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London’s blue chip index ended lower on Thursday, mirroring its European peers, as fresh exchanges between the US and Iran tested peace optimism, and Brent cooled amid renewed hope of a potential deal to end the conflict. ‘The optimism which has persisted for much of this week about the prospects for a deal between the US and Iran is being severely tested,’ said AJ Bell Investment Director Russ Mould. The FTSE 100 closed down 79.05 points, 0.8%, at 10,425.96. The FTSE 250 ended down 60.06 points, 0.3%, at 23,324.92, while the AIM All-Share rose slightly to 813.63. The Cboe UK 100 ended down 0.8% at 1,036.94, the Cboe UK 250 was down 0.4% at 20,202.98, and the Cboe Small Companies Index ended down 0.4% at 18,761.71. The latest market volatility came as the US and Iran traded strikes Thursday in their most serious clash since an April ceasefire began. The latest exchange also drew in US ally Kuwait, which said it was responding to incoming fire, and came as violence on the war’s Lebanese front escalated sharply after Israel declared much of the country’s south a combat zone. AJ Bell’s Mould said the fresh exchange of strikes is ‘testing the fragile ceasefire and forcing a reassessment of the chances of a near-term agreement which can reopen the Strait of Hormuz and dial down the pressure the crisis is putting on the global economy.’ But mid-afternoon, there was renewed hope that a deal between the two could be forthcoming after all. Axios said that US and Iranian negotiators have reached an agreement on a 60-day memorandum of understanding to extend the ceasefire and launch negotiations on Iran’s nuclear program. However, the report, which cited two US officials and a regional source involved in the mediation efforts, said that US President Donald Trump has yet to give his final approval. ‘This is an agreement to get everybody to the table. We will work out the details in the negotiations,’ one of the US officials told Axios. After trading higher for most of the day, Brent crude for July delivery traded lower at $94.57 a barrel on Thursday, down from $96.61 at the time of the equities close in London on Wednesday. In European equity markets on Thursday, the CAC 40 in Paris ended down 0.2%, and the DAX 40 in Frankfurt closed down 0.3%. In New York, the Dow Jones Industrial Average was down slightly, the S&P 500 was 0.5% higher, and the Nasdaq Composite firmed 0.6%. The impact of the Middle East war was seen in the US Federal Reserve’s preferred inflation measure which rose in April by its highest year-on-year rate since 2023. The personal consumption expenditures prices index jumped 3.8% from a year ago, the Commerce Department said, up from 3.5% in March. Core PCE inflation, which strips out volatile food and energy prices, rose by 3.3%. Both figures were broadly in line with market expectations. Separate data showed the US economy expanded less than initially estimated in the first three months this year, with investment and consumer spending revised lower amid fallout from the Middle East war. Gross domestic product in the world’s biggest economy rose at an annual rate of 1.6% in the first quarter, the US Commerce Department said, down from 2.0% in an advance estimate released last month. This came as ‘new data showed services spending, particularly on medical services, slowed and business inventories fell by more than previously estimated,’ said economist Michael Pearce of Oxford Economics. Downward revisions to consumer spending in the first quarter, alongside a slowdown in April, ‘point to a consumer coming under stress,’ he added. ‘Today’s readings will not change the Fed’s on-hold stance. But we think the trend toward slower incomes, consumer spending and recognition that there is not broad-based consumer price pressure in the economy can ultimately form part of an argument for more dovish Fed policy,’ analysts at Citigroup said. The pound traded at $1.3435 on Thursday afternoon, up from $1.3429 on Wednesday. Against the euro, sterling eased to €1.1530 from €1.1543 on Wednesday. The yield on the US 10-year Treasury narrowed to 4.46% on Thursday from 4.47% on Wednesday. The yield on the US 30-year Treasury trimmed to 4.99% from 5.00%. The euro traded higher against the greenback, at $1.1653 on Thursday against $1.1633 on Wednesday. Against the yen, the dollar was trading at JP¥159.23, lower than JP¥159.46. Gold traded at $4,479.57 an ounce on Thursday, up from $4,439.66 on Wednesday. On the FTSE 100, defence manufacturers ticked higher amid the ongoing Middle East crisis with Babcock International and BAE Systems up 4.1% and 2.7% respectively. BT Group fell 3.5% as the Financial Times reported that the UK government would oppose any attempt by Bharti Enterprises to increase its stake in BT to above 24.95%, citing a government official. On the FTSE 250, PPHE Hotel Group soared 22% as Fattal Hotel Group confirmed it has made a bid proposal. Fattal is a Tel Aviv-based hospitality chain which operates hotels under the Leonardo and NYX brands. It already had an around 4% stake in PPHE, the Guernsey-registered operator of Park Plaza and art’otel hotels, with a property portfolio valued at £2.2 billion. Late Wednesday PPHE disclosed that it had received an offer of £22 per share from Fattal that valued it at £930 million in total. Metro Bank climbed 5.6% as RBC Capital Markets raised its share price target to 195p from 170p seeing the lender as ‘better shielded from UK political risk’. On the AIM market, shares in MicroSalt were down 16%. The London-based provider of low-sodium salt products lowered its 2026 sales guidance to $4.5 million from previous guidance of $7.0 million in November. ‘This adjustment reflects the anticipated production timing associated with the 2027 launch schedule, rather than any change in the underlying demand outlook,’ MicroSalt noted. It reaffirmed its 2027 sales estimate of $15 million. The biggest risers on the FTSE 100 were Babcock International Group, up 44.00p at 1,108.50p, Compass, up 0.92p at 31.92p, BAE Systems, up 53.50p at 2,019.00p, Antofagasta, up 73.00p at 4,166.00p and Rolls Royce, up 17.40p at 1,314.60p. The biggest fallers on the FTSE 100 were Autotrader, down 17.20p at 427.20p, National Grid, down 47.00p at 1,223.00p, Rightmove, down 15.30p at 414.20p, Severn Trent, down 110.00p at 3,004.00p and BT Group, down 7.50p at 209.50p. Friday’s global economic calendar has GDP figures from Canada, French, German and Italian inflation data plus the Chicago PMI. Friday’s local corporate calendar has first quarter results from Beowulf Mining. Copyright 2026 Alliance News Ltd. All Rights Reserved.
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