London's FTSE 100 index advanced on Monday, climbing 0.4% to 10,781 points, as a de-escalation in US-Iran tensions over the weekend drove oil prices sharply lower and lifted risk appetite across global markets. The mid-cap FTSE 250 also rose 0.6% during the session.
Oil price decline fuels sector rotation
Crude oil prices tumbled more than 6% to around $90 a barrel after the United States paused its military operations against Iran, easing fears of a broader conflict in the Middle East. The drop in oil prices weighed heavily on British energy stocks, which fell 2.5% and were on track for their steepest one-day decline since early July.
Conversely, the lower oil price provided a tailwind for sectors sensitive to fuel costs. Travel and leisure stocks surged 2.3%, making them the best-performing group in the FTSE 350. Shares of International Airlines Group (IAG) rose 2.8%, while Whitbread, owner of Premier Inn, added 2%.
Telecom and pharma stocks rally on earnings
The telecom sector also posted strong gains, with the FTSE 350 telecom services provider index rising 3%. Vodafone was a standout, its shares climbing 4.5% after the company raised its forecast following its Safaricom deal and said it expected to deliver results at the upper end of its revised range.
Pharmaceutical stocks added 1.3%, supported by AstraZeneca, which gained 1.6% after backing its annual and long-term forecasts and reporting second-quarter profit that exceeded expectations. The results provided additional support to the broader market as investors weighed corporate updates alongside macroeconomic developments.
Central bank decisions and tech earnings in focus
Investors are now turning their attention to key events later this week. Earnings from major US technology companies, including Microsoft and Apple, are expected to offer clues on whether the artificial intelligence-driven rally can sustain its momentum. Their performance could influence broader market direction as traders assess the durability of recent AI-led gains.
Policy decisions from the US Federal Reserve and the Bank of England are also on the horizon. According to LSEG-compiled data, markets are pricing in at least one 25-basis-point rate increase in both economies, with a more than 60% chance of a second hike in the US and over 40% probability of another increase in the UK. These central bank signals will be closely watched for their implications on borrowing costs and economic growth.
In related currency markets, the forex markets remained cautious as oil retreated and inflation data shaped sentiment, while the USD/JPY pair hit 163 as the yen weakened further.
Vesuvius shares slump on profit decline
On the FTSE 250, Vesuvius shares plunged about 10%, making it the biggest decliner on the mid-cap index. The sharp drop followed the company's report of a decline in profit for the first half of the year, contrasting with the broader gains across UK markets.
The day's trading reflected a market responding to a mix of geopolitical developments, sector-specific earnings, and shifting expectations around monetary policy. While the FTSE 100 and FTSE 250 advanced, the divergence between energy and other sectors underscored the impact of lower oil prices on market dynamics.
This article is for informational purposes only and does not constitute financial advice.
