After threatening to wipe Persian civilisation off the map, Donald Trump decided that the plan put forward by Tehran and backed by Pakistan offered a workable route out of the Iranian morass. Markets have responded as one would expect, welcoming the news in the hope that the coming days will be used to secure a more durable compromise. Put simply, this is the sort of outcome that could bring oil prices back to more manageable levels before the summer holiday exodus, allowing motorists to wash away the painful memory of three-figure trips to the pump with beer, spritz and rosé.

In practical terms, a temporary two-week ceasefire has taken effect between the United States, Iran and Israel, under Pakistani mediation, narrowly heading off US strikes that the White House had said would be devastating. In return, Tehran has agreed to guarantee safe passage through the Strait of Hormuz, which it controls, subject to what it described as "technical constraints". Washington has suspended military operations after achieving its objectives, Donald Trump insisted, while intensive talks are due to begin in Islamabad under the direction of Vice-President J.D. Vance. According to the White House, the deal is based on a ten-point Iranian proposal deemed sufficiently advanced to serve as the foundation for a broader settlement.

Even so, the situation remains fragile. On the Iranian side, implementation of the ceasefire may be gradual, especially among the Revolutionary Guards, while differences remain between regional allies, particularly over the geographical scope of the truce. Israel, for example, denied that the ceasefire extends to Lebanon, contrary to what the Pakistani mediator had announced.

The market reaction to these announcements is hardly surprising. First, oil prices have fallen sharply. US light crude, WTI, is down 19%, while Brent has dropped 15%. Both contracts are now trading at around USD 95 a barrel, compared with more than USD 110 less than 24 hours ago. Second, the dollar has weakened against the other major currencies, while US Treasury yields have moved lower. The market is now slightly less gloomy about inflationary pressures and, by extension, the outlook for interest rates. Third, equities have bounced. Not Western markets, at least not yet, as these developments came overnight. But Asia-Pacific bourses are setting the tone this morning: the MSCI Emerging Markets Index is up 4.5%, while South Korea's KOSPI has jumped 7%, making it the regional benchmark most exposed to good news.

At sector level, the session is likely to produce sharp divergences. Traders with a taste for aggressive positioning will probably be long airlines and short oil and gas names. Highly geared sectors that have been heavily sold in recent weeks, notably technology and luxury goods, should stage a strong rebound. Basic materials, including chemicals, steel and construction, are also likely to perform well, helped by a less downbeat outlook for growth, reconstruction prospects and supply that remains constrained after the destruction seen in March. More defensive corners of the market are likely to be left behind. Defence stocks are a closer call: they may come under short-term pressure, although the broader backdrop remains highly supportive of rearmament.

Nothing is likely to stop markets from embracing the news in the near term. This ceasefire will eclipse everything else. Today's macroeconomic data are unlikely to shift the narrative. Attention may return tomorrow and Friday, with a run of major indicators due, but the buying momentum should not fade quickly. Commentators who kept saying "yes, but" on the way down will now be able to recycle the same line on the way up.

In Asia-Pacific, it is a full-blown rally. The Nikkei 225 is up more than 5% and the KOSPI more than 6.5%. Hong Kong is making do with a 3% gain and Australia with 2.6%. Europe is set to open sharply higher.

Today's economic highlights:

See the full calendar here.

  • GBP / USD: US$1.34
  • Gold: US$4,841.43
  • Crude Oil (BRENT): US$93.76
  • United States 10 years: 4.24%
  • BITCOIN: US$71,645.8

In corporate news:

  • Barclays plans to redeem AU$400 million of outstanding debt instruments on May 20.
  • Gamma Communications confirmed it is in early-stage talks with potential suitors for a possible takeover deal.
  • Senior has accepted a GBP1.28 billion bid from a consortium led by Tinicum and Blackstone.
  • JTC reported a swing to a GBP8.4 million profit for 2025, with revenue up 25% to GBP381.9 million.
  • Hunting secured USD63.5 million worth of orders for its titanium stress joint product line for an offshore development in Guyana.
  • Volex announced a GBP40 million share buyback and confirmed plans to move to the London Main Market.
  • Bayer confirms its 2026 targets despite U.S. tariffs on pharmaceuticals.
  • The court rejects UBS's request to amend the agreement on Holocaust-era assets.
  • Telefónica sells its Mexican operations to a consortium for $450 million.
  • Banca Monte dei Paschi di Siena terminates Luigi Lovaglio's tenure as CEO.
  • Youngtimers is set to complete its capital increase of 1.93 million francs.
  • Subsea 7 is partnering with Petronas on field development projects in Suriname.
  • Intel is partnering with SpaceX and Tesla to operate a new computer chip factory.
  • Ford is appealing to the Trump administration over the impact of tariffs on the F-150, according to the WSJ.
  • Apple's foldable iPhone remains on track for a September launch, according to Bloomberg, despite rumors to the contrary.
  • AppLovin announces a succession plan for its executive leadership and appoints a new independent chairman.
  • General Dynamics secures a $450 million contract with the U.S. Marine Corps.
  • Insmed abandons development of its dermatological treatment following the failure of an interim study.

See more news from UK listed companies here

Analyst Recommendations:

  • Chesnara Plc: Berenberg maintains its buy recommendation and raises the target price from GBX 333 to GBX 339.
  • Greatland Gold: Argonaut Securities Pty Limited maintains its buy recommendation and raises the target price from AUD 16 to AUD 17.30.
  • Primary Health Properties Plc: JP Morgan maintains its neutral recommendation and raises the target price from GBP 1 to GBP 1.05.
  • Persimmon Plc: Jefferies maintains its buy recommendation and reduces the target price from GBX 1792 to GBX 1591.
  • Bellway P.l.c.: Jefferies maintains its buy recommendation and reduces the target price from GBX 3463 to GBX 2394.
  • St. James's Place Plc: UBS maintains its buy recommendation and reduces the target price from GBX 1600 to GBX 1520.
  • Next Plc: Citi maintains its neutral recommendation and reduces the target price from GBP 135.42 to GBP 132.
  • Astrazeneca Plc: Zacks maintains its neutral recommendation and raises the target price from USD 212 to USD 213.
  • Hsbc Holdings Plc: Zacks upgrades to outperform from neutral with a price target raised from USD 89 to USD 97.50.
  • Senior Plc: Panmure Liberum downgrades to hold from buy and reduces the target price from GBX 358 to GBX 300.
  • M&G Plc: RBC Capital maintains its sector perform recommendation and raises the target price from GBX 260 to GBX 285.