Stocks experienced significant swings in choppy trading on Friday, driven by uncertainty surrounding escalating tensions in the Middle East. London's FTSE 100 index closed strongly, rising 71.50 points, or 0.7%, to finish at 10,436.29. This gain came after a day of volatile activity, with the blue-chip index trading as high as 10,465.24 and as low as 10,287.90.
Initial Market Falls and Geopolitical Tensions
Stocks initially nursed hefty falls following a late Wednesday address by US President Donald Trump, in which he threatened further heavy strikes on Iran. Although Trump indicated that the US was "very close" to achieving its military objectives, his remarks dampened hopes for de-escalation that had previously buoyed markets. Tehran responded with a warning, stating that the US and Israel should expect "more crushing, broader, and more destructive actions."
"Investors didn't get what they wanted from President Trump's address to the American people and have reacted accordingly," said AJ Bell investment director Russ Mould. He added, "Famously, uncertainty is kryptonite for the markets, and between the contradictory messages from Trump, disputed claims on both sides, and the lack of clarity on a resolution plan, they are getting a heavy dose of it right now."
Mid-Afternoon Recovery and Regional Developments
However, mid-afternoon UK time, the FTSE 100 pushed higher, and US and European markets pared losses. This shift occurred as Bloomberg and other sources noted a report by Iran's state-run IRNA that Iran is drafting a protocol with Oman to monitor traffic through the Strait of Hormuz. According to a CNBC translation, the report stated that ship traffic through this key global oil transit route "should be supervised and coordinated" with the two countries, quoting Kazem Gharibabadi, Iran's deputy minister of legal and international affairs.
Gharibabadi reportedly said, "Of course, these requirements will not mean restrictions, but rather to facilitate and ensure safe passage and provide better services to ships that pass through this route." In response, Brent oil traded higher at $106.75 a barrel on Thursday afternoon, up from $101.83 late on Wednesday, though well below earlier highs near $110.
European and US Market Performance
In European equities on Thursday, the CAC 40 in Paris closed down 0.2%, while the Dax 40 in Frankfurt fell 0.6%, both recovering from earlier lows. Stocks in New York were slightly lower but well ahead of earlier levels. The Dow Jones Industrial Average was down 0.2% but jumped 600 points on the Iran-Oman reports, while the S&P 500 index and Nasdaq Composite each declined by 0.1%.
UK-Led Talks and Economic Impact
On Thursday, the UK hosted talks featuring 35 nations to discuss reopening the Strait of Hormuz, through which a fifth of global oil normally travels. UK Foreign Secretary Yvette Cooper condemned "Iranian recklessness" for "hitting global economic security." She emphasized, "Iranian recklessness towards countries who were never involved in this conflict... is not just hitting mortgage rates and petrol prices and the cost of living here in the UK and in many different countries across the world, it is hitting our global economic security." Cooper insisted that diplomatic and international planning measures are currently the focus for countries seeking to reopen the sea passage.
Currency and Bond Market Movements
The yield on the US 10-year Treasury narrowed to 4.30% on Thursday from 4.31% on Wednesday, while the yield on the US 30-year Treasury remained unchanged at 4.89%. In currency markets, the pound fell to $1.3238 on Thursday afternoon from $1.3324 at the equities close on Wednesday. Against the euro, sterling eased to €1.1463 from €1.1476, and the euro stood lower against the dollar at $1.1548 from $1.1608. The dollar traded higher against the yen at 159.31 yen compared to 158.66 yen.
UK Economic Indicators and Corporate Updates
In the UK, a Bank of England Decision Maker Panel survey showed that firms expect to increase their prices by 3.5% over the next 12 months, based on data for the three months to March. This is 0.1 percentage point higher than predicted over the three months to February. JPMorgan analyst Allan Monks noted these moves are "small" compared to the jump seen in household inflation expectations, adding, "Arguably, business expectations matter more now, given the weaker jobs market and the reduced bargaining power of labour." Monks believes the report reduces pressure on the Bank of England to act quickly, potentially avoiding a rate hike in April.
On the FTSE 100, the weak gold price weighed on Fresnillo and Endeavour Mining, down 1.7% and 2.4% respectively, while on the FTSE 250, Hochschild Mining fell 3.4%. Gold traded at $4,663.40 an ounce on Thursday, down from $4,781.92 at the same time on Wednesday. SSE rose 1.9% after raising the bottom end of its annual earnings guidance, now expecting adjusted earnings per share of 147p to 152p for the financial year ending March, compared to previous guidance of 144p to 152p per share.
Weekly Performance and Key Movers
For the week, the FTSE 100 rose 4.7%, the FTSE 250 firmed 1.6%, and the AIM All-Share added 1.9%. The biggest risers on the FTSE 100 included 3i Group, up 103.0p at 2,687.0p, Centrica, up 6.5p at 218.5p, Shell, up 100.0p at 3,543.5p, Tesco, up 13.5p at 487.0p, and Rentokil Initial, up 12.7p at 488.3p. The biggest fallers were Endeavour Mining, down 114.0p at 4,606.0p, St James's Place, down 25.0p at 1,211.0p, Kingfisher, down 5.8p at 282.9p, Howden Joinery, down 15.0p at 799.0p, and Experian, down 47.0p at 2,592.0p.
Upcoming Economic and Corporate Events
Tuesday's global economic calendar features a slew of composite PMI readings, including the UK at 9.30am BST. In the US, durable goods orders data and a consumer inflation expectations report are due. Domestically, full-year results from JTC PLC are scheduled. Financial markets in the UK will be closed on Friday and Monday for Good Friday and Easter Monday.
