Markets soar as US and Iran agree peace deal - but Footsie misses out after oil price slump

Stock markets soared as the US and Iran agreed to end their conflict – but London missed out on the rally as the oil price slump sent BP and Shell shares tumbling.

As the tentative deal – which will also see the Strait of Hormuz reopened – raised hopes of an end to the energy crisis, Wall Street raced higher, with the Nasdaq up nearly 3 per cent, while the Dow Jones Industrial Average hit a record high.

In Europe, the Dax jumped 1.1 per cent in Frankfurt and the Cac gained 0.4 per cent in Paris.

But the FTSE 100 slipped 0.4 per cent in London as a fall in the oil price to a three-month low, at near $80 a barrel – having traded as high as $126 in April as the Middle East conflict raged – dragged down BP and Shell. BP dropped 3.3 per cent, while Shell was down 4.4 per cent – wiping £10.5billion from the value of the two energy giants.

David Morrison, senior market analyst at City broker Trade Nation, said: ‘The hefty drop in the oil price has put considerable downside pressure on the oil majors which are significant FTSE 100 constituents.’

The effective closure of the Strait since the war began in February has hit oil and gas supplies – sparking a global energy crisis and an inflation shock as prices soared.

Oliver Jones, head of asset allocation at wealth manager Rathbones, said that while the US-Iran deal ‘provides a near-term boost’ for investors, a number of key details including around Tehran’s nuclear programme remain unclear. He cautioned: ‘There remains scope for volatility if expectations run ahead of reality.’

Investors are also braced for interest rate decisions by the Federal Reserve and Bank of England this week, as well as UK jobs and inflation data and Thursday’s by-election – which could trigger a Labour leadership challenge as Andy Burnham seeks to replace Keir Starmer as prime minister.

Jemma Slingo, an investment specialist at pensions and savings group Fidelity International, said: ‘Investors will need eyes everywhere this week.

'Interest rate decisions and a crucial by-election could all move markets. For now, however, attention is firmly on the Middle East.

'The conflict triggered an energy crisis that pushed up prices around the world, and many investors feared a prolonged period of oil-driven inflation. The preliminary deal has eased some of these concerns.

‘There is still plenty to do before the Strait of Hormuz can return to normal, however. Most urgently, the waterway must be cleared of mines. Investors will also be wary of false dawns.

‘There have been several diplomatic breakthroughs since the conflict began, but ceasefires have proved fragile so far.’