Early market roundup: Stocks rise as US hints winding down Iran war

Stock prices in London were higher on Wednesday morning as US President Donald Trump signalled that the war in Iran could come to an end, with the price of Brent oil easing.

The FTSE 100 index opened up 102.76 points, 1.0%, at 10,067.92. The FTSE 250 was up 277.43 points, 1.3%, at 21,406.25, and the AIM all-share was up 12.62 points, 1.8%, at 726.71.

The Cboe UK 100 was up 1.1% at 1,002.58, the Cboe UK 250 was up 1.0% at 18,604.93, and the Cboe small companies was marginally lower at 16,797.90.

UK consumer price inflation held steady in February, before the impact from the Iran war could be factored in, while factory gate price growth eased and input costs returned to annual growth, according to data from the Office for National Statistics.

The consumer prices index including owner occupiers’ housing costs rose 3.2% in the 12 months to February, unchanged from January. The headline consumer prices index also held at 3.0% on-year, in line with both the previous month and FXStreet-cited consensus.

On a monthly basis, CPIH and CPI each increased by 0.4% in February, matching the rise recorded a year earlier and meeting market expectations.

Underlying inflation showed signs of persistence. Core CPI, which excludes energy, food, alcohol and tobacco, edged up to 3.2% from 3.1%, in line with consensus. Core CPIH also ticked higher to 3.4% from 3.3%.

Separate producer price data pointed to a mixed backdrop for UK manufacturers.

Input prices rose 0.5% on an annual basis in February, reversing a revised 0.4% decline in January and beating expectations of a 0.4% increase. On a monthly basis, input costs climbed 0.8%.

However, output prices rose 1.7% on-year, slowing from 2.5% growth in January and falling short of FXStreet expectations of 2.6%. On a monthly basis, factory gate prices declined 0.5%. The import price index increased 0.3% annually.

The ONS noted that the producer price data predates the escalation of hostilities in the Middle East at the end of February, which has since driven volatility in energy markets.

Analysts at ING said: ‘[The figures are] not exactly a game-changer for a central bank that was on the verge of cutting rates this month. Clearly, we can’t rule out rate hikes if energy prices spike further, but our base case is a pause throughout 2026.’

In European equities on Wednesday, the CAC 40 in Paris was up 1.5%, while the DAX 40 in Frankfurt was up 1.7%.

Oil prices eased on hopes that a de-escalation in Middle East tensions could be in sight. Brent oil was quoted at $98.33 a barrel early in London on Wednesday from $103.95 late Tuesday. It hit lows of as much as $97.07.

Iran’s military mocked claims by Donald Trump that talks are ongoing with Tehran aimed at ending the war. In a dismissive statement, it asked whether the US was negotiating with itself, after reports that Washington had drafted a 15-point proposal to try to bring the conflict to a close.

Trump also claimed Iran has agreed to ‘never’ have a nuclear weapon, telling a White House event: ‘We can say this is regime change’ and ‘we’ve won this war’. Iran, however, vowed to fight on until ‘complete victory’.

The US is still deploying more than 1,000 additional troops from an airborne assault unit to the Middle East, despite Trump’s talk of possible peace. Meanwhile, Israel plans to seize swathes of southern Lebanon to create a ‘defensive buffer’ in its battle with Hezbollah militants, its defence minister said.

Ipek Ozkardeskaya, senior analyst at Swissquote, said: ‘Investor sentiment is cautiously improving on hope, but the fundamentals have taken a hit after almost a month of fighting in the Middle East and disruptions around the critical Strait of Hormuz.’

This sentiment was reflected in Tuesday’s flash PMI readings, which showed expectations and activity in major economies taking a hit throughout March, the first datasets available since the Iran war began.

Ozkardeskaya said: ‘Investors are eager for tensions to ease, hoping for a post-’Liberation Day‘-type rebound in equity markets. I would argue that a rebound is likely, but the recent dip in US equities has not been as severe as last year’s selloff.’

The pound was quoted at $1.3418 early Wednesday, higher than $1.3394 at the London equities close on Tuesday. Against the euro, sterling rose to €1.1555 from €1.1551. The euro traded at $1.1614 early Wednesday, higher than $1.1591 late Tuesday. Against the yen, the dollar was quoted at JP¥158.76, lower versus JP¥158.82.

In Asia on Wednesday, equities ended in positive territory. The Nikkei 225 index in Tokyo ended up 2.9%. In China, the Shanghai Composite rose 1.3%, while the Hang Seng index in Hong Kong gained 1.1%. The S&P/ASX 200 in Sydney closed up 1.9%.

In the US on Tuesday, Wall Street ended lower, with the Dow Jones Industrial Average down 0.2%, the S&P 500 down 0.4% and the Nasdaq Composite down 0.8%.

Strains are building in private credit markets, while AI-related disruption continues to weigh on parts of the technology sector.

Tech shares came under pressure on Tuesday after reports that Amazon, which was trading up 1.6% in New York premarket, is developing AI tools within its cloud unit to automate functions across sales, business development and other areas.

The yield on the US 10-year Treasury was quoted at 4.33%, narrowing from 4.38%. The yield on the US 30-year Treasury was quoted at 4.90%, narrowing from 4.94%.

Back in London, the FTSE 100 underperformed European peers due to its heavy weighting in energy shares, with oil majors Shell and BP down 1.3% and 0.3% respectively on the pullback in oil prices and after broker moves from Morgan Stanley.

Morgan Stanley raised BP to ’overweight’, while cutting Shell to ’equal-weight’.

Reckitt Benckiser was at the bottom of the index, down 1.7%, after Deutsche Bank Research cut its price target to 5,460 pence from 5,500 pence, retaining a ’hold’ rating.

At the top of the blue-chip index, Croda International rose 4.9% after Morgan Stanley raised it to ’overweight’ with a 3,350 pence price target.

It was followed by ICG, up 3.8%, after Chief Financial Officer David Bicarregui bought 30,000 shares at £14.93 each on Tuesday for a total of £447,900.

RS Group was at the bottom of the FTSE 250, down 5.0%. It said it expects adjusted pretax profit to be ahead of expectations despite a revenue dip, as like-for-like full-year revenue is seen declining 0.6%. It noted difficult markets, with Europe and Africa improving in the second half while America declined.

Among smaller caps, Cloudbreak Discovery fell 2.1%. It said it is currently ‘better positioned’ than at any time in recent history, declared no first-half dividend, unchanged year-on-year, and reported a cash balance of £159,058 at December 31 versus £38,821 a year earlier.

MediaZest jumped 8.1% after saying trading has been ‘solid’ at the start of its new financial year and that it expects further growth and improved profitability in 2026. In an AGM statement, the Surrey-based audio-visual solutions provider said performance across its core retail, automotive and corporate office segments has remained strong.

It expects revenue of £5.0 million and pretax profit of £250,000 for the year to September 30, alongside further year-on-year growth. It added that cash has improved to around £300,000 following recent debt restructuring and an equity raise.

Gold was quoted at $4,563.47 an ounce on Wednesday morning against $4,421.77 late Tuesday.

Still to come on Wednesday’s economic calendar are Germany’s Ifo business climate index, and US export and import prices.

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