British equity markets continued to weaken on Friday as geopolitical developments in the Middle East kept crude oil trading above $100 a barrel and fresh UK data showed the economy stalled in January.
As of 08:54 GMT the FTSE 100 was down 0.7%. The pound traded lower against the dollar, slipping 0.6% to 1.3265. In mainland Europe, Germany's DAX lost 0.7% and France's CAC 40 fell 0.9%.
Geopolitical drivers
Heightened tensions in the Middle East continued to underpin energy prices. Iran's Supreme Leader Mojtaba Khamenei stated that the Strait of Hormuz will remain closed, with Iran effectively blocking maritime traffic to use the blockade as leverage against Western nations. Separately, the United States eased sanctions on Russian oil in an effort to reduce pressure on energy prices.
The persistence of high oil prices contributed to market unease, reinforcing concerns about potential inflationary pressures and the economic impact on energy-dependent sectors.
UK economic data and bond market reaction
Domestic economic momentum disappointed in January. The Office for National Statistics reported that gross domestic product showed 0.0% month-on-month growth for January, below the consensus forecast of 0.2%. The data were released before the subsequent increase in energy prices linked to the Middle East conflict.
Government bond markets reacted to the data and broader market moves. Ten-year gilt yields rose to 4.817%, recording their highest level since September. Five-year and 10-year gilt yields increased by about 3 to 4 basis points shortly after markets opened.
Corporate updates reflecting market strain
Several UK-listed companies reported results or guidance that underscored subdued demand and uncertainty in key sectors.
- Berkeley Group Holdings reaffirmed its annual profit guidance, reiterating an expectation of roughly about £450 million for the current financial year and a similar level for fiscal 2027, and said it is targeting a net cash position of around £300 million by year-end, while warning that geopolitical tensions and macroeconomic uncertainty are weighing on buyer confidence in the UK housing market.
- Stelrad Group reported annual revenue of £279.6 million, a 3.8% decline from the prior year. The radiator manufacturer and distributor said market demand remains subdued in its core territories of the UK, Ireland and Europe and expects that subdued demand to continue for at least the first half of 2026. Shares in the company fell following the release.
- CLS Holdings saw its shares drop, making it the largest decliner on the FTSE small-caps index. The property investment firm said economic conditions remain subdued across Europe and that it is too early to assess the short- or long-term impact of the Middle East war on European economies and property markets. CLS reported that 2025 net rental income fell by about 11% to £101.3 million.
Outlook
Markets are navigating a combination of geopolitical risk, energy price pressures and weak near-term economic data. The immediate path for UK equities and sterling will be influenced by developments in the Middle East, the trajectory of energy costs and further domestic indicators that clarify the health of the economy after the flat January GDP print.