British shares turned lower on Wednesday as conflicting information from ceasefire negotiations between the United States and Iran, coupled with renewed tensions around the Strait of Hormuz, offset early optimism and erased gains seen at the start of trading.
The benchmark FTSE 100 retreated by 0.09% while continental European peers finished higher, with Germany's DAX up 0.54% and France's CAC 40 climbing 0.35%. Sterling was broadly steady, trading at $1.3447, up 0.01% as of 03:22 ET (07:22 GMT).
Commodity markets mirrored the cautious sentiment. Brent crude lost 2.20% to settle at $94.56 a barrel, trimming some of Tuesday's roughly 4% rise, and West Texas Intermediate fell 2.7% to $91.37. The pullback reflected investor demand for clearer signals on the status of maritime traffic and the outlook for Iranian assets.
Hormuz and diplomatic signals
Market participants digested a mix of reports from the Hormuz corridor and the broader diplomatic exchanges. Tehran accused the United States of breaching the maritime ceasefire with strikes on southern Iranian targets. The U.S. described its actions as defensive, saying they followed incidents that included Iranian drones approaching American naval vessels and speedboats it believed were preparing to lay mines, according to reporting attributed to two U.S. officials in the New York Times.
At the same time, reports that some liquefied natural gas tankers had transited the strait in recent days raised hopes that the waterway could be reopening to commerce. This prospect would add to global supply and was among the factors pressuring crude prices lower on the session.
Diplomatic negotiations mediated by Qatar continued, with access to frozen Iranian funds identified as a central unresolved issue, Tasnim News, which has links to the IRGC, reported citing a source close to the talks. The same reporting indicated a potential memorandum of understanding would require the release of $24 billion in blocked Iranian assets.
In a separate development that markets interpreted as a confidence-building move, Iran's internet connectivity was largely restored on Wednesday after 88 days of near-total isolation from international networks, according to internet monitor NetBlocks.
New Zealand's foreign minister said he had discussed the talks with Iran's foreign minister, reporting that Tehran briefed him on its perspective. The New Zealand minister urged unrestricted navigation through Hormuz as an essential precondition for lasting peace.
However, hardline comments from Tehran complicated the picture. A member of Iran's parliamentary national security committee suggested Tehran should make "maximum use" of the Strait of Hormuz and advocated altering the legal regime governing the waterway. Iran's economy minister said the country was redirecting trade through land borders and northern ports to mitigate the effect of a U.S. naval blockade in the south.
UK domestic developments
On the domestic front, retailer Pets at Home reported a 30.2% decline in annual underlying pretax profit, a drop that the company said was in line with market expectations. The results highlighted softer retail earnings and the impact of price reductions, which offset continued growth in its veterinary services division.
Energy costs for British households also moved into focus. The energy regulator Ofgem announced it will raise the energy price cap by 13% for the July to September period, which will add roughly 18 to monthly household bills for consumers using both gas and electricity. The increase was attributed to surging energy prices against the backdrop of the Iran conflict.
Overall, markets navigated a day of mixed geopolitical signals and domestic economic pressure points, with commodity moves and energy policy announcements adding to investor caution.