The FTSE 100 surrendered early gains on Monday as investors balanced optimism over a breakthrough between the US and Iran against sharp declines in oil and defence stocks, leaving London’s benchmark index trailing major markets in Europe and the US.
After a positive start, the FTSE 100 closed down 0.4% at 10,430.62, while the FTSE 250 edged 0.2% higher to 23,362.62.
Sentiment initially improved after reports that Washington and Tehran had reached an interim agreement to reopen the Strait of Hormuz and begin 60 days of negotiations over Iran’s nuclear programme. Officials are expected to meet in Switzerland later this week to formally sign the accord, although details remain scarce and neither side has yet released the full text.
The framework represents meaningful progress towards ending the conflict, though investors remain wary given the number of unresolved issues and the possibility of fresh twists before a final agreement is secured.
That caution was reflected in oil markets. Brent crude fell sharply to $83.18 a barrel from around $87 at Friday’s London close as traders priced in reduced supply disruption risks.
The decline weighed heavily on London’s energy heavyweights. BP dropped 3.3% and Shell lost 4.4%, making them among the biggest drags on the index. Defence contractor BAE Systems also came under pressure, falling 4.7% as geopolitical risk premiums eased.
Utilities were another weak area ahead of Thursday’s Makerfield by-election. Greater Manchester Mayor Andy Burnham is seeking a return to Westminster and, if successful, is widely expected to mount a leadership challenge against Prime Minister Keir Starmer.
Over the weekend, The Guardian reported that bringing water and energy assets back under public control would form a central part of Burnham’s long-term agenda should he eventually reach Downing Street. Against that backdrop, Centrica fell 2.3%, United Utilities lost 2.7% and SSE slipped 1.0%.
The weakness in several heavyweight sectors left London lagging behind overseas markets. Paris’s CAC 40 gained 0.4%, Frankfurt’s DAX advanced 1.1%, while US markets pushed higher with the Dow Jones Industrial Average up 1.2%, the S&P 500 rising 1.7% and the Nasdaq jumping 2.7%.
Attention is now turning to a busy week for UK economic data. Inflation figures are due on Wednesday, followed by the Bank of England’s interest rate decision on Thursday.
Barclays expects headline inflation to rise to 3.0% in May from 2.8% in April, driven partly by a rebound in airfares, while core inflation is forecast to increase to 2.7% from 2.5%.
Among individual movers, Bunzl added 0.6% after Bloomberg reported activist investor Elliott Investment Management had built a stake of almost 5% in the distributor and was pushing for a share buyback alongside a review of its North American business.
Rolls-Royce climbed 3.9% after securing agreements linked to its small modular reactor programme, including a deal to supply three reactors to Swedish developer Videberg Kraft and a separate UK-Japan nuclear cooperation initiative.
On the FTSE 250, Vistry tumbled 7.1% after JPMorgan cut its rating to ‘underweight’ and slashed its price target. The decline was compounded by a Sunday Times report suggesting the housebuilder has launched a voluntary exit scheme as it seeks to preserve cash, having already paused its share buyback programme last month to focus on reducing debt.