FTSE 100 set for weekly decline as Middle East ceasefire concerns grow

The UK’s benchmark FTSE 100 index edged lower on Friday as renewed tensions in the Gulf unsettled global markets, while investors also assessed early local election results that showed heavy losses for Prime Minister ⁠Keir Starmer’s Labour Party.

The blue-chip FTSE 100 index fell 0.1% to 10,261.38 points by 0947 GMT and was on track for a third consecutive weekly decline.

Meanwhile, the domestically focused FTSE 250 index rose 0.2%, extending gains for a third straight session.

Gulf tensions pressure market sentiment

Investor sentiment remained fragile after the United States and Iran exchanged fire in the Middle East, raising concerns about the stability of a month-long ceasefire between the two countries.

Although US President Donald Trump attempted to downplay the hostilities, markets reacted cautiously as oil prices climbed back above $100 a barrel.

The rise in crude prices weighed on broader market sentiment and increased concerns about higher operating costs for businesses dependent on fuel and energy imports.

British Airways owner IAG fell 2.1% after warning that its annual profit would come in below forecasts.

The airline group also said jet fuel costs would be about 2 billion euros higher in 2026 compared with 2025 because of the ongoing conflict.

The stronger British pound also added pressure on the FTSE 100, as many companies in the index generate a significant portion of their revenues overseas.

Labour losses add political uncertainty

Investors were also monitoring developments in UK politics after early local election results showed that Reform UK, led by Brexit campaigner Nigel Farage, gained more than 350 council seats across England.

The results highlighted growing fragmentation in Britain’s traditional two-party system, with analysts pointing to a broader shift towards a multi-party political landscape.

Despite the losses, Starmer said he would not resign.

Strategists at Bank of America said in a note that “Risks of a leadership challenge can rise post the May local elections, though it is not a given.”

The bank added, “if a leadership challenge were to ensue, and a left-leaning Labour leader were to emerge, risks of higher borrowing would increase.”

The political developments added another layer of uncertainty for investors already navigating geopolitical risks and economic concerns.

Shares of testing and inspection company Intertek declined 3% after the company rejected a third revised takeover proposal from Swedish private equity firm EQT AB.

The offer was valued at 8.93 billion pounds, equivalent to approximately $12.12 billion.

UK housing data weakens

Domestic economic data also remained in focus after figures showed British house prices fell in April for a second consecutive month.

The decline reflected concerns that the conflict involving Iran could weaken buyer demand and further affect consumer confidence.

Investors are now awaiting the US jobs report later in the day, which could provide additional direction for global markets and influence expectations around the broader economic outlook.