Category: Market Summary

UK equities moved higher in early trading on Wednesday, shrugging off a sharp escalation in hostilities between the United States and Iran as investors focused on indications that diplomatic negotiations remain on track.

The FTSE 100 gained 0.21% in early dealings, while broader European markets also traded in positive territory. Germany’s DAX rose 0.28% and France’s CAC 40 added 0.30%. Sterling was little changed against the US dollar at 1.3391.

Investor sentiment remained relatively resilient despite a significant exchange of military action in the Gulf region. The US military confirmed that American aircraft carried out strikes against multiple Iranian air defence, radar and command targets near the Strait of Hormuz, describing the operation as a proportional response to the downing of a US Army Apache helicopter earlier in the week.

Iran responded overnight with missile and drone attacks targeting US military facilities in Bahrain, Kuwait and Jordan. Iranian media reported substantial damage, while US and regional officials said most incoming projectiles were intercepted and provided no confirmation of major losses. Jordanian authorities stated that several missiles were destroyed before reaching their intended targets and reported no casualties.

Despite the escalation, markets took comfort from comments suggesting diplomatic efforts remain active. A senior White House official indicated that ongoing negotiations had not been derailed and that an agreement remained within reach. At the same time, diplomatic discussions involving international mediators continued, with United Nations representatives holding talks in Washington.

Elsewhere, regional tensions remained elevated after the UK Maritime Trade Operations agency reported an exchange of fire between a commercial vessel and an armed small craft off the coast of Yemen.

UK Corporate Highlights

WH Smith (LSE:SMWH) came under scrutiny after lowering its annual profit outlook for a second time this year and announcing plans to raise fresh equity capital equivalent to around 20% of its existing share capital. The retailer cited weaker travel demand and disruption linked to the conflict in the Middle East as key factors behind the downgrade.

According to reports in the Financial Times, Thames Water could face up to £749 million in fees, interest and associated costs if a proposed creditor-led rescue proceeds. The report said Apollo is expected to support a £6.55 billion financing package, while creditors are considering a restructuring plan that could ultimately pave the way for a stock market listing by 2030.

The Financial Times also reported that private equity firms Warburg Pincus and KKR are exploring potential sales of their UK fibre broadband assets, including Community Fibre, as interest in digital infrastructure assets remains strong.

Pennon Group (LSE:PNN) reported a return to profitability for the year ended March 2026, posting statutory pre-tax profit of £114.4 million compared with a loss of £72.7 million a year earlier. The utility benefited from a regulatory reset that increased water revenues by 24.6%, although it continues to face regulatory scrutiny, including an ongoing Ofwat investigation and a pending Environment Agency sentencing related to South West Water.

U.S. equity futures traded higher on Tuesday, indicating a stronger start for Wall Street as investors reacted positively to a sharp decline in oil prices and continued to assess prospects for easing tensions in the Middle East.

The drop in energy prices provided early support for risk assets, with U.S. crude futures falling more than 2%.

Oil slipped below the $90-per-barrel mark after President Donald Trump suggested that a peace agreement between the United States and Iran could be reached within “two or three days.”

Trump also said the Strait of Hormuz would reopen “immediately” once an agreement is finalized, although previous predictions of a near-term breakthrough have yet to produce a formal deal.

The market may also continue to benefit from bargain-hunting activity after Friday’s broad-based sell-off left many stocks trading at reduced levels.

Stocks rebounded sharply at the start of Monday’s session following the previous week’s losses, but much of that momentum faded throughout the day. By the closing bell, the major indices had retreated significantly from their highs, with the Dow ending modestly lower.

The Nasdaq, which had gained as much as 1.8% intraday, finished up 220.23 points, or 0.9%, at 25,929.66. The S&P 500 rose 21.99 points, or 0.3%, to 7,405.73, while the Dow Jones Industrial Average slipped 80.77 points, or 0.2%, to 50,786.01.

Much of Monday’s early strength stemmed from investors stepping back into technology shares after Friday’s sell-off pushed the Nasdaq to its weakest close in a month.

However, buying activity slowed as traders monitored ongoing geopolitical risks, including reports that Israel and Iran exchanged missile strikes over the weekend.

Crude prices later eased after Trump stated that Israel and Iran were “looking to do an immediate ceasefire.”

“Final negotiations on ‘Peace’ are proceeding, subject to ignorance or stupidity getting in its way,” Trump said in a post on Truth Social. “The Blockade will remain in place, and in full force and effect, until a ‘Final Deal’ is reached. Things should move quickly.”

