London stocks are expected to open higher on Wednesday as optimism over a potential agreement between the US and Iran to reopen the Strait of Hormuz boosted investor confidence and pushed oil prices lower.
Futures indicate the FTSE 100 will open around 27 points higher at 10,906.78, following Tuesday’s 0.2% gain to 10,879.38.
Market sentiment improved after reports suggested the US, Iran and Oman are close to reaching an interim agreement to guarantee safe passage through the Strait of Hormuz for an initial 60-day period. According to Axios, an announcement could come as early as Wednesday.
US President Donald Trump said negotiations were progressing but warned Iran it would be “hit very hard” if the strategic shipping route was not reopened quickly.
The prospect of easing tensions weighed on crude prices, with Brent crude falling to US$78.64 a barrel, down from US$80.60 at Tuesday’s close.
Wall Street ended strongly higher overnight, with the Dow Jones Industrial Average rising 1.7%, the S&P 500 gaining 1.8%, and the Nasdaq climbing 2.6%.
In Asia, markets also traded firmly higher. Japan’s Nikkei 225 surged 3.5%, China’s Shanghai Composite gained 1.5%, Hong Kong’s Hang Seng added 0.2%, and Australia’s S&P/ASX 200 advanced 0.9%.
Currency markets were relatively steady. Sterling edged up to US$1.3456, while the euro strengthened to US$1.1537. Gold continued its advance, rising to US$4,152.32 an ounce.
Attention now turns to a busy economic calendar featuring services and composite PMI data from Europe, the UK and the US, alongside eurozone producer prices, US ADP employment figures and weekly US crude oil inventory data.
On the corporate front, investors will be watching half-year results from Coca-Cola HBC, Glencore and Legal & General, while Next is scheduled to issue a trading update.
