FTSE 100 Rises on U.S.-Iran Diplomatic Hopes, Easing Oil Prices

London's FTSE 100 and other major European stock indexes advanced on Friday, as investor sentiment was buoyed by signs of diplomatic progress between the U.S. and Iran, which helped ease crude oil prices despite persistent geopolitical tensions in the Middle East.

As of 03:13 ET (07:13 GMT), the UK's FTSE 100 index had gained 0.50%. The positive sentiment was reflected across the continent, with Germany’s DAX adding 0.66% and France’s CAC 40 rising 0.40%, according to Investing.com data.

Diplomatic Overtures Drive Sentiment

The market's optimism was fueled by comments from Iranian President Masoud Pezeshkian at the UN General Assembly in New York. He told Fox News that a "framework was agreed upon" and stated that Tehran's goal was for Washington to return to a Memorandum of Understanding "before the midterms."

These statements support reports, cited by Reuters, that U.S. and Iranian negotiators are exploring a phased framework. The potential deal could involve Tehran reopening the critical Strait of Hormuz waterway in exchange for Washington lifting its economic blockade. The diplomatic push also included a meeting between UK Foreign Secretary Ed Miliband and his Iranian counterpart, Abbas Araghchi, to discuss the importance of reopening the strait, Sky News reported.

Market Impact

The prospect of de-escalation had a direct impact on commodity markets, which have been sensitive to supply disruption fears. The developments sent prices for key benchmarks lower:

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• Brent crude fell 0.63% to $105.95 a barrel.
• WTI crude dropped 1.4% to $93.32 a barrel.

Elsewhere, the British pound was nearly flat against the U.S. dollar, trading at $1.3223. Gold futures, often seen as a safe-haven asset, rose modestly by 0.32% to $4,311.50 an ounce.

Geopolitical Risks Remain

Despite the positive market reaction, the physical security situation in the Gulf remains tense. Reuters reported that vessel transits through the Strait of Hormuz fell to just nine on Thursday, compared to a 10-day average of approximately 18.

At the same time, the threat to regional supply chains has broadened, with Houthi forces striking targets in Saudi Arabia. In response, Saudi Arabia, Türkiye, and Pakistan announced plans for a joint defense meeting. The United Arab Emirates also joined several other countries in suspending flights by Iranian carriers to enforce new U.S. secondary sanctions.