Global Indices Gain From Oil

The FTSE soared over 1.1% on Wednesday as the rally in oil lifted heavyweight oil majors such as Shell and BP, whilst more M&A activity also boosted sentiment. The FTSE outperformed most of its European counterparts closing at 7651. The price of oil continued its rally on Wednesday, lifted primarily by the US withdrawal from the international Iran nuclear deal and secondly by falling US crude oil stocks. Tuesday's announcement by Trump that the US was withdrawing from the Iran n deal will see US sanctions aimed at the country's oil sector re imposed. The prospect of sanctions in Iran, in addition to ongoing problems in Venezuela impacting oil production and a market already tightened by OPEC measures sent crude higher across the morning. These gains were then amplified as data showed that US stockpiles fell by more than expected last week. Crude rallied over 3% hitting a peak of $71.28 a level not seen since November 2014.

Meanwhile Brent futures traded 3.2% higher at $77.25 per barrel. Wall Street also opened in the front foot boosted by energy stocks. Yet whilst global stock indices are reaping the benefits of the US walking away from the Iran deal right now, this does appear to be a double-edged sword. Geopolitical tensions will almost certainly increase longer term on the back of Trump's action which could end up impacting negatively on stocks later down the line. Whilst the dollar has fallen from overnight highs it is finding support around 93.00. US producer prices showed that inflation at factory gate level had lowered slightly in April, easing fears of run away inflation and a more aggressive Fed. Investors will now look towards consumer price inflation tomorrow.

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