The FTSE 100 nursed modest losses on Thursday as doubts grew over the strength and sustainability of the US-Iran ceasefire.
The agreement already “seems to be fraying at the edges”, commented Dan Coatsworth, head of markets at AJ Bell.
The FTSE 100 closed down 5.40 points, 0.1%, at 10,603.48. The FTSE 250 ended down 229.19 points, 1.0%, at 22,205.64, but the AIM All-Share rose 5.54 points, 0.7%, to 769.35.
The two-week ceasefire between Iran and the US was placed in doubt, largely by Israel’s ongoing attacks against Iran-backed Hezbollah in Lebanon.
Iran claimed Lebanon was part of the truce agreement but the US said it was excluded.
Amid fears that the fragile truce could break down, there were international calls for the ceasefire to encompass Lebanon.
“Israeli actions are putting the US-Iran ceasefire under severe strain. The Iran truce should extend to Lebanon,” the European Union’s top diplomat, Kaja Kallas, said.
France’s foreign minister Jean-Noel Barrot condemned the strikes as “unacceptable”, while his British counterpart Yvette Cooper called for the ceasefire to include Lebanon.
Mr Coatsworth said there is still “optimism that the fragile peace will hold but also a growing awareness that things won’t go back to a pre-war state in a hurry”.
“The disruption and damage to infrastructure seen over recent weeks is likely to take months to unpick and the inflationary pressures unleashed by the conflict are only just beginning to feed into the wider economy. Even if energy prices eased significantly tomorrow, there is still likely to be a lasting impact,” he added.
Brent oil traded higher at 97.36 dollars a barrel on Thursday afternoon, up from 95.20 at the time of the equities close in London on Wednesday.
In European equities on Thursday, the CAC 40 in Paris closed down 0.2%, while the DAX 40 in Frankfurt declined 1.1%.
The mood was brighter across the pond. On Wall Street, the Dow Jones Industrial Average was up 0.1%, while the S&P 500 and Nasdaq Composite were 0.3% higher.
Stephen Innes at SPI Asset Management said Wednesday’s equity market rally had “all the hallmarks of a powerful short squeeze rather than fresh conviction”.
“The ceasefire looks less like a settlement and more like a reset of the deadline with optionality preserved on all sides. The market has effectively been handed a two-week window where escalation risk is deferred but not removed, and that distinction is critical. When the clock is still running, rallies struggle to build depth because conviction never fully sets,” he added.
The yield on the US 10-year Treasury widened to 4.30% on Thursday from 4.27% on Wednesday. The yield on the US 30-year Treasury stretched to 4.89% from 4.86%.
The pound was little changed at 1.3437 dollars on Thursday afternoon from 1.3438 on Wednesday. Against the euro, sterling ebbed to 1.1484 from 1.1495.
On the FTSE 100, renewed strength in oil prices lifted BP 3.2%, and Shell, up 1.4%, while DCC firmed 1.8% as Exane BNP upgraded to ‘outperform’ from ‘neutral’.
Standard Life was a prominent faller, down 3.5%, as it traded ex-dividend. So did Lloyds Banking Group, down 1.5%.
Citigroup upgraded Lloyds to ‘buy’ from ‘neutral’, arguing that the lender is simply “too cheap” post its recent sell-off.
Metlen Energy & Metals fell 0.6% as it lowered its dividend, as losses in the M Power Projects sub-sector dented annual profit.
The Athens-based energy and metallurgy company had to delay its results to allow its external auditor, PricewaterhouseCoopers, more time to complete work on the 2025 financial statement, Metlen’s first as a dual-listed entity in London and Athens.
On the FTSE 250, Energean rose 2.7%, after it received notice from the Israeli Ministry of Energy & Infrastructure permitting the resumption of production and operations at its Energean Power floating production, storage & offloading unit.
Operations were temporarily suspended in early March, due to the geopolitical escalation in the region.
Elsewhere in London, ITM Power shot up 7.1%. It said it has received backing from the UK government through a strategic investment and grant.
The Sheffield-based designer and manufacturer of electrolyser systems for green hydrogen production said publicly-owned Great British Energy Group is to invest £40 million into ITM through a non-pre-emptive subscription.
The biggest risers on the FTSE 100 were BP, up 17.8p at 580.5p, United Utilities, up 31.0p at 1,396.0p, GSK, up 42.0p at 2,167.0p, Hiscox, up 31.0p at 1,607.0p and SSE, up 51.5p at 2,757.5p.
The biggest fallers on the FTSE 100 were Entain, down 49.0p at 535.2p, Informa, down 30.6p at 774.4p, Compass Group, down 1.0p at 28.1p, Standard Life, down 25.6p at 707.4p, and Experian, down 88.0p at 2,590.5.
Friday’s global economic calendar has CPI and PPI data from China overnight, followed by US CPI figures, US factory orders and the Michigan consumer sentiment index.
Friday’s domestic corporate calendar has a trading update from student accommodation provider, Unite Group.
– Contributed by Alliance News