The FTSE 100 finished Friday on the back foot as investors weighed growing political uncertainty in the UK alongside rising tensions in the Middle East that pushed oil prices sharply higher.
London’s blue-chip index closed down 0.4% at 10,363.27, while the FTSE 250 lost 0.6% to end the session at 23,200.73. European markets also struggled, with Paris’ CAC 40 falling 0.6% and Frankfurt’s DAX 40 slipping 0.2%.
Attention in the UK remained fixed on Westminster after Andy Burnham secured victory in the Makerfield by-election, a result widely viewed as strengthening his position ahead of an expected leadership challenge against Prime Minister Keir Starmer.
Starmer sought to project confidence during a public appearance in London, insisting he would fight any contest rather than step aside.
“If there is a contest then yes I will run, I will stand. I’ve said repeatedly, I’m not going to walk away from that,” he told reporters.
Bond markets reacted, with the yield on the UK 10-year gilt rising to 4.84% by the close from 4.76% a day earlier, suggesting investors were demanding a greater premium for holding government debt amid the political uncertainty.
Meanwhile, fresh developments in the Middle East unsettled investors as planned talks between the United States and Iran in Switzerland were postponed, while renewed fighting between Israel and Hezbollah in Lebanon heightened concerns about instability across the region.
Although Iran’s foreign ministry attempted to downplay the delay, saying there was “no urgency” for further negotiations after a memorandum of understanding had already been signed electronically, oil traders remained focused on supply risks.
Brent crude rose to $80.21 a barrel from $77.04 on Thursday, providing support for energy producers. BP gained 2.8% and Shell added 1.1%, making them among the stronger performers on the FTSE 100.
Gold slipped to $4,155 an ounce from $4,230, weighing on mining shares. Fresnillo dropped 4.7% and Endeavour Mining lost 3.3%.
Elsewhere, Informa advanced 1.3% after Citigroup upgraded the exhibitions and events group to “buy” from “neutral”. The broker pointed to improved prospects following the UK government’s decision to withdraw its previous advice against travel to the United Arab Emirates and Saudi Arabia.
Insurance group Admiral moved in the opposite direction, falling 3.2% after RBC Capital Markets downgraded the stock to “sector perform” from “outperform”. Analyst Ben Cohen said the broker had adopted a more cautious stance ahead of interim results in August, citing concerns around volumes and margins during the first half of the year.
On the FTSE 250, PPHE Hotel Group suffered the heaviest losses, tumbling 15% after Fattal Hotels confirmed it would not proceed with an offer for the company. The decision followed opposition from Euro Plaza Holdings, which owns roughly a third of PPHE.
However, the operator of the Park Plaza and art’otel brands attempted to reassure investors by revealing that another party had submitted an indicative proposal. PPHE said the approach remains at a very early stage and is currently being evaluated.