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London’s benchmark for blue-chip stocks pushed higher Wednesday, buoyed largely by shares of oil producers, which rose as crude prices rallied in the wake of the U.S. decision to resume sanctions on Iran.
Meanwhile, shares of Vodafone PLC popped higher on confirmation that the British telecommunications company has agreed a nearly $23 billion deal to buy some European assets from Liberty Global PLC.
How markets are moving
The FTSE 100 index climbed 0.4% to 7,598.21, led by gains for the oil and gas and the basic materials sectors. The consumer services group was down the most. The benchmark on Tuesday declined by less than 0.1% , but hovered near its highest closing level since Jan. 30, according to FactSet data.
The pound fell to $1.3519 from $1.3546 late Tuesday in New York.
What’s driving markets
The FTSE 100 was outperforming most of its counterparts in Europe as shares of BP PLC and Royal Dutch Shell PLC scaled toward the top of the index. The oil-and-gas sector has a weighting of nearly 17% on the FTSE 100, the second-largest sector after financials, according to FactSet data.
Shares of oil producers rose as U.S. crude and Brent prices jumped more than 2% on Wednesday, bringing West Texas Intermediate above $70 a barrel and to highs not seen in more than three years.
Oil prices, which have been swinging in recent sessions, initially dipped but eventually advanced after U.S. President Donald Trump late Tuesday said he will impose “powerful” new sanctions on Iran as the U.S. withdraws from the Iran nuclear deal.
The reinstatement of Iranian sanctions could result in tighter global oil supplies, because they make it more difficult for Iran to export oil, according to some analysts.
What are strategists saying?
“While it was widely anticipated that Trump would pull out of the Iran agreement, what is likely to leave a lasting impact on the markets is the threat that he would also penalize those who help Iran,” said Lukman Otunuga, research analyst at FXTM, in a note.
“These overall risks are encouraging traders to price in some new geopolitical risk premium, and his threat can potentially be seen as a blow for U.S allies. There is a threat of Trump’s stark tone questioning U.S relations with its European allies, especially given that the likes of France and the United Kingdom had appealed for Trump not to withdraw,” said Otunuga.
Stock movers
BP PLC gained 1.6%, and Royal Dutch Shell PLC bulked up 1.9% as oil prices jumped.
Burberry Group PLC shares tumbled 7.1% after Belgian holding company Groupe Bruxelles Lambert said it has sold a 6.6% stake in the British luxury goods maker.
Vodafone was up 1% after the company agreed to buy operations in Germany, Hungary, Romania and the Czech Republic from Denver-based cable giant Liberty Global PLC . The deal, valued at €19 billion ($23 billion), doesn’t include Liberty businesses in the U.K. and Ireland, which compete with Vodafone’s.
Compass Group PLC dropped 5.7% as the food services company posted a fall in first-half 2018 pretax profit to £792 million ($1.07 billion), which is said was partly due to foreign exchange effects.