For a brief, glorious moment on Monday morning, the screens in Canary Wharf turned a shade of green so vivid it hurt the eyes. The FTSE 100 shot up over three hundred points, adding billions in notional value, all because of a fragile, two-week ceasefire agreement between the United States and Iran. It was a classic relief rally, the kind that makes you want to crack open the Bollinger before elevenses. The geopolitical risk premium that had been strangling energy stocks and global sentiment evaporated, and traders who had been shorting the market were left running for cover faster than a tourist caught in a downpour without a brolly. The oil majors led the charge, naturally, as the spectre of $150 a barrel crude retreated to a slightly less terrifying $110.
Advertisement
However, before you start writing that cheque for the Aston Martin, let’s have a proper look under the bonnet. A ceasefire is not a peace treaty. It’s a two-week pause in a region that runs on decades of deep-seated mistrust and proxy warfare. The situation in the Strait of Hormuz remains as tense as a meeting between Oasis and Blur in 1995. One errant drone, one misinterpreted naval manoeuvre, and that three percent gain evaporates faster than a politician’s promise. This is a market running on fumes and hope. The volume behind the rally was thin. It wasn’t a flood of institutional money pouring into UK equities with a long-term view; it was algorithmic trading desks covering their shorts and hedge funds playing a quick momentum trade before the weekend.
