UK equities traded modestly higher on Friday as higher oil prices continued to support energy stocks, while fresh data from Lloyds highlighted renewed pressure on mortgage borrowers following the recent escalation in the Middle East.
By 03:30 ET (07:30 GMT), the FTSE 100 was up 0.22%. Elsewhere in Europe, Germany’s DAX advanced 0.33% and France’s CAC 40 gained 0.26%. Sterling weakened slightly against the US dollar, with GBP/USD slipping 0.07% to 1.3449.
Hormuz Shipping Slump Keeps Energy Markets on Edge
Investors remained focused on developments in the Strait of Hormuz after shipping activity fell sharply. Reuters, citing Kpler data, reported that only 33 vessels transited the waterway between Monday and Thursday, compared with 50 during the same period a week earlier. Just six crude oil tankers departed the strait during the week, while traffic through the Bab al-Mandeb route increased to 26 vessels on Thursday, indicating that some shipping is being redirected.
The disruption followed explosions near Iran’s Qeshm Island on Thursday evening, which the semi-official Fars news agency linked to reported military strikes. Brent crude surged almost 4% in the previous session before extending gains on Friday.
Diplomatic Tensions Continue to Influence Markets
Political developments remained mixed. Iranian Parliament Speaker Mohammad Bagher Ghalibaf criticised the United States, writing on X that “using bullying + broken promises + fake news as leverage is a failed strategy,” describing Washington’s approach as “theater diplomacy.”
Mohit Kumar, an analyst at Jefferies, said investors could become “desensitized to the Middle East, as long as oil stays around of below $80,” arguing that broader market fundamentals remain supportive thanks to a resilient US labour market and strong global liquidity.
However, Kumar identified higher US government bond yields as the primary concern, calling 10-year Treasury yields near 4.70% the “biggest worry.” He noted that oil prices between $75 and $80 remain around 25% to 30% above pre-conflict levels, warning this would “feed into inflation globally.”
He also suggested that a potential agreement between Iran and Oman over shipping in the Strait of Hormuz would be unlikely to satisfy Washington because it would effectively hand Iran greater control over the strategic waterway. Referring to reports that Tehran wants to restrict US and Israeli vessels from using the strait, Kumar said “we are still some distance from a deal.”
Reuters separately reported that any reopening of the Strait of Hormuz may require concessions from Washington, as the United States opposes any arrangement granting Iran control or the right to collect transit fees, while Tehran continues to insist on retaining influence over the route.
Meanwhile, US President Donald Trump acknowledged that certain American weapons stockpiles were “a little bit tighter” than others, while dismissing reports that the ongoing five-month conflict had significantly depleted US military supplies. His comments followed media reports, denied by the White House, that he had questioned Defence Secretary Pete Hegseth over ammunition levels.
Lloyds Reports Slower UK House Price Growth
In the UK, Lloyds’ latest House Price Index showed property prices were unchanged in July after rising 0.2% in June. The average UK home was valued at £299,253, while annual house price growth slowed to 0.1%, the weakest reading since November 2023.
“The UK housing market remained steady in July, with the average property price effectively unchanged over the month,” said Amanda Bryden, Head of Mortgages at Lloyds. She added that mortgage rates “have edged higher again after easing earlier in the summer” following the recent escalation in Middle East tensions.
Oil and Gold Extend Gains
Oil prices continued to move higher, with Brent crude rising 0.70% to $83.08 a barrel and US West Texas Intermediate adding 0.36% to $77.57.
Safe-haven demand also lifted precious metals. Gold futures climbed 1.04% to $4,345.47 an ounce, while spot gold gained 1.1% to $4,286.50.
UK Corporate News
- JD Sports (LSE:JD.) has appointed former IKEA chief executive Peter Agnefjäll as its new chair, with the appointment taking effect on 1 September.
- Goodwin (LSE:GDWN) is in discussions over the sale of its defence business following order delays, according to a report by the Financial Times.
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