UK markets cautious as political and geopolitical risks mount

UK equities were largely unchanged on Friday as the cancellation of US-Iran peace talks in Switzerland dampened investor sentiment and kept risk appetite subdued.

Gains in energy and healthcare stocks, however, helped limit broader market losses.

The benchmark FTSE 100 index slipped 5.40 points, or 0.05%, to 10,394.30 by 0948 GMT.

The domestically focused FTSE 250 index declined 0.5% to 23,210.43 and remained on course for a weekly loss.

Geopolitical concerns pressure markets

Investor caution increased after Washington and Tehran called off peace talks that had been expected to ease concerns surrounding energy supplies through the Strait of Hormuz.

The development weighed on global equity markets, while oil prices moved higher as traders reassessed supply risks.

The rise in crude prices provided support to energy companies listed in London.

Mining stocks lead declines

Mining shares were among the biggest drags on the FTSE 100.

Anglo American fell 2.2%, while Glencore declined 1.5%.

Rio Tinto also traded lower, shedding 1.1%.

The weakness in mining stocks contributed to the subdued performance of the broader market, offsetting gains elsewhere.

Political developments add to uncertainty

Markets were also digesting political developments in the UK after Labour mayor Andy Burnham cleared a path on Friday to potentially challenge British Prime Minister Keir Starmer.

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

Bond yields rise

British government bond yields climbed to their highest level in a week. The increase slightly outpaced moves in German government debt yields.

The rise followed higher-than-expected government borrowing figures and Burnham's election victory, both of which appeared to influence investor expectations.

Energy and healthcare stocks provide support

Despite broader market caution, energy shares emerged as the strongest source of support for the FTSE 100.

BP gained 1.7%, while Shell advanced 1.0% as Brent crude traded near $79.50 per barrel.

Healthcare stocks also performed well.

AstraZeneca rose 1.3%, leading gains within the sector, while GSK added 0.9%.

The strength in these sectors helped counterbalance losses in mining stocks and kept the benchmark index close to flat territory.

Company-specific moves

Shares of Admiral Group fell 5% after RBC downgraded the insurer's stock to "sector perform" ahead of its upcoming results.

Homebuilder Barratt Redrow announced the appointment of former British Airways finance chief Rebecca Napier as its new chief financial officer.

The company's shares edged 0.5% lower following the announcement.

Meanwhile, shares in Entain moved modestly higher after Reuters reported that the Ladbrokes owner had started exploring options for its joint venture operations in Central and Eastern Europe, including a potential sale.

As trading progressed, investors continued to balance geopolitical risks, domestic political developments, and sector-specific movements, leaving the UK's main stock index little changed while the FTSE 250 remained on track for a weekly decline.