The FTSE 100 surrendered early gains on Monday to close firmly in the red, despite positive momentum from a landmark interim US-Iran agreement.
London’s blue-chip index ended the session down 41.10 points, or 0.4%, at 10,430.62, having earlier reached an intraday high of 10,570.09.
The FTSE 250 managed a modest rise of 36.91 points, or 0.2%, closing at 23,362.62, while the AIM All-Share surged 2.3% to 805.29.
The US and Iran reached an interim agreement to reopen the Strait of Hormuz and begin 60 days of talks on Tehran’s nuclear programme, lifting early sentiment across European markets.
Officials from both countries are expected to meet in Switzerland later this week to formally sign the accord, though the text of the agreement has not yet been published by either side.
Russ Mould, investment director at AJ Bell, noted that “the framework deal is a major step forward to ending the conflict, although it is still not officially signed and remains light on detail.”
Mould added that “a full celebration is off the cards until the ink is dry on the deal,” reflecting the cautious mood among investors who remain alert to potential setbacks.
Brent crude for August delivery fell sharply to 83.18 US dollars a barrel on Monday, down from 87.00 dollars at Friday’s London equities close, pressuring energy stocks heavily.
BP (BP.L) and Shell (SHEL.L) fell 3.3% and 4.4% respectively, while defence manufacturer BAE Systems (BA.L) dropped 4.7% as geopolitical tensions eased.
Utilities stocks also underperformed, with Centrica, SSE and United Utilities ending lower by 2.3%, 1.0% and 2.7% respectively amid political uncertainty ahead of the Makerfield by-election on Thursday.
The by-election could see Greater Manchester Mayor Andy Burnham secure a return to Westminster and potentially launch a leadership challenge against Prime Minister Sir Keir Starmer.
The Guardian reported over the weekend that a decade-long project to bring water and energy back into public ownership would sit at the heart of Burnham’s agenda should he become prime minister.
London significantly underperformed its European and US counterparts, with Paris’s CAC 40 rising 0.4% and Frankfurt’s DAX 40 climbing 1.1% on the day.
In New York, the Dow Jones Industrial Average advanced 1.2%, the S&P 500 gained 1.7%, and the Nasdaq Composite surged 2.7% as risk appetite returned strongly.
Gold climbed to 4,354.54 dollars an ounce from 4,219.28 dollars on Friday, boosting mining stocks with Fresnillo, Endeavour Mining and Hochschild Mining rising 6.6%, 7.2% and 11% respectively.
Rolls-Royce (RR.L) jumped 3.9% after securing two significant agreements for its small modular reactor technology, including a deal with Swedish firm Videberg Kraft for three reactors on the Varo peninsula.
Bunzl (BNZL.L) edged up 0.6% after Bloomberg reported that activist investor Elliott Investment Management has built a near-5% stake and is pushing for a share buyback and strategic review of its North America arm.
Vistry (VTY.L) tumbled 7.1% after JPMorgan downgraded the stock to “underweight” from “neutral” and slashed its price target to 210p from 430p, compounding worries over a reported voluntary staff exit scheme.
Investors are now focused on Wednesday’s UK inflation data, with Barclays forecasting headline CPI to accelerate to 3.0% year-on-year in May, followed by the Bank of England’s rate decision on Thursday.
The Bank of England’s Monetary Policy Committee voted 8-1 at its April meeting to hold the bank rate at 3.75%, with analysts watching closely whether chief economist Huw Pill’s hawkish stance gains further support from Megan Greene.