The FTSE 100 surged again on Tuesday after Donald Trump suggested he would end the war without reopening the Strait of Hormuz.
London-listed stocks jumped on the news, with the FTSE 100 trading above 10,200 in early trade. Oil prices slipped on the news, but Brent still remained above $110 per barrel.
Donald Trump’s comments suggest there could be an end to the war without the US securing some of its previously stated aims. There are signs that both sides could walk away claiming victory.
But Trump’s unpredictability makes any market positioning risky as he’s liable to post something to the contrary before long.
That could be why stocks rallied on Tuesday, but oil remained steady. Energy traders seemed unprepared to wind down their long positions with tensions still high in the region amid ongoing attacks.
Stocks, on the other hand, were quite happy to rally on the slightest hint of optimism on the suggestion that the conflict could be entering its final stages.
“The FTSE 100 consolidated Monday’s gains to stand firmly above the 10,000 mark as investors continue to weigh competing narratives over the Iran conflict,” said AJ Bell investment director Russ Mould.
US futures also rose on Tuesday, pointing to a stronger session in the cash market this afternoon.
London’s interest rate-sensitive stocks were among the best performers of the session.
Should the conflict end in the near term and the oil shock be prevented from causing a material impact on the global economy, there’s a whole raft of UK-listed stocks that will start to look attractive.
They include some of Tuesday’s top risers, including JD Sports, Barratt Developments, and the top riser at the time of writing, Antofagasta, which was 2.6% higher.
Housebuilders have been crushed during the Middle East war and could be among the sectors to recover if it looks like interest rates won’t have to be hiked to fight off inflation.
Persimmon added 0.8% as Barratts rose 2%.
Unilever shares were 0.7% higher after confirming late-stage talks on the potential sale of its foods business to McCormick for a reported mix of $15.7 billion in cash and McCormick shares, with Unilever owning 65% of the new entity.
“The market could be about to make its own version of Marie Rose sauce as a combination between Unilever’s food business, which encompasses Hellman’s mayonnaise, and McCormick, owner of French’s Ketchup, moves closer to fruition,” Russ Mould said.
“The presence of activist investor Nelson Peltz on the shareholder register since 2022 has led to consistent pressure on Unilever’s management to streamline the business.
“Having shed its ice cream division last year, this demerger of its food business is the first big strategic move under CEO Fernando Fernandez since he took the top job a year ago.”
The prospect of an end to the conflict is making the oil majors less attractive, with BP and Shell falling on Tuesday. BP was down 0.3%.