Oil prices have fallen sharply to below 100 US dollars a barrel on fresh hopes of an end to the Iran war and unblocking of the crucial Strait of Hormuz.

The cost of benchmark Brent crude dropped 11% to under 98 dollars a barrel in afternoon trading on Wednesday as US President Donald Trump said he was pausing efforts to guide stranded ships out of the strait to finalise a deal with Iran on ending the conflict.

But he confirmed a US blockade of Iranian ports would remain in place while talks were held to end the war.

Stock markets across the UK and Europe surged in response, with London’s FTSE 100 Index soaring 2.6% to 10485.9.

In France, the Cac 40 was 3.3% higher and Germany’s Dax was 2.8% higher.

Investor sentiment was boosted on reports that Iranian officials were travelling to China ahead of a summit between Mr Trump and Chinese leader Xi Jinping.

A ceasefire with Iran is already in place, but it has been increasingly fragile.

The US military is trying to reopen a path in the Strait of Hormuz, which would allow oil tankers to resume shipments from the Persian Gulf.

The blockage of the strait, through which a fifth of the world’s oil is carried, has sent oil and energy prices soaring worldwide.

Chris Beauchamp, chief market analyst at investing and trading platform IG, said: “There does seem to have been some real progress on key issues, and perhaps a pathway has been found that strikes a deal amenable to both sides.

“Such a result would allow markets to go back to focusing on earnings growth and a recovery in economic momentum, putting the worries of the last two months behind them.”

Long-term UK government borrowing costs also eased back, as gilts recovered from Tuesday’s sell-off thanks to optimism over inflation concerns should the Iran war come to an end.

The yield on 30-year UK government bonds, also known as gilts, fell back to 5.63%, having reached their highest level since 1998 on Tuesday, at 5.798%.

Ten-year gilt yields fell to 4.94%, having hit a six-week high of 5.102% on Tuesday.

Gilt yields move counter to the value of the bonds, meaning their prices fall when yields rise.

Growth in the UK’s services sector rebounded last month with business activity picking up, but firms face a “short-lived” recovery amid surging costs and lower demand linked to war in the Middle East, a new survey has shown.

Experts cautioned that the outlook for firms may be weaker after a rush of activity in April.

The S&P Global UK services PMI survey showed a reading of 52.7 in April, up from 50.5 the previous month.

Any reading above 50.0 means the sector is growing while any reading below signals it is contracting.

Activity across the industry, which spans businesses from hospitality and leisure to healthcare and transport, has been increasing for almost a year.

But while the latest reading marked an improvement from March – when the US-Israel’s conflict with Iran escalated – it signals a slower rate of growth than at the start of the year.

Businesses taking part in the survey, which is watched closely by economists, cited worries about intensifying pressures on inflation, global supply shortages and elevated borrowing costs as factors holding back business and consumer demand in April.

Some firms said export sales were lower due to disruptions to business travel and weaker demand in the Middle East.

Nevertheless, others pointed out resilient global demand for technology services while backlogs of work also decreased.

But the survey revealed that cost pressures ramped up for businesses in the service industry last month.

Costs for companies rose at the fastest pace since November 2022, with firms widely attributing the increased bills to fuel costs and higher prices for raw materials including metals and plastics, which have been driven up by soaring energy prices since the start of the war.

Many firms also cited pressure from higher wages, following the increase to the national minimum wage at the start of April.

Tim Moore, economics director at S&P Global Market Intelligence, said April’s “modest recovery” for the industry could “easily prove short-lived as new business intakes remained subdued in comparison to the start of 2026”.

Mr Moore said: “Survey respondents widely noted that the Middle East conflict and subsequent global supply chain disruptions had weighed heavily on business and consumer confidence.”

Matt Swannell, chief economist for the Item Club, agreed that there were “already some signs that this jump will be short-lived as businesses reported little improvement in new work amidst weak domestic and foreign demand”.

“We think that the outlook for private sector activity is gloomier,” he went on.

“A sharp rise in inflation will cause households’ real incomes to fall and spending growth to slow.

“Supply chain disruption, rising costs and lingering geopolitical uncertainty will cause some businesses to put their investment plans on hold.”

Mr Swannell added that the survey suggests the Bank of England will prefer to keep interest rates held steady for the rest of the year, but that there was the potential for a hike in the summer.

Thomas Pugh, chief economist at RSM UK, said firms showed “resilience” last month, adding: “However, the rebound is partly fuelled by a rush of activity before price rises and supply shortages start to bite.”

He said future interest rate hikes were “more likely” as a result, but that “everything depends on how energy prices move going forward”.

“Peace hath her victories, no less renowned than war.” The old adage rang true at the Pakistan Stock Exchange (PSX) on Wednesday, as easing geopolitical tensions ignited a strong revival in investor confidence, fuelling a powerful market rebound.

The market opened on a vibrant note and rejoiced in the news that the US President signalled a temporary pause in operations to escort ships through the Strait of Hormuz, citing progress towards a broader agreement with Iran. The development injected a strong sense of relief into the financial landscape, prompting investors to return aggressively to equities.

A strong bullish trend dominated the session throughout the session, with the index oscillating between an intra-day high of 172,088.58 and a low of 167,354.44. Eventually, the benchmark KSE-100 index added a staggering 6,962.29 points, or 4.23%, to close at 171,704.76.

KTrade Securities’ Ahmed Sheraz noted that the KSE-100 delivered a powerful rebound, closing at 171,704, up 6,962 points (+4.23% DoD), marking a standout session with broad-based strength. Momentum remained firmly positive throughout the day, supported by strong volumes in KSE100 of 562 million shares, reflecting aggressive participation and renewed risk appetite after recent volatility.

Sector-wise, gains were widespread with commercial banks, cement, exploration & production, and oil leading the charge. Key index movers included United Bank, Lucky Cement, Pakistan Petroleum, Fauji Fertiliser, Oil & Gas Development Company, National Bank, Hub Power and others, all contributing meaningfully to the upside, signalling institutional as well as retail alignment on the bullish side.

The primary trigger remained the sharp correction in international oil prices, which have fallen significantly from recent highs near $126/bbl to around $98/bbl, easing inflationary and external account concerns. This decline was fuelled by improving geopolitical sentiment, particularly around easing tensions in the Strait of Hormuz and progress in US-Iran negotiations.

Looking ahead, the market’s near-term direction hinges on the outcome of these geopolitical developments. A formal agreement within the next 24–48 hours could further stabilise oil and sustain bullish momentum, while any setback may reintroduce volatility. For now, sentiment remains constructive, with improving macros and external cues setting the stage for continued recovery, Sheraz wrote.

Overall trading volume increased to 1.20billion shares compared with Tuesday’s total of 453.2million. Value of traded shares stood at Rs63billion. Shares of 489 companies were traded. Of these, 395 jumped, 67 declined, and 27 remained unchanged. Hascol Petroleum was the volume leader with trading in 103.5million shares, gaining Rs1.14 to close at Rs22.69.