FTSE 100 poised for gains as Trump hints at Hormuz deal; UK recession warning

The London stock market is poised for a positive start to the week, buoyed by indications from U.S. President Donald Trump that a deal concerning the Strait of Hormuz is nearing completion. Trump stated that Saudi Arabia, the UAE, Qatar, and Iran had requested the cessation of military strikes, believing a deal on Hormuz and the nuclear program is achievable. These developments precede further talks scheduled for Monday afternoon.

A resolution to the tensions in the Strait of Hormuz could trigger a significant relief rally across global stock markets, although market participants may maintain some caution given the protracted nature of previous negotiations.

Domestically, the UK economy faces a stark warning from the latest EY economic outlook. Chancellor John Healey has been alerted that the economy could teeter on the brink of recession next year. The forecast predicts a slowdown in gross domestic product (GDP) to just 0.5% this year, with a contraction of 0.2% anticipated for the following year, contingent on the unresolved conflict and continued closure of the Strait of Hormuz. This scenario could lead to inflation soaring to 6.4% by the end of 2026, driven by escalating oil and energy prices. EY has also revised down its business investment forecast, now expecting a 0.7% fall in 2026, a decrease from its previous projection of stable investment.