The FTSE 100 posted modest falls on Thursday, closing well above early lows, as investors weighed the latest developments in the Middle East.
The FTSE 100 closed down 19.45 points, 0.2%, at 10,457.01.
It had earlier traded as low as 10,361.45.
The FTSE 250 ended down 207.49 points, 0.9%, at 22,764.52, and the Aim All-Share fell 5.99 points, 0.7%, at 802.13.
US President Donald Trump continued to strike a defiant tone as the US-Iran conflict continued amid the ongoing ceasefire.
Mr Trump said he has ordered the US Navy to “shoot and kill any boat, small boats though they may be… that is putting mines in the waters of the Strait of Hormuz.”
US Central Command said it has ordered 31 vessels to turn around or return to port since the blockade of the Strait of Hormuz began.
While the US Defence Department said on Thursday that its forces boarded a vessel in the Indian Ocean that was transporting oil from Iran.
More optimistically, various news outlets reported that an Iranian diplomatic source told the Russian news agency Ria Novosti on Thursday that preparations for negotiations between Iran and the US in Pakistan could lead to a breakthrough as early as tonight or tomorrow.
AJ Bell analyst Dan Coatsworth noted: “There continue to be mixed messages around peace talks, creating an air of uncertainty that periodically stops investors in their tracks.
“It’s one of those days where investors have dialled back risk appetite to consider what could go wrong, rather than shrugging off the backdrop of conflict to bid markets higher.”
Brent oil traded at 103.25 dollars a barrel on Thursday afternoon, compared to 101.42 dollars at the time of the equities close in London on Wednesday.
Joshua Mahony, chief market analyst at Scope Markets, fears that while previous market moves were “driven by escalation and de-escalation of the conflict, we are now heading towards a slow grind higher for energy prices as the prospect of a drawn-out stalemate comes into play”.
In European equities on Wednesday, the Cac 40 in Paris ended up 0.9%, supported by gains in L’Oreal, and the Dax 40 in Frankfurt fell 0.2%.
In New York, markets stabilised after strong gains on Wednesday.
The Dow Jones Industrial Average was down 0.1%, as was the Nasdaq Composite, while the S&P 500 was 0.1% higher.
Tesla fell 2.6% after it announced a big jump in capex, and some delays to product roll-outs, taking the shine off better-than-expected financial results.
“Tesla’s physical AI ventures offer large potential revenue opportunities, but could take a while to get there”, was how UBS summed up the situation, continuing to believe Tesla is driven by “narrative/sentiment not fundamentals”.
