London's FTSE 100 rose strongly at the close on Friday in a volatile day, as rumors and uncertainty surrounding the Middle East caused strong movements in the market.
The FTSE 100 closed up 71.50 points, or 0.7%, at 10,436.29.
The blue-chip index traded as high as 10,465.24 and as low as 10,287.90 on Friday.
The FTSE 250 closed down 45.89 points, or 0.2%, at 21,642.30, and the Aim All-Share fell 4.64 points, or 0.6%, to 734.61.
Over the week, the FTSE 100 rose 4.7%, the FTSE 250 strengthened 1.6% and the AIM All-Share added 1.9%.
Stocks initially suffered sharp declines after US President Donald Trump threatened further strong attacks on Iran, although he noted that the US was “very close” to achieving its military goals.
Tehran responded by warning the United States and Israel to expect “more crushing, broader and more destructive actions.”
Trump's speech late Wednesday in the United States dampened hopes of a de-escalation that had boosted markets on Wednesday.
“Investors didn't get what they wanted from President Trump's speech to the American people and reacted accordingly,” said AJ Bell chief investment officer Russ Mould.
“Uncertainty famously is kryptonite for the markets and between Trump's mixed messages, disputed claims from both sides and the lack of clarity about a plan that can provide a solution to the conflict, they are getting a strong dose of it right now.”
But by mid-afternoon UK time, the FTSE 100 rose and US and European markets pared losses as Bloomberg and others took note of a report from Iran's state agency IRNA that Iran is drafting a protocol with Oman to monitor traffic through the Strait of Hormuz.
CNBC said, according to a translation of the IRNA report, that ship traffic through the key global oil transit route “should be monitored and coordinated” with the two countries, citing Kazem Gharibabadi, Iran's deputy minister of legal and international affairs.
“Of course, these requirements will not mean restrictions, but rather will facilitate and ensure safe passage and provide better services to ships passing through this route,” Gharibabadi reportedly said.
Brent oil rose Thursday afternoon to $106.75 a barrel, up from $101.83 late Wednesday, but well below previous highs near $110 a barrel.
In European stocks on Thursday, the CAC 40 in Paris closed down 0.2%, while the Dax 40 in Frankfurt fell 0.6%, both well above initial lows.
Stocks in New York fell slightly, but well above previous levels.
The Dow Jones Industrial Average fell 0.2%, but jumped 600 points following the reports from Iran and Oman.
The S&P 500 index fell 0.1%, as did the Nasdaq Composite.
On Thursday, the UK hosted talks with 35 countries to discuss how to reopen the Strait of Hormuz, through which a fifth of the world's oil normally passes.
UK Foreign Secretary Yvette Cooper condemned “Iranian recklessness” for “undermining global economic security.”
She said: “Iranian recklessness towards countries that were never involved in this conflict… is not only affecting mortgage rates and oil prices and the cost of living here in the UK and in many different countries around the world, but it is affecting our global economic security.”
Ms Cooper insisted that “diplomatic and international planning measures” were currently the focus of countries seeking to reopen the sea passage.
The 10-year U.S. Treasury yield fell to 4.30% on Thursday from 4.31% on Wednesday.
The 30-year US Treasury yield was unchanged at 4.89%.
The pound fell to $1.3238 on Thursday afternoon from $1.3324 at the close of trading on Wednesday.
Against the euro, the pound sterling fell to 1.1463 euros from 1.1476 euros.
The euro fell against the dollar to $1.1548 from $1.1608.
Against the yen, the dollar was trading higher at 159.31 yen against 158.66 yen.
In the United Kingdom, a report showed that companies expect to increase prices in the coming months, but only modestly.
According to the Bank of England's Decision Maker Panel survey, businesses expect to increase their prices by 3.5% over the next 12 months, based on data for the three months to March.
This is 0.1 percentage points higher than expected for the three months to February.
Allan Monks, an analyst at JPMorgan, these movements are “small” compared to the jump observed in household inflation expectations.
“Business expectations arguably matter more now, given the weaker labor market and workers' reduced bargaining power,” he added.
Monks believes the report reduces pressure on the Bank of England to act quickly and therefore not have to raise rates in April.
In the FTSE 100, the weak price of gold weighed on Fresnillo and Endeavor Mining, with falls of 1.7% and 2.4% respectively.
While on the FTSE 250, Hochschild Mining fell 3.4%.
Gold was trading at $4,663.40 an ounce on Thursday, down from $4,781.92 at the same time on Wednesday.
SSE rose 1.9% after raising the lower end of annual earnings guidance to reflect continued strong operating performance.
The Perth, Scotland-based electricity generator now expects adjusted earnings per share of 147 pence to 152 pence in the financial year ending in March.
This compares with guidance of 144 pence to 152 pence per share given in February and 160.9 pence per share in the previous financial year.
RBC Capital Markets said the Bloomberg consensus for adjusted EPS for the financial year to March is 148.4 pence per share.
The biggest risers on the FTSE 100 were 3i Group, up 103.0p to 2,687.0p, Centrica, up 6.5p to 218.5p, Shell, up 100.0p to 3,543.5p, Tesco, up 13.5p to 487.0p and Rentokil Initial, up 12.7p to 488.3p.
The biggest fallers on the FTSE 100 were Endeavor Mining, down 114.0p to 4,606.0p. St James's Place, down 25.0p to 1,211.0p. 2,592.0p.
Tuesday's global economic calendar has a number of composite PMI readings, including the UK at 9:30am BST.
In the US, durable goods orders data and a consumer inflation expectations report will be published.
Tuesday's domestic corporate calendar includes JTC PLC's full-year results.
The UK financial markets are closed on Friday and Monday for Good Friday and Easter Monday.
– Contributed by Alliance News
