London stocks rose on Wednesday as investors responded to a sudden shift in rhetoric from Washington regarding tensions with Iran. At 3:25 ET (07:25 GMT), the FTSE 100 was up 1.3% while sterling strengthened slightly to $1.3587. Germany's DAX also climbed 1.3% and France's CAC 40 increased 1.14% as the wider European market tracked the improving tone.
President Donald Trump said progress had been made toward a "complete and final agreement" with Iran and announced a temporary pause in "Project Freedom," the U.S. military operation that deployed naval and air assets to escort commercial vessels through the Strait of Hormuz. He also made clear that the naval blockade of Iranian ports would remain fully in force.
The announcement followed a briefing from Secretary of State Marco Rubio earlier the same day in which he had described the operation's continuation. The rapid change in public messaging suggested the diplomatic picture was evolving quickly. Pakistan was reported to be acting as an intermediary, transporting proposals between Washington and Tehran.
Markets reacted positively to the de-escalatory signals, taking comfort from the pause, though analysts and traders noted the situation remained fragile. Iran's president, Pezeshkian, publicly rejected unilateral demands from the United States, saying Tehran would not give in to such demands and asserting that "no one can make us surrender."
On the multilateral front, a U.S.-drafted United Nations Security Council resolution - supported by Bahrain, Saudi Arabia, the United Arab Emirates, Kuwait and Qatar - calls on Iran to stop attacking ships, remove sea mines and permit safe maritime transit. That draft resolution is expected to be put to a vote in the coming days.
UK corporate updates
- Smith+Nephew reported underlying revenue growth of 3.1% in the first quarter, reaching $1.5 billion. The company cited robust performance in its sports medicine and wound management divisions and announced a $500 million share buyback while leaving its full-year outlook unchanged.
- Kingfisher said Thierry Garnier will step down as chief executive after nearly seven years and is due to become chief of Ahold Delhaize in 2027. Kingfisher recorded a 6% rise in annual adjusted pretax profit and has begun a search for a new CEO, considering both internal and external candidates.
- J D Wetherspoon reported a 3.4% increase in like-for-like sales for the 13 weeks to April 26. The pub operator cautioned, however, that sharply higher energy costs - which it said have been exacerbated by the conflict with Iran - together with increased taxes could push its full-year profits slightly below market expectations.
- Diageo delivered a surprise 0.3% rise in quarterly organic net sales, helped by strong demand for Guinness in Britain and Ireland and by World Cup-related stocking in Latin America and the Caribbean. Diageo's largest market, North America, remained a drag with a 9.4% decline in organic sales.
Investors absorbed these corporate updates alongside the geopolitical developments, weighing company-specific operational signals against a shifting external risk environment.
Market implications
The immediate market reaction - across equities and the pound - reflected relief that direct naval escort operations would be paused, even as the risk of further escalation has not been removed. The support for a U.S.-backed U.N. resolution and the ongoing shuttle diplomacy, reportedly facilitated by Pakistan, appear to have reinforced hopes that a diplomatic route could be pursued.
At the same time, comments from Iran's president underscore the fragile nature of the situation and the potential for rapid shifts in sentiment should negotiations falter. Market participants noted corporate exposures to energy costs and regional demand as factors likely to influence future earnings announcements.
Overall, the combination of a temporary operational pause, signs of negotiation, and a set of mixed-but-informative corporate results from UK-listed companies produced a constructive market tone on the session reported here.