Stock markets surged on Wednesday, while oil prices slid sharply, as renewed hopes emerged that a peace deal could be brokered between the United States and Iran to bring an end to the Middle East war.
The FTSE 100 closed up 219.55 points, or 2.2%, at 10,438.66, while the FTSE 250 ended 388.61 points higher, up 1.7%, at 22,832.42. The AIM All-Share index also rose, gaining 9.34 points, or 1.2%, to 808.62.
Peace Deal Prospects Lift Sentiment
According to a report by Axios, the US believes it is nearing an agreement with Iran on a one-page memorandum of understanding (MOU) that would end the Middle East war and set a framework for more detailed nuclear negotiations. The 14-point MOU is being negotiated between US President Donald Trump’s envoys Steve Witkoff and Jared Kushner and several Iranian officials, both directly and through mediators.
The proposed MOU, as outlined by Axios, would declare an end to the war in the region and initiate a 30-day period of negotiations on a detailed agreement to reopen the Strait of Hormuz, limit Iran’s nuclear programme, and lift US sanctions. These negotiations could take place in Islamabad or Geneva.
AFP reported that Iran’s Foreign Ministry spokesman Esmaeil Baqaei stated that a US proposal to end the war is still “under review” by Tehran, citing local media. Meanwhile, President Trump issued an ultimatum, urging Iran to accept the deal or face intense renewed US bombing.
Oil Prices Tumble
The prospect of a peace deal sent oil prices lower. Brent crude for July delivery was trading at $102.12 per barrel on Wednesday, a sharp decline from $110.70 at the time of the equities close in London on Tuesday.
Kathleen Brooks, research director at XTB, commented: “No-one knows how this latest peace plan will pan out; however, the market is willing to trade on hope at this stage.” She cautioned, however: “We have been promised peace deals before, which have then failed to materialise, so while the market is willing to trade on the back of this de-escalation, it will take further concrete steps to end the war and reopen the Strait of Hormuz before the oil price can meaningfully fall below $100 per barrel for Brent crude.”
European and US Markets Rally
In European equities, the CAC 40 in Paris ended up 2.9%, while the DAX 40 in Frankfurt jumped 2.1%. In New York, markets were higher, with the Dow Jones Industrial Average rising 1.2%, the S&P 500 also up 1.2%, and the Nasdaq Composite gaining 1.5%.
Disney shares rose 6.4% after reporting better-than-expected second-quarter results, while Advanced Micro Devices soared 18% following strong first-quarter earnings and upbeat guidance.
The yield on the US 10-year Treasury narrowed to 4.35% on Wednesday from 4.42% on Tuesday, and the yield on the 30-year Treasury fell to 4.94% from 5.00%.
Currency and Commodity Movements
The pound firmed to $1.3602 on Wednesday afternoon from $1.3569 on Tuesday. Against the euro, sterling was lower at €1.1566 from €1.1586. The euro traded higher against the greenback at $1.1756 from $1.1707, while the dollar weakened against the yen, trading at ¥156.27 compared to ¥157.66.
Gold traded higher at $4,692.73 per ounce on Wednesday, up from $4,576.51 on Tuesday.
London Market Highlights
London’s rally was broad-based, with miners featuring strongly. Gold miner Fresnillo rose 11%, aerospace and defence manufacturer Rolls-Royce climbed 6.4%, British Airways owner IAG advanced 6.7%, lender Barclays added 5.5%, and housebuilder Persimmon firmed 4.6%.
Retailer Next rose 4.4% after nudging up full-year profit guidance, driven by first-quarter sales growth that exceeded its forecast. The Leicester-based clothing and homewares retailer reported full-price sales up 6.2% in the 13 weeks to May, ahead of its 4.0% forecast. This reflected a strong start to the period, with sales in the first five weeks of the financial year up 11.8%.
JPMorgan analyst Georgina Johanan described the “solid” statement as “somewhat reassuring” for the broader UK retail sector.
Diageo added 6.3% after backing its annual outlook and reporting better-than-expected third-quarter sales, despite weakness in the US spirits market. The brewer and distiller, behind brands such as Guinness, Smirnoff, and Tanqueray, reported net sales of $4.48 billion for the quarter ended March 31, up 2.3% from $4.38 billion a year earlier, beating market consensus of $4.27 billion. Organic net sales edged up 0.3%, compared to expectations of a 2.3% decline.
Fallers and Sector Divergence
Unsurprisingly, oil majors BP and Shell were prominent blue-chip fallers, down 3.7% and 3.1% respectively, reflecting the lower oil price. Smith & Nephew fell 3.6% despite reporting first-quarter trading in line with expectations, as knee implant sales in the US dropped.
On the FTSE 250, travel retailer WH Smith leapt 8.5%, while airlines easyJet and Wizz Air soared 8.9% and 7.2% respectively. However, Telecom Plus plunged 11% after Deutsche Bank Research downgraded the stock to “hold” from “buy” and slashed its price target to 1,300 pence from 2,000p.
Reach, publisher of the Daily Mirror, Daily Express, and UK regional titles, slid 9.9% after reporting “ongoing disruption in search and referral volumes” in its first quarter. Revenue fell 6.9% year-on-year in the first quarter of 2026, with print down 6.6% and digital 8.1% lower. On-platform referral volumes, mainly from Alphabet’s Google, were “materially lower,” contributing to the digital revenue decline.
Biggest Risers and Fallers on FTSE 100
The biggest risers on the FTSE 100 were Fresnillo, up 347p at 3,462p; Endeavour Mining, up 393p at 4,678p; Prudential, up 81.5p at 1,184p; Anglo American, up 263p at 3,827.5p; and Antofagasta, up 257p at 3,818.5p.
The biggest fallers were BP, down 21.3p at 551.3p; Smith & Nephew, down 41.5p at 1,117.5p; Shell, down 101p at 3,211.5p; London Stock Exchange, down 238p at 9,340p; and Sage Group, down 22p at 886.6p.
Looking Ahead
Thursday’s global economic calendar includes eurozone retail sales data, a slew of construction PMI readings, and weekly initial jobless claims figures in the US. On the local corporate calendar, full-year results from sports retailer JD Sports Fashion, first-quarter numbers from Holiday Inn owner InterContinental Hotels Group and oil major Shell, plus a trading statement from insurer Hiscox are expected.
