The market's mood is as volatile as ever this week, with the FTSE 100 bucking the trend of global equities that have surged following reports of a potential US-Iran peace deal. Despite the optimism, the UK's leading share index has fallen by 1.3 per cent to 7,244.2 points, weighed down by the significant presence of oil majors in its composition.
The decline in oil prices, with Brent crude dropping by 3.8 per cent to below $84 a barrel, is the primary culprit behind this downturn. Shares in BP and Shell have plummeted, offsetting gains elsewhere in the market and holding back the FTSE's participation in the global upswing.
A US-Iran agreement is expected to alleviate long-standing fears of an oil shortage, which have driven inflation across the globe. The US recently reported a consumer price growth rate of 4.2 per cent, largely attributed to a spike in energy prices. A deal that facilitates the reopening of the Strait of Hormuz – a critical chokepoint for global oil shipments – is anticipated to increase supply and stabilise energy costs.
The prospect of peace between the US and Iran has sparked significant attention, particularly given recent scepticism surrounding its viability. Iran's chief negotiator, Mohammad Bagher Ghalibaf, had expressed doubts about progress, citing the Israeli strike on Lebanon as evidence that the US was not fulfilling its commitments or lacked capacity to do so.
However, former President Donald Trump has since indicated a continued commitment to the peace process, stating that the Beirut strike "should not have happened." The specifics of the agreement are expected to be ironed out in coming days, with market participants eagerly awaiting further details.