The FTSE 100 recorded its strongest opening rally in a month on Friday after US President Donald Trump signalled that a potential agreement with Iran could be close, easing concerns over energy supplies and inflation.
London’s blue-chip index climbed as much as 1.5% in early trading, supported by a sharp decline in oil prices and growing expectations that UK interest rates may remain lower for longer.
Airline stocks led the gains, with British Airways owner IAG rising 6.6% as lower fuel costs boosted sentiment across the travel sector. Housebuilders also advanced strongly as investors responded positively to weaker-than-expected UK economic data.
Market optimism increased after Trump said he had cancelled further military strikes against Iran and suggested that a diplomatic agreement could soon be reached. He also indicated that the strategically important Strait of Hormuz could reopen fully once a deal is finalised.
The prospect of reduced geopolitical tensions triggered a sharp sell-off in oil markets. Brent crude fell as much as 4.3% to $86 per barrel, its lowest level since mid-April, helping to ease inflation concerns that have weighed on global markets in recent months.
The FTSE 100 also benefited from softer UK GDP data, which reinforced expectations that the Bank of England may be less inclined to tighten monetary policy further this year.
Meanwhile, the more domestically focused FTSE 250 rose as much as 1.8%, reflecting improving investor confidence across the broader UK economy.
With oil prices falling, inflation pressures easing and hopes rising for a diplomatic breakthrough in the Middle East, investors have returned to risk assets, driving a broad-based rally across UK equities.
