FTSE 100 slips as Iran crisis dampens investor confidence

UK equities moved lower on Friday and were on track for weekly losses, as fading hopes of a swift resolution to the Iran conflict and a warning from the Bank of England weighed on investor sentiment.

The benchmark FTSE 100 index fell 0.6% to 10,391.16 points by 1005 GMT.

The blue-chip index was set for its first weekly decline in five weeks, potentially erasing gains recorded since the announcement of a US-Iran ceasefire earlier this month.

Meanwhile, the midcap FTSE 250 index dropped 1.1%, reflecting broader market weakness.

Oil price surge adds to market pressure

Investor caution intensified as crude oil prices climbed amid concerns of renewed military escalation in the Middle East.

The closure of the Strait of Hormuz, a key route for global energy supplies, has added to market uncertainty and weighed on the outlook for the British economy

There has been no progress in negotiations to reopen the Strait of Hormuz.

Rising oil prices weighed heavily on travel and leisure stocks.

The sector declined 1.4%, with airline operator Wizz Air falling 4.9%.

Higher fuel costs and geopolitical uncertainty continued to pressure companies reliant on travel demand.

Bank of England warns of downside risks

Further dampening sentiment, Bank of England Deputy Governor Sarah Breeden cautioned that global equity markets may not fully reflect the risks facing the economy.

She told the BBC that stock markets worldwide are expected to fall, as current valuations do not account for ongoing uncertainties.

This warning added to investor concerns, particularly as geopolitical tensions remain unresolved and global growth outlooks appear uncertain.

Banks and retailers under pressure

Major UK banking stocks also declined during the session.

Barclays and HSBC both fell more than 1%, contributing to the overall downturn in the FTSE 100.

Despite broader market weakness, sterling edged up 0.1% after data showed British retail sales rose by 0.7% in March.

However, major retailers have warned that persistent tensions in the Middle East could weigh on their earnings outlook in the coming months.

Defensive sectors offer limited support

Some defensive sectors provided modest support to the market.

Personal care, drug, and grocery stocks rose 0.5%, making them among the few gainers on the FTSE 100, alongside energy and utilities shares.

In individual stock movements, Computacenter surged 9.9% after the technology services provider said it expects to beat annual profit forecasts.

The strong outlook helped the stock outperform the broader market.

Mondi falls on rising cost concerns

On the downside, packaging company Mondi dropped 8.2%, making it the worst performer on the FTSE 100.

The company flagged rising costs linked to the Iran conflict.

Overall, UK markets remained under pressure as geopolitical tensions, rising oil prices, and central bank warnings combined to dampen investor confidence heading into the end of the week.