European Markets Rally on Diplomatic Progress
UK equities moved higher on Friday as investors focused on the prospect of a diplomatic breakthrough between the United States and Iran, helping offset concerns about a softer-than-expected monthly UK economic reading.
The FTSE 100 gained 0.85% in early trading, while Germany’s DAX rose 1.33% and France’s CAC 40 advanced 1.47%. Sterling slipped 0.17% against the US dollar to $1.3394.
Commodity markets reflected improving risk sentiment, with Brent crude falling 1.96% to $88.61 a barrel and WTI crude declining 1.79% to $86.13 as fears over potential supply disruption eased. Gold also weakened, falling 0.76% to $4,179.15 per troy ounce.
UK Economy Records Mixed Growth Picture
Fresh data from the Office for National Statistics showed the UK economy expanded by 0.7% in the three months to April 2026, marking a fifth consecutive period of rolling quarterly growth and accelerating from 0.6% in the previous three-month period.
However, monthly GDP fell by 0.1% in April, representing the first contraction since August 2025. The decline was driven primarily by a 0.2% reduction in services activity, which outweighed a modest 0.1% increase in construction output.
The ONS indicated that some of the weakness may have been linked to disruption caused by the Middle East conflict, citing reduced activity across manufacturing, wholesale trade, travel-related businesses and sporting events.
Markets React to Signs of U.S.-Iran Agreement
Investor sentiment improved after U.S. President Donald Trump suggested that a preliminary agreement between Washington and Tehran could be finalised within days.
Trump said the United States had effectively “ended the war with Iran” and described the proposed agreement as “a very strong memorandum of understanding that is a little conceptual.”
“We made a great deal. There’ll be no nuclear weapons. People will start coming home very soon. It’s pretty much, pretty much completed. We got everything we wanted,” Trump said during a tele-rally event.
According to reports, the proposed framework would extend the existing ceasefire, reopen the Strait of Hormuz to shipping traffic and provide sanctions relief to Iran in exchange for compliance with agreed conditions.
However, uncertainty remains. Iran’s semi-official Fars news agency reported that negotiators had not yet approved any formal agreement, highlighting continuing questions over whether a deal will ultimately be signed.
Flutter and McBride Among Corporate Movers
In company news, Flutter Entertainment (LSE:FLTR) announced plans to cancel its London Stock Exchange listing, with trading set to cease on 3 August 2026. The company said it had concluded that concentrating liquidity on the New York Stock Exchange, where its shares trade under the ticker FLUT, would be in the best interests of shareholders.
Meanwhile, McBride (LSE:MCB) warned that higher costs for petrochemical-based and energy-intensive raw materials, driven by the Middle East conflict, are expected to weigh on profitability. The household cleaning products manufacturer now expects adjusted EBITA for fiscal 2026 and fiscal 2027 to come in between 5% and 10% below current analyst expectations, although it anticipates performance will begin to recover from the second quarter of fiscal 2027 onwards.
Investors Monitor Geopolitics and Economic Data
The combination of improving geopolitical sentiment and resilient longer-term economic growth helped support equity markets despite weaker monthly GDP data. Investors are likely to remain focused on developments surrounding any potential U.S.-Iran agreement, as well as its implications for oil prices, inflation and broader market sentiment in the weeks ahead.
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