Semiconductor stocks remained a notable area of strength throughout the session. The Philadelphia Semiconductor Index climbed 5.6%, recovering part of the steep 10.3% decline recorded on Friday.

Marvell Technology (NASDAQ:MRVL) surged 9.6% after confirmation that the company will be added to the S&P 500, alongside electronics manufacturing services provider Flex (NASDAQ:FLEX).

Nvidia (NASDAQ:NVDA) gained 1.7% after announcing a long-term partnership with SK hynix focused on developing advanced memory technologies for AI infrastructure and speeding up semiconductor innovation.

Energy-related shares also performed well, with the Philadelphia Oil Service Index advancing 3.6%.

Oil producers and computer hardware companies ended the session among the strongest performers, while utilities and commercial real estate stocks lagged as Treasury yields continued to move higher.

European equities traded mostly higher on Tuesday as easing tensions between Israel and Iran supported investor sentiment. The U.S. dollar retreated from a two-month high, while Brent crude slipped below $93 per barrel after both countries agreed to suspend attacks, raising expectations that diplomatic efforts could gain momentum.

Market confidence also received a boost from fresh economic data showing strong growth in both Chinese exports and imports during May.

In Europe, official figures showed German industrial production rose 0.4% month-on-month in April, reversing a revised 0.1% decline recorded in March, according to Destatis.

The result matched market expectations and marked the first monthly increase in industrial output in five months.

Separate data indicated that German exports increased 0.9% in April compared with the previous month, accelerating from March’s 0.3% gain. Economists had anticipated a 0.3% decline.

The French CAC 40 advanced 0.7%, while Germany’s DAX gained 0.5%. In contrast, the UK’s FTSE 100 slipped 0.3%, weighed down by weakness in energy stocks including BP Plc and Shell.

Among corporate movers, shares of Technip (EU:TE), Airbus (EU:AIR) and Safran (EU:SAF) moved higher after the French companies partnered with Tereos on a sustainable aviation fuel production initiative in France.

In London, scientific instruments specialist Oxford Instruments (LSE:OXIG) dropped 6.5% despite delivering full-year results that modestly exceeded expectations.

Housebuilder Bellway (LSE:BWY) climbed 3% after reaffirming its profit outlook for fiscal 2026.

Keller Group (LSE:KLR) gained 3% after announcing a $207 million contract variation related to a major highway reconstruction project in the United States.

Meanwhile, GSK (LSE:GSK) fell 3.5% after agreeing to acquire U.S.-listed oncology company Nuvalent in a deal valued at $10.6 billion.

European equity markets showed little clear direction on Tuesday as investors weighed signs of easing tensions in the Middle East while looking ahead to the European Central Bank’s upcoming interest rate decision.

By 03:04 ET (07:04 GMT), the pan-European Stoxx 600 was broadly flat. Germany’s DAX slipped 0.1%, France’s CAC 40 traded near unchanged levels, and the UK’s FTSE 100 fell 0.4%.

Sentiment was supported by announcements from Iran and Israel that they had suspended their recent exchange of attacks, helping to calm concerns over regional instability and raising hopes that U.S. President Donald Trump may be able to secure a diplomatic agreement with Tehran.

However, uncertainty remained elevated. The Strait of Hormuz, a critical route for around one-fifth of global oil and liquefied natural gas shipments, continues to face severe restrictions on tanker traffic, while Trump has indicated that the U.S. blockade of Iranian ports will remain in force.

Brent crude, the international oil benchmark, declined 1.0%, although prices remain significantly above levels seen before the conflict. At the same time, Eurozone government bond yields moved lower as investors sought safer assets.

Markets remain alert to the risk that higher energy costs could fuel another wave of inflation, potentially prompting central banks to maintain a restrictive policy stance.

The European Central Bank is widely expected to raise interest rates on Thursday as policymakers continue to focus on controlling inflation despite signs of slowing economic momentum across the 21-country euro area. In the United States, investors are also increasingly pricing in another rate increase from the Federal Reserve before year-end, following stronger-than-expected employment data released in May.

On the corporate front, GlaxoSmithKline (LSE:GSK) shares fell 2.1% after the pharmaceutical group announced an agreement to acquire oncology company Nuvalent for $10.6 billion. The transaction will provide GSK with access to three lung cancer treatment candidates and further strengthen its oncology pipeline.

UK equities traded lower on Tuesday morning as investors assessed a fragile pause in hostilities between Iran and Israel. Market sentiment remained cautious after U.S. President Donald Trump suggested negotiations were in their “final throes”, while both countries signalled that military action could resume if talks fail. Additional uncertainty emerged after reports of a U.S. military helicopter crash near the Strait of Hormuz.

