The FTSE 100 opened firmly higher on Monday as investors welcomed news of a US-Iran agreement aimed at reopening the Strait of Hormuz, easing concerns over global energy supplies and supporting a broad rally across equity markets.
London’s blue-chip index rose 0.8% to 10,551.84 in early trading, extending last week’s gains as falling oil prices and improving geopolitical sentiment encouraged investors to return to risk assets.
The more domestically focused FTSE 250 outperformed, climbing 1.2% to 23,614.99 as confidence improved across a broad range of UK-listed companies.
The market reaction followed announcements that Washington and Tehran had reached a framework agreement aimed at reducing tensions in the Middle East and paving the way for the reopening of the strategically important Strait of Hormuz, through which a significant proportion of the world’s oil exports pass.
The prospect of increased oil flows has weighed heavily on crude prices, with Brent crude retreating sharply from the highs seen during the conflict. Lower energy prices have helped ease inflation concerns and improved expectations that central banks may face less pressure to keep interest rates elevated.
Airlines, consumer-focused companies and housebuilders were among the sectors benefiting from the improved outlook, while lower oil prices also provided support for the broader economy by reducing input and transportation costs.
The positive start to the week mirrors gains seen across Asian markets overnight and follows a strong performance on Wall Street, where investors also reacted positively to signs of de-escalation in the Middle East.
With geopolitical tensions easing and energy prices moving lower, investors are increasingly focusing on the potential economic benefits of a more stable global environment heading into the second half of the year.
