London stocks fell on Thursday after early gains faded, as another jump in oil prices amid the deepening Middle East conflict fuelled inflation concerns and pushed bond yields higher, weighing on rate-sensitive sectors.
The FTSE 100 index ended down 153.71 points, 1.5%, at 10,413.94.
The FTSE 250 closed down 196.47 points, 0.9%, at 22,700.20 and the AIM All-Share dropped 6.20 points, 0.8%, at 788.36.
The Cboe UK 100 was down 1.3% at 1,036.40, the Cboe UK 250 was 0.5% lower at 20,036.78, but the Cboe Small Companies Index ended slightly higher.
Financial markets continued to be rattled by the Iran conflict, which entered its sixth day with seemingly no immediate prospect of resolution.
As inflation expectations increase on the back of rising energy costs, hopes for interest rate cuts diminish sending bond yields higher.
The yield on the US 10-year Treasury stretched to 4.15% on Thursday from 4.07% on Wednesday. The yield on the US 30-year Treasury widened to 4.76% from 4.71%.
Central bank meetings are due in the US, UK, Europe and Japan in two weeks with policy makers now facing another dilemma, hot on the heels of another supply shock from tariffs.
On Thursday, Iran’s army said on it had launched a drone attack on a US site in the Iraqi Kurdistan city of Erbil, after targeting the headquarters of Kurdish forces with three missiles.
Meanwhile, AFP said residents in the Emirati capital Abu Dhabi reported hearing a series of loud explosions, with UAE air defences responding to a missile threat as Iran pressed on with its retaliation campaign in the Gulf.
Britain is sending additional fighter jets to Qatar amid the widening war in the Middle East, Prime Minister Keir Starmer announced Thursday as his defence minister visited Cyprus.
The four Typhoon planes will join an existing UK squadron in the Gulf state ‘to strengthen our defensive operations in Qatar and across the region’, Starmer told reporters.
The announcement came after Defence Secretary John Healey arrived in Cyprus following a drone strike on a UK air base on the Mediterranean island earlier this week.
Brent oil traded higher at $84.41 a barrel on Thursday afternoon, up from $80.75 at same time on Wednesday.
‘Oil prices remain elevated, and as things stand there’s no sign that either WTI or Brent looks set to reverse direction,’ said David Morrison at Trade Nation.
‘Oil has, perhaps more than any other market, been driven by headlines concerning the ongoing hostilities across the Middle East, particularly around the Strait of Hormuz,’ he noted.
In European equities on Thursday, the CAC 40 in Paris closed down 1.5%, while the DAX 40 in Frankfurt declined 1.6%.
On Wall Street, markets fell. The Dow Jones Industrial Average was down 1.6%, the S&P 500 index was 0.8% lower while the Nasdaq Composite dropped 0.6%.
The pound was lower at $1.3309 on Thursday afternoon, down from $1.3365 at the equities close on Wednesday.
The euro stood lower at $1.1574, from $1.1634. Against the yen, the dollar was trading higher at JP¥157.67, compared to JP¥157.01.
In London, alongside geopolitical developments, investors waded through a raft of earnings.
Rentokil Initial was the big winner on the FTSE 100, up 11%, as it reported better-than-expected growth in its key North American business.
The pest control specialist reported organic revenue growth of 3.6% in North America in the fourth quarter picking up from 3.4% in the third quarter, and allaying fears of a weather driven slowdown as flagged by industry peer Rollins.
‘These results should reassure that Rentokil is on the right track, although the key spring/summer period will be proof of the pudding,’ analysts at RBC Capital Markets said.
Insurer Admiral rose 7.6% as it hailed strong trading in 2025, hiking its dividend amid a profit rise.
The home and motor insurer booked £954.8 million in annual pretax profit, up 14% from £839.2 million on-year, while pretax profit from continuing operations rose to £957.9 million from £826.5 million.
Analysts at UBS noted the pretax profit outcome beat consensus of £944.0 million.
But Reckitt Benckiser fell 5.8% as it said the first quarter of 2026 would be hit by a weak cold and flu season and said trading in Europe remains challenging.
The consumer goods firm, which owns products such as Nurofen painkillers, Strepils throat sweets and Dettol antiseptic, reported a strong end to 2025 with fourth quarter core like-for-like sales growth of 5.9%, ahead of 5.3% consensus.
A weak gold price put the brakes on Fresnillo, down 7.3%, and Endeavour Mining - which also reported results - down 5.8%.
Gold declined to $5,075.16 an ounce on Thursday from $5,142.25 on Wednesday.
While rising bond yields and worries of fewer interest rate cuts this year sent housebuilders into the red.
Persimmon fell 2.9% and Berkeley Group fell 2.4%.
Travel firms suffered once more.
Wizz Air fell 11% after warning late Wednesday that ongoing disruption in the Middle East is expected to reduce its financial 2026 net profit by around €50 million, pushing earnings below its previous guidance.
British Airways owner IAG fell 3.6% and budget airline easyJet dipped 5.0%.
On the FTSE 250, Coats rose 8.8% as it raised mid-term targets for free cash flow and margins, while Harbour Energy soared 9.5% as it set out a new payout policy which could see the oil and gas producer return up to three quarters of its annual free cash flow to shareholders.
But PageGroup plummeted 15% as it reported a 67% drop in full-year pretax profit and halved its dividend.
The recruiter said the market outlook remains uncertain with the conversion of interviews to accepted offers remaining the ‘most significant area of challenge.’
The downbeat statement weighed on industry peer, Hays, down 3.8%.
The biggest risers on the FTSE 100 were Rentokil Initial, up 45.70p at 471.20p, Admiral Group, up 218.00p at 3,078.00p, Compass, up 71.00p at 2,306.00p, Relx, up 70.00p at 2,623.00 and Experian, up 70.00p at 2,755.00p.
The biggest fallers on the FTSE 100 were 3i, down 258.00p at 2,929.00p, Fresnillo, down 280.00p at 3,572.00p, Endeavour Mining, down 282.00p at 4,566.00p, Reckitt Benckiser, down 350.00p at 5,700.00p and Rio Tinto, down 403.00p at 6,787.00p.
Friday’s global economic calendar has US nonfarm payrolls, Halifax house price data in the UK and eurozone GDP figures.
Friday’s UK corporate calendar has full-year results from IMI.
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