The FTSE 100 fell 0.41% by 03:23 ET (07:23 GMT). Across Europe, Germany’s DAX declined 0.14%, while France’s CAC 40 managed a gain of 0.30%. Sterling strengthened modestly against the U.S. dollar, rising 0.19% to 1.3367.

Speaking to reporters at New York’s JFK Airport on Monday, Trump said Iran and Israel “were going back and forth and now they both agreed, through me, to stop,” adding that a final agreement could be reached within “two or three days.”

Meanwhile, the New York Times reported that a U.S. Army Apache helicopter crashed near the Strait of Hormuz on Monday. The cause of the incident remains unknown, although Trump confirmed that both pilots were unharmed.

Separately, U.S. Central Command said it had disabled an empty oil tanker in the Gulf of Oman after the vessel allegedly breached a U.S. naval blockade by attempting to reach an Iranian port.

Iran’s military leadership announced a suspension of operations on Monday after launching around 30 ballistic missiles at Israel since Sunday evening, describing the attacks as a “painful response” in support of Lebanon. Israel agreed to halt military action following a request from Washington, although Prime Minister Benjamin Netanyahu warned that if Iran were to “make the mistake of resuming attacks against us, we will respond with full force.”

The Israeli military issued new evacuation notices for residents of Tyre in southern Lebanon on Tuesday. Highlighting the political complexities surrounding the conflict, a senior U.S. official told Axios, “Bibi needs the war to continue to stay politically alive in Israel, and Trump needs the war to end to stay politically alive in the U.S.”

Iran’s ambassador to the United Nations, Amir Saeid Iravani, told the Associated Press that he hoped a final agreement would be reached “soon.” However, an Iranian official told Al Jazeera that recent U.S. amendments to a draft memorandum remained unacceptable, stating that “without the release of frozen assets and the lifting of sanctions, no deal is possible.”

According to the Wall Street Journal, the United States has dropped efforts to immediately refer Iran to the UN Security Council as part of a compromise aimed at securing European support for a joint resolution at the International Atomic Energy Agency’s Board of Governors.

UK Corporate Round-Up

MJ Gleeson (LSE:GLE) warned that annual adjusted pre-tax profit is likely to fall below current market expectations after delays to a major land sale, which represents roughly half of its anticipated plot sales for the current financial year.

Fellow housebuilder Bellway (LSE:BWY) reported softer customer demand after a strong start to the spring selling season, while rising fuel and energy costs continue to place pressure on profitability.

GSK (LSE:GSK) announced an agreement to acquire U.S.-listed oncology specialist Nuvalent in a $10.6 billion all-cash transaction. The offer values Nuvalent at $124 per share, representing a 40% premium to the company’s previous closing price, and is intended to strengthen GSK’s position in lung cancer treatments.

Meanwhile, investors in BP (LSE:BP.) remain unclear about the circumstances surrounding the departure of former chairman Albert Manifold in May, according to a report by the Financial Times.

FTSE 100 slips as investors monitor easing Middle East tensions. Bellway maintains guidance while GSK agrees an £8bn cancer drug acquisition.

Market Overview

European markets were mixed at the open as easing tensions in the Middle East helped stabilise investor sentiment. The FTSE 100 slipped 0.27 per cent to 10,325.57, while the CAC 40 fell 0.23 per cent and the DAX lost 0.58 per cent. In contrast, US markets finished higher overnight, with the Nasdaq gaining 0.65 per cent and the S&P 500 adding 0.31 per cent. Investors continued to assess developments around Iran-Israel ceasefire efforts and the potential implications for energy markets and broader risk appetite.

Commodity markets reflected improving geopolitical sentiment. Brent crude moved lower after recent volatility linked to Middle East tensions, while copper and natural gas advanced. Gold was little changed as safe-haven demand eased. Sterling strengthened against the US dollar, euro, Japanese yen, Swiss franc and Australian dollar, while Bitcoin weakened against the pound. Markets remain focused on geopolitical developments, energy prices and the outlook for global economic growth.

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Market Numbers

FTSE 100: Down (-0.27%), 10,325.57

CAC40: Down (-0.23%), 8,199.290

DAX: Down (-0.58%), 24,616.22

NASDAQ: Up (0.65%), 29,573.0

S&P 500: Up (0.31%), 7,425.0

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In the Headlines

Spring Demand Slows – Bellway (LSE:BWY)

Bellway said higher mortgage costs softened demand during the spring selling season, although reservation rates and cancellation levels remained broadly stable. The housebuilder maintained its full-year profit and completion guidance, signalling confidence in underlying market conditions despite affordability pressures.

