London stocks were set to open higher on Monday as oil prices rebounded after US President Donald Trump rejected an Iranian proposal to end the conflict and reopen the Strait of Hormuz. Trump said negotiations were nevertheless expected to continue this week.
The FTSE 100 was called around 29 points higher at roughly 10,724, after closing 0.1% higher at 10,695.25 on Friday.
Brent crude rose more than 1% to around $106 a barrel, while West Texas Intermediate traded above $93, reversing part of last week’s decline as hopes of an immediate breakthrough between Washington and Tehran faded.
The renewed oil rise could support BP, Shell and other energy producers, although higher crude prices also reinforce inflation concerns and the prospect that global interest rates remain elevated.
Precious metals remained under pressure, with gold sharply lower after Friday’s $4,282.86 close, while sterling was little changed around $1.324 against the dollar.
Asian equities were mixed, with Chinese shares falling while Hong Kong edged higher, as investors balanced renewed geopolitical uncertainty against Friday’s gains on Wall Street.
In the UK, attention is increasingly turning towards Chancellor John Healey’s 28 October Budget, with higher government borrowing and rising financing costs reducing the Treasury’s room for manoeuvre. Prime Minister Andy Burnham, who took office in July, faces his first Labour conference as premier against that more difficult fiscal backdrop.
US-China relations also remain in focus after Donald Trump and Xi Jinping agreed during last week’s state visit to establish a bilateral communication channel for artificial-intelligence incidents and continue their broader technology dialogue.
The market implication is that Monday’s expected FTSE gain is being driven partly by the index’s heavy exposure to oil producers rather than a broad easing of risk. If crude remains above $100 while bond yields stay elevated, energy shares may outperform, but consumer, property and other rate-sensitive stocks could remain constrained ahead of a data-heavy week in the US.
Investor takeaway: London stocks are set for a firmer start, with higher oil likely to support heavyweight energy shares. The broader backdrop remains less comfortable, however, as continued US-Iran tensions keep energy inflation elevated while high bond yields maintain pressure on equity valuations.
