Market snapshot: ceasefire and investor sentiment on shaky ground
With Middle East peace talks seemingly making little ground, recent optimism is beginning to fade. ii's head of markets talks through latest developments.
28th May 2026 08:25
by Richard Hunter from interactive investor
The main US indices edged to new record closing highs once more, although overnight developments in the Middle East have left Dow futures pointing lower ahead of the open today.
The ceasefire appears to be on increasingly shaky ground. In what is becoming a tired playbook, the impasse seems to be entrenched, with limited progress on the reopening of the Strait of Hormuz and Iran apparently holding firm on its nuclear ambitions. The US confirmed that it had shot down four Iranian drones “that posed a threat” around the Strait, while also targeting a military site in Bandar Abbas. Meanwhile, Iranian authorities claimed to have attacked a US airbase with a “more decisive response” planned in the event of further US strikes.
The oil price rose by almost 3% on the news, although remaining shy of the psychologically important $100 level. Even so, the news sent markets in Asia lower overnight, with most of Europe following suit, and with the US also likely to open lower by as much as 0.5% according to the latest futures reading. This comes ahead of important economic releases in the US later in the form of GDP and the Personal Consumption Expenditures report, where some nerves are fraying on both consumer sentiment as well as the inflationary impact of higher energy prices.
- What City thinks of IQE, the best-performing share of 2026
- FTSE 100 reshuffle to boost UK tech exposure
The news follows a session which saw the Dow Jones play an element of catch-up to record its own closing high, while Micron Technology Inc added another 3.6% after having joined the trillion dollar club in the US in terms of market capitalisation. A similar value was also assigned to SK Hynix in South Korea, with memory chip makers moving into high fashion among investors as the best way to ride the AI wave.
Although there has been much focus on the mega cap tech stocks, smaller companies are also seeing the benefit of renewed investor interest. The rally has almost been under the radar, but despite the likelihood of interest rates staying higher for longer which is to the detriment of smaller companies looking to borrow to grow their businesses, the Russell 2000 index hit a record high on Tuesday and has added 16% in the year so far.
- Stockwatch: should you follow Warren Buffett into tech giant?
- L&G, Shell, BP and HSBC head £10bn FTSE 100 dividend payday
It remains to be seen whether the new oil price spike will reverse some of the gains seen in the previous session on ceasefire optimism, whereby the likes of Norwegian Cruise Line Holdings Ltd and United Airlines Holdings Inc rallied by 6.1% and 6.3% respectively on the prospects of lower energy costs. In the meantime, the fresh bump added to the gains of the main indices in the year to date, with the Dow Jones rising by 5.4% alongside growth of 9.9% and 14.8% for the S&P500 and Nasdaq respectively.
Quite apart from the disappointing developments in the Middle East, a raft of stocks within the FTSE100 were marked ex-dividend and therefore put further weight on the index, which opened sharply lower. Nine stocks traded without their latest dividend, including the likes of Severn Trent, National Grid, Kingfisher and Associated British Foods, while a weaker gold price weighed on Fresnillo and Endeavour Mining. Among the few risers, there were inevitable gains for BP and Shell.
- Serious concerns raised about savers raiding retirement pots
- Sign up to our free newsletter for investment ideas, latest news and award-winning analysis
The weaker sentiment may yet prove to be transient given the stability and financial strength of the premier index, which remains ahead by 5% so far this year. The more domestically focused FTSE250 is also clinging to gains of 3.8% despite the wider travails which have seen gilt yields spike, consumer spending come into question, economic growth falter and the Bank of England in a parlous position with regard to its next move on interest rates.
These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.
Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.