Cancer Drug Acquisition – GSK (LSE:GSK)

GSK has agreed to acquire US lung cancer specialist Nuvalent in a deal worth approximately £8 billion. The transaction strengthens GSK’s oncology pipeline and underlines the company’s strategy of expanding its portfolio of targeted cancer treatments.

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Currencies (vs GBP)

USD: Up (0.20%), $1.3365

CHF: Up (0.09%), Fr.1.06506

EUR: Up (0.15%), €1.1578

JPY: Up (0.20%), ¥214.076

AUD: Up (0.13%), $1.894520

Bitcoin (BTC/GBP): Down (-0.37%), £47,144.1

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Commodities

Copper: Up (0.78%), 6.42364

Gold: Up (0.01%), 4,330.29

Brent Crude: Down (-1.30%), 92.202

Natural Gas: Up (0.63%), 3.173

European airline shares came under pressure on Monday after the International Air Transport Association (IATA) sharply reduced its forecast for global airline profitability in 2026, warning that soaring fuel costs linked to disruptions in the Middle East are expected to weigh heavily on the sector.

Shares of IAG (LSE:IAG), Air France-KLM (LSE:AF), Lufthansa (TG:LHA), Wizz Air (LSE:WIZZ) and Ryanair (LSE:0A2U) declined between 1.47% and 2.1% by 04:40 ET (08:40 GMT). easyJet (LSE:EZJ) proved more resilient, falling 0.86%.

Fuel costs drive sharp downgrade to earnings outlook

IATA now forecasts the global airline industry will generate net profits of $23 billion in 2026, down sharply from $45 billion in 2025 and significantly below its previous projection of $41 billion.

The industry’s net profit margin is expected to narrow to 2.0% from 4.2% a year earlier, while profit generated per passenger is projected to fall from $9.10 to $4.50.

“Profits will shrink from $45 billion in 2025 to $23 billion this year. And margins will shrink from 4.2% to 2.0%,” said Willie Walsh, IATA’s Director General. “It won’t even buy you a hot dog at most of the FIFA World Cup venues.”

According to IATA, the primary challenge facing airlines is the sharp increase in fuel expenses.

Jet fuel prices expected to surge

The association expects jet fuel prices to average $152 per barrel in 2026, compared with $90 per barrel in 2025, based on an assumed average Brent crude price of $95 per barrel.

As a result, total fuel expenditure is forecast to jump 40% to $350 billion from $252 billion in 2025. Fuel is expected to account for 31.4% of airline operating costs, up from 25.4% last year.

Overall operating expenses are projected to rise to $1.117 trillion, exceeding the pace of revenue growth. Industry revenue is expected to increase 9.4% to $1.165 trillion.

European carriers face profit squeeze

European airlines are expected to experience a significant decline in profitability under the new forecasts.

IATA projects net profit for the region’s carriers will fall to $9.60 billion in 2026 from $13 billion in 2025. Net margins are forecast to decline from 4.5% to 3.1%, while profit per passenger is expected to drop to $7.50 from $10.30.

Although European airlines had hedged approximately 70% of their fuel requirements before the latest crisis, IATA warned that higher fuel prices will increasingly affect earnings as existing hedging contracts expire.

Middle East airlines face the steepest decline

The most severe impact is expected in the Middle East, where airlines are forecast to move from a combined net profit of $7.20 billion in 2025 to a net loss of $4.30 billion in 2026.

Demand, measured by revenue passenger kilometres, is expected to decline by 11.4% across the region.

Elsewhere, North American carriers are projected to generate net profits of $9.40 billion, down from $12.40 billion, while airlines in the Asia-Pacific region are expected to see profits fall to $6.60 billion from $9.80 billion.

“Smaller carriers that started the year with weak balance sheets are certainly struggling,” Walsh said.

Returns fall below cost of capital

IATA also expects returns on invested capital to decline to 4.3% in 2026, compared with 6.6% in 2025. That figure remains below the estimated weighted average cost of capital of 8.5%.

Despite the weaker profitability outlook, the industry is still expected to generate total revenues of $1.165 trillion, carry 5.10 billion passengers and achieve a record load factor of 84%.

The figures highlight the resilience of travel demand but also underline the growing financial pressure airlines face as fuel costs continue to climb.