The FTSE 100 traded lower on Thursday as escalating tensions between the United States and Iran overshadowed better-than-expected UK economic data, while investors continued to assess the potential impact of disruption to global energy markets.
The FTSE 100 fell 0.37% by 07:25 GMT, extending the previous session’s losses. Elsewhere in Europe, Germany’s DAX declined 0.22% and France’s CAC 40 slipped 0.21%. Sterling was little changed against the US dollar at $1.3535.
UK economy grows faster than expected
Fresh figures from the Office for National Statistics showed the UK economy expanded more strongly than forecast.
Gross domestic product increased 0.7% over the three months to May, comfortably ahead of economists’ expectations for 0.5% growth. Annual GDP growth accelerated to 1.3%, marking the fastest pace in 13 months.
On a monthly basis, the economy grew 0.1% in May after contracting 0.1% in April, with the services sector providing the main support through a 0.3% increase in output.
Iran tensions continue to dominate market sentiment
Despite the encouraging economic data, geopolitical developments remained the primary focus for investors.
A spokesman for Iran’s military headquarters warned that “all infrastructure in the region” would be “crushed under the steel blows” of Iran’s armed forces if the United States proceeded with threats to target Iranian infrastructure. The comments followed remarks by US President Donald Trump, who warned on Wednesday that Washington would “knock out all their power plants… all their bridges” unless Tehran returned to negotiations.
Military activity intensified overnight as US forces reportedly carried out strikes around Tehran and in Semnan province, while Iran responded with missile and drone attacks targeting Bahrain, Jordan and Kuwait. Iran’s Revolutionary Guard said it had struck a US base in Jordan following what it described as an American attack near a children’s cancer hospital in Ahvaz.
Strait of Hormuz concerns keep investors cautious
Strategists continued to warn that tensions around the Strait of Hormuz could remain elevated for an extended period.
Jefferies strategist Mohit Kumar said shipping through the vital energy corridor “has slowed down significantly,” adding that Iran currently appears unwilling to negotiate.
Kumar said the latest escalation differs from previous confrontations, which had been “meant as an objective to gain an upper hand in negotiations and to eventually de-escalate the situation,” arguing Iran is unlikely to “give up its claim of sovereignty over the Strait that easily” and that he was “doubtful whether there is a unified leadership in Iran that can take that decision.”
Jefferies said it was “keeping risk levels low” while continuing to expect “eventually we will get a deal even if it’s a fudge,” although the firm believes the current standoff could continue “for a few weeks,” leaving oil prices under continued upward pressure.
Meanwhile, US Vice President JD Vance described the recent attacks as part of a “delicate diplomatic dance” during an interview with Joe Rogan, while President Trump said separately, “We’ll find out whether or not we settle with them or we just finish it off.”
Commodities and corporate news
Brent crude slipped 0.38% to US$84.63 per barrel, while West Texas Intermediate eased 0.08% to US$79.54. Gold futures fell 0.55% to US$4,029.27 an ounce, with spot gold down 0.88% at US$4,025.62.
Among UK-listed companies, Crest Nicholson (LSE:CRST) warned operating profit is likely to come in at the lower end of its FY2026 guidance and confirmed an extension to a key banking covenant waiver.
Ocado (LSE:OCDO) said it continues to pursue new retail partnerships in the United States while maintaining its target of becoming cash flow positive.
TotalEnergies (LSE:TTE) said higher oil and gas prices linked to Middle East tensions are expected to support second-quarter earnings.
Premier Foods (LSE:PFD) reported a 4% increase in first-quarter branded sales, helped by strong demand for its grocery and sweet treats portfolio.
Frasers Group (LSE:FRAS) declined to provide guidance for FY2027, citing uncertainty surrounding ongoing takeover activity involving Hugo Boss and Accent Group.
SSE (LSE:SSE) reaffirmed its earnings guidance after reporting higher investment across its electricity networks and stronger renewable generation, while also announcing the appointment of former National Grid chief executive John Pettigrew to its board.
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