UK stocks edge lower amid renewed Middle East uncertainty
The FTSE 100 traded modestly lower on Tuesday as investors assessed reports of a proposed temporary ceasefire between the United States and Iran, while renewed attacks on commercial shipping in the Strait of Hormuz continued to fuel geopolitical uncertainty. Investors also digested stronger-than-expected UK labour market figures alongside an improvement in the government’s latest borrowing data.
The FTSE 100 slipped 0.18%, while Germany’s DAX traded broadly flat and France’s CAC 40 gained 0.05%. Sterling strengthened 0.07% against the US dollar to $1.3444.
Ceasefire proposal competes with escalating regional conflict
According to reports, Qatar, Egypt and Pakistan have put forward a proposal for a 10-day ceasefire between Washington and Tehran, aimed at reopening the Strait of Hormuz and creating an opportunity for broader discussions on maritime security.
However, uncertainty remained elevated after reports that Iran attacked a tanker in the Strait of Hormuz early on Tuesday, forcing the crew to abandon the vessel. The incident followed a tenth consecutive night of US airstrikes targeting Iran’s military capabilities linked to commercial shipping.
Separately, Yemen’s Houthi movement announced a blockade of Saudi Arabia through the Bab al-Mandeb Strait, while Iran’s president declared the country had entered “full-scale war.” Meanwhile, diplomatic efforts continued, with Iran’s interior minister travelling to Pakistan for mediation talks.
US President Donald Trump has yet to decide whether to support the proposed ceasefire or continue backing wider military operations alongside Israel, with officials suggesting the coming days will be critical.
Government announces energy tax cut
Domestically, newly appointed Prime Minister Andy Burnham announced that VAT on household electricity bills will be abolished from October 1, with the measure funded by cancelling the £1.8 billion Digital ID programme.
“We’re taking immediate action to cut taxes on energy bills, put more money in people’s pockets and bring back hope,” Burnham said.
Chancellor John Healey added that the policy would “help bring down inflation while supporting households in every postcode.”
Government bond yields moved higher following the announcement.
UK labour market remains resilient
Fresh data from the Office for National Statistics showed the UK unemployment rate fell to 4.9% during the three months to May, outperforming forecasts of 5.0%.
Employment increased by 148,000 over the quarter, comfortably ahead of economists’ expectations for an 80,000 gain, while the employment rate rose to 75.1%.
Average weekly earnings increased by 4.3% year-on-year, slightly below the expected 4.5%, while regular pay excluding bonuses rose 3.4%, matching forecasts.
Private sector regular pay growth stood at 2.9%, compared with 5.5% in the public sector, while job vacancies declined by 7,000 to 712,000 during the second quarter.
Public borrowing declines in June
The UK’s public finances also showed improvement, with public sector borrowing falling to £16.0 billion in June, a reduction of £7.9 billion compared with the same month last year and marginally below official forecasts.
Borrowing for the financial year to date reached £57.6 billion, down £3.7 billion from a year earlier but still £2.7 billion above projections.
Public sector net debt stood at 94.9% of GDP at the end of June, up 0.4 percentage points year-on-year and remaining close to levels last seen in the early 1960s.
Commodities mixed as investors seek safety
Oil prices eased despite ongoing geopolitical tensions, with Brent crude falling around 0.4% to $88.87 per barrel, while US WTI crude remained broadly unchanged near $82.46.
Gold extended its rally as investors sought defensive assets, with futures climbing 1.6% to $4,078.52 an ounce and spot gold rising 1.7% to approximately $4,074.33.
UK companies in focus
Mitie Group (LSE:MTO) reported a 10% increase in first-quarter revenue, supported by contract wins, renewals and the acquisition of Marlowe. The company also agreed to a £3.1 billion takeover by OCS Group and suspended its £100 million share buyback programme.
MONY Group (LSE:MONY) posted record first-half revenue and reiterated its full-year earnings guidance, with growth across its Insurance, Money and Home Services divisions helping offset weaker Cashback performance. Ongoing cost efficiencies and increased use of automation and artificial intelligence continued to support profitability.
Compass Group (LSE:CPG) delivered 7.1% organic revenue growth during the third quarter as new business momentum accelerated into its target range. The catering group said it remains on course to achieve a fifth consecutive year of 4% to 5% net new business growth.
Wickes Group (LSE:WIX) reported higher second-quarter revenue, driven by increased customer volumes and market share gains despite continued pricing pressure. The home improvement retailer maintained its fiscal 2026 profit guidance, supported by growth in its TradePro membership programme and digital sales.
Leave a Reply