London’s FTSE 100 led a broad European market rebound on Tuesday, clawing back the previous day’s losses as geopolitical tensions showed tentative signs of easing and a sharp drop in the oil price tempered fears of persistent inflation.
The rally was sparked by remarks from US President Donald Trump, who said the conflict with Iran would end “very soon,” while adding it would not conclude within the next week. The comments offered a glimmer of hope to investors, even as Pentagon chief Pete Hegseth described Tuesday as “our most intense day of strikes inside Iran.” General Dan Caine, the top US military officer, stated that operational goals included the destruction of Iran’s navy, which has been targeted with “artillery, fighters, bombers and sea-launched missiles.”
Oil Price Swings and Inflation Watch
The immediate financial impact of the de-escalating rhetoric was felt in the oil markets. Brent crude plunged to $87.92 a barrel on Tuesday afternoon from over $100 late on Monday. This significant retreat alleviated some of the acute inflation concerns and bets on aggressive interest rate hikes that had weighed on sentiment at the start of the week.
The volatility has prompted a coordinated international response. The Paris-based International Energy Agency announced its member states would hold crisis talks to assess “the current security of supply” and the potential release of emergency stocks. IEA Executive Director Fatih Birol, following a meeting of G7 energy ministers, warned that oil market conditions had “deteriorated in recent days” due to challenges in the Strait of Hormuz and curtailed production, creating “significant and growing risks.” He noted that while substantial reserves exist, no decision on their release has been made and alternative export routes are being explored.
The falling oil price bolstered the pound, which climbed to $1.3458 from $1.3396, and the euro, which rose to $1.1648 from $1.1593. In bond markets, the yield on the benchmark US 10-year Treasury note softened slightly to 4.11%.
Broad-Based Gains with Notable Exceptions
Against this backdrop, the FTSE 100 jumped 162.72 points, or 1.6%, to close at 10,412.24. The mid-cap FTSE 250 surged 1.8% and the AIM All-Share also gained 1.6%. The rally was mirrored across the Channel, with Frankfurt’s DAX 40 up 2.4% and Paris’s CAC 40 1.8% higher.
Mining stocks, often sensitive to global growth optimism, led the charge. Fresnillo soared 8.1%, Antofagasta gained 6.0%, and Anglo American rose 6.6%. However, sectors that had benefited from the prior day’s war fears retreated. Oil giants BP and Shell fell 2.1% and 0.8% respectively, while defence contractor BAE Systems dipped 0.4%.
Individual corporate stories also drove significant moves. Shares in Pershing Square Holdings, the closed-end fund run by billionaire Bill Ackman, rose 5.7% after it filed for dual initial public offerings on the New York Stock Exchange. The firm said it has secured $2.8 billion in commitments and expects to raise between $5 billion and $10 billion in the combined transaction.
Housebuilder Persimmon climbed 4.5% after reporting robust results that analysts said showed it stood “head and shoulders” above its peers. Its underlying operating profit rose 17% to £472.1 million for 2025, and the company anticipates delivering between 12,000 and 12,500 completions in 2026, with profit expected toward the upper end of market consensus.
On the FTSE 250, engineering firm Costain jumped 17% after hailing “another strong performance.” Its pretax profit rose 32% to £48.2 million despite a 16% drop in revenue, and its forward work position grew to a record £7 billion. In contrast, valve manufacturer Rotork’s shares sank 13% as it pointed to a “softer” outlook for its oil and gas division, despite reporting a 12% rise in annual pretax profit.
On London’s junior AIM market, Abingdon Health shares jumped 10% after it announced plans to start trading on the OTCQB Venture Market in the US, a move it said could attract a larger universe of investors.
In New York, stocks also moved higher, with the Dow Jones, S&P 500, and Nasdaq Composite all in positive territory. Safe-haven asset gold rose to $5,228.60 an ounce.
Looking ahead, Wednesday’s economic calendar features German inflation data and a US consumer price index report. The UK corporate diary includes full-year results from blue-chip insurer Legal & General, as well as from construction group Balfour Beatty and engineering firm Hill & Smith.
