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Highlights
FTSE 100 rises despite declines in energy and defence shares
Oil prices fall sharply after ceasefire between Israel and Iran
Tech and industrial stocks remain in focus as markets shift attention
The FTSE 100 began the session on a positive note as geopolitical concerns in the Middle East eased following a ceasefire agreement between Israel and Iran. While the overall index gained ground, major constituents in the energy and defence sectors registered notable losses. Within the broader FTSE landscape, sector rotation became evident as investors reassessed priorities following reduced tension in the region.
Energy Sector Retreats Despite Broader Index
Energy majors such as BP PLC (LON:BP) and Shell PLC (LON:SHEL) traded lower in early action. The pullback followed a significant decline in global oil benchmarks, driven by reduced supply concerns in light of the ceasefire. Crude futures breached key technical levels before stabilising slightly higher, although still well below previous highs seen earlier this month. The shift away from energy stocks contributed to the relative underperformance within the sector, even as broader equities edged upward.
Defence Stocks Reverse Gains as Tensions Ease
Defence companies, which had previously advanced on geopolitical uncertainty, faced headwinds following the truce. BAE Systems PLC (LON:BA), part of the FTSE 100, saw its share price decline notably, making it one of the weakest performers on the index. Similarly, Babcock International Group PLC (LON:BAB), a component of the FTSE 350, was also in the red before paring some losses. In Germany, comparable moves were observed, with major defence manufacturers under pressure amid reduced expectations for heightened global conflict.
Oil, Dollar and Commodities Adjust to Truce
Commodities experienced widespread repricing following the ceasefire announcement. Oil prices led the decline, but gold and the US dollar also experienced downward movements. Analysts noted that Brent crude briefly touched levels not seen since prior to the escalation of military activities. Market participants appeared to interpret the ceasefire as likely to remain in place, driving an accelerated correction across affected asset classes.
Focus Shifts to Earnings and Macro Developments
With geopolitical risk perceived to be receding, market attention began to pivot toward macroeconomic indicators and the upcoming earnings season. As the second quarter draws to a close, expectations are mounting around company results and broader economic policies, including developments related to US trade. In the technology space, interest remains in companies perceived to benefit from defence-related contracts, such as Palantir, which recently rallied in response to global unrest but may now face reassessment.
The day’s movement marked a shift in sentiment, especially in sectors previously buoyed by elevated international tensions. While the FTSE 100 maintained its upward trajectory, the divergence across sectors underscores the evolving market landscape in light of geopolitical and economic developments.
